17 September 2018

Communique on principles and procedures of implementation of Article 376 of the Turkish Commercial Code has been announced in the Official Gazette dated 15 September 2018 (“New Communique”).
Article 376 of the Turkish Commercial Code, regulates the cases of loss of capital and statutory reserves and insufficiency of assets to cover liabilities in companies.  As set out in the Turkish Commercial Code, in such cases, the companies may eventually be declared bankrupt.  The trigger for initiation of the relevant procedures, which may eventually result in bankruptcy in certain cases, are (i) loss of 2/3 of the capital and statutory reserves based on the latest annual financial statements; (ii) assets of the company not covering its liabilities based on the interim financial statements to be prepared in case of any signs of financial distress. 
 Provisional Article 1 of the New Communique, provides for the option not to take into account FX losses arising from the obligations in foreign currency which are not yet performed, while making the calculations to determine the existence of capital loss and financial distress, which may trigger the relevant procedures in Clause 376 of the Turkish Commercial Code.  Through the New Communique, FX losses, which may have been incurred given the recent FX rate fluctuations, may be opted to be left out for the purposes of Clause 376 of the Turkish Commercial Code.   Impact of implementing the alternative to disregard the FX losses, is to be considered from corporate tax perspective.  


For further information, please contact:

Attorneys at Law
+ 90 (212) 236 36 44

Levent Mah. Sülün Sok. N.23
34330, Beşiktaş/Istanbul

This client alert provides very brief and generic information on certain recent legislative developments, for informational purposes only and is not intended and should not be construed as a legal advice.