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Exceptions Announced regarding Dividend Distribution Restrictions Imposed as Covid-19 Precautions

Dividend Distribution Restrictions:

  • Introduced as a provisional article to Turkish Commercial Code through Law No 7244 of 17/4/2020 to preserve the financial strength of companies vis-à-vis Covid-19 effects

  • Applicable to capital companies other than those more than fifty percent of the share capital of which are directly or indirectly owned by, the State, special provincial administrations, municipalities, villages and other public legal entities as well as funds, more than fifty percent of the capital of which is owned by public bodies

  • Restrictions:

- only up to 25% of the net annual profit for the year 2019 can be distributed until the date of 30/9/2020

- previous years’ profit and free reserves may not be subject to distribution

the general assembly may not authorize the board of directors to distribute advance dividends

- if general assembly has already decided to distribute dividend concerning the accounting year of the 2019, payments exceeding 25% will be postponed until after 30/9/2020

  • Ministry of Trade is authorized to determine the exceptions, and the procedures and principle regarding implementation.


Exceptions and Implementation Principles of Dividend Distribution Restriction:

  • Introduced by a Communiqué published on 17/5/2020 in the Official Gazette

  • For companies which apply a special fiscal year different than a calendar year, the most recent fiscal year that ended will be taken into account

  • Financials to be used for the purposes of calculation of dividend clarified

  • Exceptions generally aimed at facilitating payment obligations of shareholders out of the proceeds of the dividend distribution and comprise:

- Except for companies which benefit from mainly Covid-19 subsidies or which have utilised loans through guarantees backed by the Treasury; where the amount of dividends to be distributed do not exceed TL 120,000

- Where more than ½ of the distributed dividend is used by shareholders to fulfil capital contribution obligations (in cash) in other companies

- Where distributed dividend is used by shareholders to repay in cash obligations arising from loan or project finance agreements that will become due before 30/9/2020

  • Application of exceptions is subject to the prior affirmative opinion of the Ministry of Trade to be obtained through the submission of documentation evidencing the exceptions as well as the invitation to the general assembly where dividend distribution will be discussed, financial statements, and profit and loss table