Announcement of the Turkish Ministry of Trade on Dividend Distribution of Capital Companies for Preserving Their Equity During Covid-19 Outbreak

ADMD Law Office
Dilara Tamturk

I. Introduction


Several Chambers of Commerce’s throughout Turkey published a uniform announcement regarding dividend distributions on their websites, based on the information note of Turkish Union of Chambers and Commodity Exchanges dated April 1, 2020, No. 34221550-045.02-3392, referring to the letter of the Ministry of Trade dated March 31, 2020 (Announcement). The Announcement informs companies to preserve their equities during the COVID-19 pandemic.


II. What is recommended by the Ministry of Trade with the Announcement?

The advisory Announcement emphasized on preserving the equity of the capital companies due to Covid-19 outbreak and stated that there is a need to limit the distribution of profits in order to prevent companies from falling into a state of capital loss and debt because of such outbreak.

In this regard, the Announcement recommends all companies, except state-owned enterprises, to preserve their equities and in this regard, take the below principles into consideration for General Assembly meetings for the 2019 financial year that will be held this year:

  • Not to utilize profits from their previous financial years for dividend distributions.
  • Not to distribute any profit that is more than 25% of their net profit for the 2019 financial year; and
  • Not to grant their boards of directors the authority to distribute advance dividends.


III. Is It Obligatory to Decide in the General Assembly Meetings in Line with the Announcement of the Ministry of Trade?

 The Ministry of Trade bases its letter on Article 13/5 of the Regulation on Procedures and Principles of the Joint Stock Companies’ General Assembly Meetings and Participating Ministry of Trade Representatives, published in the Official Gazette dated November 28, 2012 and No. 28481 (“Regulation”). The said article is as follows:

‘It is obligatory to insert the issues on the agenda of general assemblies which are requested by the Ministry of the as a result of an audit or for any other reason deemed appropriate by the Ministry’. 

Within the scope of this authorization, the subjects determined by the Ministry of Trade should be placed on the agenda of the general assembly meetings of the capital companies.

 Although the Ministry of Trade is authorized to determine the agenda topics of the general assembly meetings, the Ministry of Trade appears to have exceeded the limits of its authority within the Regulation considering the content of the Announcement and asked companies to pass a resolution in a certain direction. As can be clearly understood from the Articles 408/II-d, 509/2, 519, 523 and 608 of the Turkish Commercial Code No. 6102 (“TCC”), dividend distribution is a matter that the general assembly of the company shall decide whether to distribute dividends by taking into consideration of interests of the company along with shareholders.

In this respect, the advisory Announcement of the Ministry of Trade appears to arbitrary as to whether it has solid legal bases.

On the other side, if the companies do not pass general assembly resolutions within the scope of this Announcement, they may have difficulties in registering the general assembly resolutions before the Trade Registry.

Although such announcement is advisory for the capital companies, the application for registration of general assembly meetings that resolve dividend distributions against the Announcement may be rejected by the Registry of Commerce.

Since the Announcement is sent to relevant parties by the Ministry of Trade on April 1, 2020, the general assembly resolutions taken as of and after April 1, 2020 shall be considered within the scope of the Announcement. Therefore, it can be noted that there is no consideration required for the registration of the general assembly resolutions taken before such date.



It is not obligatory to comply with recommendation of the Ministry of Trade by the companies regarding the limitation of the dividend distribution within the agendas of General Assembly meetings for the closing (confirmation) of their 2019 financial year accounts.

It is therefore possible to resolve a contrary decision in the light of the existing regulations unless a new legislation is passed to the contrary.

As explained above, although it is thought that the Announcement appears to be without strong legal basis, we still advise all companies except state-owned enterprises that are planning on holding their general assembly meetings for the 2019 financial year to consider the Announcement’s statement regarding their resolutions for cash dividend distributions since trade registries may refuse to register such general assembly resolutions that are contrary to the Announcement.