Merger

Scope

The merger, demerger and change of legal form of commercial companies are regulated in Articles 134–194 of the Turkish Commercial Code (TTK). A merger is carried out in one of two ways: one company takes over another (merger by absorption), or the companies come together in a new company (merger by formation of a new company) (TTK Art. 136). The acquiring company takes over the assets of the transferring company as a whole; the shareholders of the transferring company automatically acquire shares of the acquiring company according to the determined exchange ratio. The merger agreement is made in writing, signed by the management bodies and, as a rule, approved by the general assemblies with the quorums set by law (TTK Art. 145, 151); in the simplified merger cases provided by law, general assembly approval may not be required (TTK Art. 155–156).

Practical significance

A merger becomes valid upon registration in the trade registry; at the moment of registration, all assets and liabilities of the transferring company pass automatically to the acquiring company (TTK Art. 153). Thus contracts, receivables and debts are transferred without individual transfer acts; the status of rights such as permits and licenses is examined separately under the relevant legislation. If creditors make a request within three months from the date on which the merger becomes valid, the acquiring company secures their receivables (TTK Art. 157). A merger may also require permission from the Competition Board; which mergers and acquisitions are subject to permission is determined by the Board’s communiqués (Law No. 4054 on the Protection of Competition, Art. 7).

Commonly confused concepts

A merger is the opposite of a demerger: in a merger, assets are brought together in a single company, whereas in a demerger all or part of the assets of a company are transferred to other companies (TTK Art. 159). A merger also differs from taking over control of a company by purchasing shares; in a share transfer the target company keeps its legal personality, whereas in a merger the transferring company ceases to exist and is deleted from the trade registry (TTK Art. 136). The notion of “merger and acquisition” in competition law is broader; it also covers acquisitions of shares and assets.