Group of Companies

A group of companies is a structure in which a parent company directly or indirectly controls one or more subsidiaries. The Turkish Commercial Code (TCC Art. 195-209) provides special rules to protect minority shareholders and creditors of subsidiaries in group structures.

Control

A company is the parent of another if it holds a majority of the voting rights, has the right to elect a majority of board members or can exercise a majority of voting rights alone or by agreement with other shareholders. Control may also be established by contract or other means. There are trade registry notification and publication obligations.

Abuse of Control

A parent may not use its control in a way that causes loss to a subsidiary (TCC Art. 202). Examples include having the subsidiary restrict its business, transfer assets to another group company below market value or transfer its profits. The parent must actually compensate the loss within the same financial year or grant the subsidiary a claim for compensation. Otherwise:

• Each shareholder of the subsidiary may claim compensation to the company from the parent and its board members,
• Shareholders may also require their shares to be purchased at real value,
• The subsidiary’s creditors may also claim compensation for the company’s loss.

Dependency Report

The subsidiary’s board prepares a report in the first three months of the financial year showing its relations with the parent and transactions made at the parent’s direction (TCC Art. 199). The report is audited and attached to the annual activity report.

In Other Areas of Law

A group may be treated as a single economic unit in competition law; see Undertaking. In intra-group transactions, the shareholder borrowing prohibition and tax transfer pricing rules must also be considered. Intra-group restructurings are often carried out through a merger or demerger.