The Ministry of Trade sent a letter to the Union of Chambers and Commodity Exchanges of Turkey on 31 March 2020 and pointed out that it is important for companies to preserve their equities due to the Covid-19 pandemic. The said letter provides for certain restrictions regarding distribution of profits by all the companies, except the state-owned ones, based on the Regulation on the Procedures and Principles of General Assembly Meetings of Joint Stock Companies (“Regulation“).
In the referred letter, it is said that “during the general assembly meetings of the companies, except for the state-owned ones, to be held this year for the financial year of 2019, regarding the agenda item on the distribution of profits, it shall not be decided to distribute the profits from previous years , the amount to be distributed shall not exceed 25% of the net profit of 2019 financial year and the board of directors shall not be authorized to distribute advance profits ..”
Article 13 of the Regulation, of which the Ministry has based its letter on, is related to the agendas of ordinary general assembly meetings of companies and the Article 13/5 of the Regulation gives the Ministry the right to add agenda items to be discussed during such meetings. Decisions regarding the distribution of profit are among the non-assignable duties and authorities of the general assembly. In this regard, it is questionable whether the restrictions mentioned in the Ministry’s letter are binding or just recommendations for companies.
It must also be noted that certain companies already convened their general assembly meetings for 2019 financial year before the referred letter.