Newsletter-21

228 NEWSLETTER 2016 its shares. The said authorization is given through an approval in the general assembly meeting of a buy-back program prepared by the board of directors. The board of directors may delegate such authori- zation to natural persons or legal entities. In practice, this authoriza- tion is mostly delegated to the financial affairs department or investor relations units or intermediary institutions. Pursuant to Art. 5 of the Communiqué, which is drafted in line with Art. 381 of the TCC, in order to prevent an imminent and seri- ous loss to the corporation, listed corporations may acquire their own shares also by a decision of the board of directors. Examples of an imminent and serious loss are defined on the preamble of Article 381 of the TCC, as follows; inability to collect debts from a debtor who is heavily in debt due to inability of the corporation to buy its own shares back, sudden sharp drops in stock-prices, or the possibility of a sudden sharp drop in stock-prices, the change of the controlling shareholder, or the possibility of a change in this direction. Thus, the total acquisition value of buy-back shares cannot ex- ceed the total amount of funds that may be subject to profit distribu- tion. The policies that may prevent profit distribution were precluded by this regulation that was introduced to protect the investor. Although the rule gives the impression that the share buy-back cannot be done by companies at balance sheet losses at first glance, it is, of course, possible for such instances as well. Lastly, in accordance with Art.379/3 of the TCC, after the prices of the shares to be acquired are deducted, the company’s re- maining net assets must be at least equal to the sum of paid-in capital and the reserves that may not be distributed according to law and arti- cles of association 1 . A listed corporation’s subsidiary may acquire the corporation’s shares only if and when the buy-back program is approved in the gen- eral assembly of the listed corporation, and the board of directors of the subsidiary takes a decision of acquisition within the frame of the 1 Please refer to our article for detailed information on buy-back shares of compa- nies pursuant to the TCC: http://www.erdem-erdem.av.tr/publications/law-post/ share-buyback-of-companies-pursuant-to-the-new-tcc/ (access date: 30.12.2016).