Information Note on the Law regarding the Reduction of the Effects of the New Coronavirus (Covid-19) Pandemic on the Economic and Social Life and the Law regarding Amending Certain Legislation
Coronavirus (Covid-19), that appeared as of December 2019, has rapidly spread to millions of people around the world. As a consequence of this issue, World Health Organization (WHO) declared a global pandemic on 11.03.2020 and made a call to all countries in the matter of taking the required measures in order to eliminate and prevent the problems arising from Coronavirus. The Law on Reduction of Effects of Novel Coronavirus (Covid-19) Pandemic on Economic and Social Life and Law on Amendment of Certain Laws No.7244 (“Law”) has been enacted for the purpose of reducing the effects of the coronavirus pandemic, which will demonstrate its effects for an unspecific time period, on the social and economic life of our country and the Law was published in the Official Gazette on 17.04.2020.
This information note is prepared to notify the amendments made on the Turkish Commercial Code and Law on Regulating the Retail Trade.
Amendments Made on the Turkish Commercial Code
Restriction of Cash Dividend Distribution of Companies
The under mentioned article will enter into force on 17.04.2020.
With the provisional article added to the Turkish Commercial Code, the dividend that companies may distribute has been restricted until 30.09.2020.
The provisional article that is added to the Turkish Commercial Code is as follows:
“PROVISIONAL ARTICLE 13- (1) In the companies with share capital, only twenty-five percent of the net profit for the year 2019 may be resolved to be distributed, the profits of previous years and free reserves may not be subject to the distribution, an authority for the distribution of dividend advances may not be given to the board of directors by the general assembly until 30.09.2020. This article does not apply to public legal entities such as the state, special provincial administrations, municipalities, villages and to the companies with more than fifty percent of share capital owned directly or indirectly by public funds with more than fifty percent of share capital owned publicly. The President is entitled to extend or reduce the time period specified under this article for period of 3 months. (2) In case a resolution regarding the distribution of dividend for the financial year of 2019 is adopted by the general assembly before the enactment of the Law, however the shareholders have not yet been fully or partially paid, the payments relating to the portion that exceeds 25% of the net profit for the financial year 2019 shall be postponed until the end of the time period specified under the first sub-article.
(3) The Ministry of Commerce is entitled to determine the exceptions, procedures and principles regarding the implementation on the capital companies in the scope of this article, through taking the opinion of the Ministry of Treasury and Finance.
By this changes to the Law, it has been regulated that until 30.09.2020, the companies with share capital may only distribute 25% of the net profit for the financial year 2019, and the profits of previous years shall not be distributed. The companies with more than 50% of shares owned directly or indirectly by government are exempted from this provision.
It has been regulated that this restriction, which is effective until 30.09.2020, may be extended by the President for a time period of 3 months.
In case the general assembly passes a resolution regarding the distribution of dividend for the financial year of 2019, however the shareholders have not yet been fully or partially paid, the payments relating to the portion that exceeds 25% of the net profit for the financial year 2019 shall be paid to the shareholders after 30.09.2020.
With this regulation, the threats on the economic life arising from the new type of coronavirus have been attempted to be prevented. Due to the uncertainty of the future circumstances in economic life, it has been aimed not to reduce company resources through dividend distribution, to protect existing equity structures of companies and to avoid additional financing needs.
Amendments on the Law on Regulating the Retail Trade
Price Gouging and Stockpiling by Manufacturers, Suppliers and Retail Undertakings
The belowmentioned article will enter into force on 17.04.2020.
In order to avoid unfair price increases and stockpiling, a preventive regulation has also been imposed due to the extraordinary increase in the demand for certain product groups such as basic food and supplies, cleaning and health products because of the Covid-19 pandemic. An additional article that is added to the Law on Regulating Retail Trade is as follows:
ADDITIONAL ARTICLE 1- (1) No exorbitant increase in the selling price of a good or service may be made by manufacturers, suppliers and retail undertakings.
(2) The manufacturers, suppliers and retail undertakings may not be engaged in any activity which prevents the consumers from accessing goods and which disrupts market balance and free competition.
(3) An Unfair Price Evaluation Board is established in order to make arrangements for exorbitant price increases and stockpiling practices of manufacturers, suppliers and retail undertakings, to execute administrative fines and to take all kinds of measures through audit and examination if necessary. The Board, chaired by the General Director of Domestic Trade, consists of 13 members as follows;
a) General Director of Consumer Protection and Market Surveillance,
b) General Director of Craftsmen, Artisans and Cooperatives,
c) One General Director for each appointed by the Ministry of Justice, Ministry of Treasury and Finance, Ministry of Industry and Technology and Ministry of Agriculture and Forestry,
ç) Relevant Assistant General Director of Domestic Trade,
d) One Member for each appointed by Union of Chambers and Commodity Exchanges of Turkey and the Confederation of Turkish Tradesmen and Craftsmen.
e) One member for each representing the producer and consumer organizations and the retail sector.
(4) The Board convenes upon the call of the Chairman if necessary with attendance of at least seven members, including the Chairman, and passes resolutions with the absolute majority of those attending the meeting. In the event that the votes are equal, the majority of the party in which the Chairman has voted is considered to be the majority. The resolutions of the Board are implemented by the Ministry.
(5) The secretariat services of the Board are provided by the General Directorate of Internal Trade.
(6) The formation, duties, working principles and procedures of the Board, secretarial services and other issues relating to the Board are determined by regulation.
With this change, unreasonable price increases are prohibited in all phases of the production-supply chain and sales made to the consumer.
At the same time, it is forbidden to avoid selling goods due to price expectations or similar reasons, to make stockpiling, to create a shortage in the market, to perform actions that prevent market balance and free competition and that prevent the consumer from accessing goods.
The Unfair Price Evaluation Board has been established to determine the actions of manufacturers, suppliers and retail undertakings which contradict the provisions set forth by this additional article. The Board is entitled to audit the producers, suppliers and retail undertakings and to impose administrative fines on these undertakings in case it determines the existence of exorbitant price increases and activities that will prevent the consumer from accessing the products.
Fines to be Imposed to Manufacturers, Suppliers and Retail Undertakings
A sanction has been regulated for manufacturers, suppliers and retail undertakings that execute activities leading to price gouging and stockpiling by the Law on Regulating Retail Trade.
The following sub-articles have been added to Article 18 of the Law on Regulating Retail Trade:
“ı) Those who act in contradiction with the first paragraph of Article 1 of Annex 1, will be fined with a penalty starting from10,000 (ten thousand) Turkish liras to 100,000 (one hundred thousand) Turkish liras; and those who act in contradiction with the second paragraph, will be fined with a penalty starting from 50,000 (fifty thousand) Turkish liras to 500,000 (five hundred thousand) Turkish liras,”
“(4) The authority to impose the administrative fines regulated under the sub-article (i) of the first paragraph of this article is vested to the Unfair Price Evaluation Board, and the authority to impose other administrative fines regulated under this article is given to the Ministry. The authority to apply administrative fines belonging to the Ministry may be transferred to provincial units. ”
With this change; the manufacturers, suppliers and retail undertakings that apply an exorbitant price increase in the sales price of a good or service will be fined with a penalty starting from 10,000.00 Turkish Liras to 100,000.00 Turkish Liras; and the manufacturers, suppliers and retail undertakings that executes stockpiling activities will be fined with a penalty starting from 50,000.00 Turkish Liras to 500,000.00 Turkish Liras.
The authority to impose these administrative fines is given to the Unfair Price Evaluation Board.
In order to reduce the effects of the new Coronavirus (Covid-19) pandemic over the economic and social life, certain restrictions have been put into effect on the issues relating to dividend distribution in the companies with share capital. It is aimed not to reduce company resources and to protect existing equity structures of such companies. With regard tosales of goods and services, the determination of price gouging and stockpiling of goods have been prevented and administrative fines have been set forth for those who do not comply with such provisions.