- Contractual Penalty under Turkish Law
- Options and Similiar Rights of Shareholders in respect of the Shares of Joint Stock Companies
- Important Principles regarding Dividends in Joint Stock Companies
- Can Errors in Predicting Future Facts Be Considered Fundamental Errors?
- Healthcare PPP Projects: Funders’ Direct Agreements
Contractual Penalty under Turkish Law
Introduction
A contractual penalty, or penal clause, is used as a mechanism to force a debtor to duly fulfil its obligations under a contract. Whereas a creditor may claim its damages in accordance with the general provisions of the law of obligations, having a contractual penalty provision set forth under a contract eliminates the obligation to prove the damages, and enables the creditor to claim a pre-determined and precise penalty amount. Contractual penalties are widely used in practice, especially in contracts with high values. The following sections of this newsletter article explain the legal characteristics and types of contractual penalties, as well as the amount, invalidity, and reduction of penalty.
Options and Similiar Rights of Shareholders in respect of the Shares of Joint Stock Companies
Even though the principle of transferability of shares in a joint stock company is deemed a general principle, not only the Turkish Commercial Code (“TCC” or “Code”) includes provisions regarding the restriction of share transfers, but also in practice, such restrictions are often regulated under either the articles of association or shareholders agreements. In accordance with The TCC, the registered shares shall be transferred without being subject to any restrictions, unless otherwise regulated by the Code or the articles of association.
In practice, the mechanisms and options with the aim to restrict share transfers, or compel the shareholder to transfer his/her shares which serve the keeping of a balance between the company’s shareholding structure, or preserving the power relation among the shareholders, or preventing a deadlock are observed in the form of rights conferred to the shareholders over the shares. In this article, the most common versions of such rights are examined by their most important features.
Important Principles regarding Dividends in Joint Stock Companies
Joint stock companies are established with the purpose of profiting and distributing dividends. The dividend right of shareholders is one of the most fundamental rights in joint stock companies. Turkish Commercial Code numbered 6102[1] (“TCC”) governs determination of dividends, body authorized to determine dividends, and payment procedures of dividends. As well, the provisions regarding public joint stock companies should be separately analyzed due to different regulations in relation to public companies.
This newsletter article examines the provisions on dividends under the TCC for joint stock companies and Capital Markets Law numbered 6362 (“CML”)[2], together with secondary legislation for public companies. However, this article will not examine the provisions on advance dividends, separately, nor will it make any assessment from a tax law perspective.
Can Errors in Predicting Future Facts Be Considered Fundamental Errors?
According to Article 30 of the Turkish Code of Obligations (“TCO”), which is based on the principle of the freedom of will, a party falling into a fundamental error when entering into a contract shall not be bound by that contract. In fact, not being bound by the contract is an option for the party falling into an error situation. The party can either approve the contract, prevent its invalidity by staying silent for one year starting from being aware of the error, or he/she can cancel such contract by notifying the counter-party within the said time period that the contract is not binding upon him/her.
Article 30 of the TCO denotes that the error shall be fundamental; whereas, Article 31 lists the cases of fundamental errors - these are “error in the characteristics of the contract (subparagraph 1),” “error in the subject of the contract (subparagraph 2),” “error in the party of contract (subparagraph 3),” “error in the person that the contract relates to while entering into such contract (subparagraph 4),” and “quantitative error (subparagraph 5).”
Healthcare PPP Projects: Funders’ Direct Agreements
Funders’ Direct Agreements (“FDAs”) are gaining greater recognition, especially with the introduction of public-private partnership (“PPP”) models in healthcare projects in Turkey. In PPP projects, FDAs are significant as they are the only agreement wherein both the third party, which is the Ministry of Finance of Turkey (“Administration” or “MoH”) for the purpose of this Newsletter and the lenders are counterparties. Lenders would obtain more protection from the Administration, and would, therefore, be able to overcome certain obstacles through certain mechanisms incorporated under FDAs.
In this article, we will analyze the background and significance of FDAs, the nature of FDAs under Turkish legislation, and the structure and content of the provisions of FDAs. We will also discuss certain provisions of the FDAs, such as step in rights.
