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The Company Merger and Acquisition Process Under The Turkish Commercial Code

The Company Merger and Acquisition Process

The company merger and acquisition process has become widespread in today’s business world. Mergers and acquisitions can be undertaken for various reasons, such as growth strategies, gaining a competitive advantage, increasing market share, reducing costs, expanding product offerings, and entering new markets.

However, these processes have many challenges due to their complex structures and legal regulations. Without proper strategies and effective planning, unexpected risks and outcomes can arise during the merger or acquisition process. Therefore, companies must proceed with careful planning and professional legal support during their merger and acquisition processes.

In the Turkish economy, company mergers and acquisitions and privatization are significant. The concept of due Diligence plays an important role in the negotiations between the parties and the examination of the target company during mergers and acquisitions. Due Diligence is a crucial aspect of the decision-making process in the transfer or acquisition of companies, often referred to under the general term of company marriages.

What is The Concept of Due Diligence?

Black’s Law Dictionary, for the concept of Due Diligence, says;

An activity or behavior that is prudent, careful, continuous and attentive, as can be expected from a reasonable and prudent person in the presence of similar conditions, provided that each case is evaluated according to its specific conditions and characteristics.

The concept of Due Diligence can be used in many different meanings. Nowadays, it is a frequently used concept, especially in company mergers or companies going public (public offering).

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Due Diligence is a detailed and systematic data or acquisition analysis about the company’s general situation to be acquired. In practice, it means a detailed and specific examination of the target company before it is acquired or merged within the framework of both acquisition and merger transactions.

Due Diligence can be classified in various ways. Accordingly, Due Diligence can be categorized as follows:

  • By Subject: Financial, Tax, Environmental, Human Resources and Cultural, Technical, Commercial, and Legal Due Diligence,
  • By Scope: Full and Limited Due Diligence,
  • By Time: Pre-Signing Due Diligence, Post-Signing/Pre-Closing Due Diligence, and Post-Closing Due Diligence,
  • By Parties Involved: Seller and Buyer Due Diligence.

Company Mergers and Acquisitions

Merger, which is a type of structure change in commercial companies, means that more than one company comes together within a company participating in the merger or a newly established company, based on the concluded merger agreement, and the company or companies other than the newly established or merged company are dissolved without liquidation. It is a legal matter.

Suppose the merger takes place within one of the existing companies. In that case, a merger occurs through the acquisition of the other company by this company (merger absorption in the form of a takeover). On the other hand, if the merger occurs within a new company established outside the existing companies, a merger in the form of a new organization (combination) is in question.

Mergers regulated by the Turkish Commercial Code No. 6102 are voluntary mergers based on a contract. Legal mergers that take place by Law or by the decision of an authority authorized by Law, considering public order, are not regulated in the TCC. However, based on the provision of article 136 of the TCC, which regulates the concept of merger can be defined as follows:

It is the merger of more than one trading company within the body of one of them or in a newly established company without liquidating their assets, and it provides the shareholders of the companies participating in the merger with the opportunity to become a shareholder in the company where the merger took place, according to a certain change rate.

In a merger, only one “assignee” and one or more “assigned” companies exist. Acquired and transferred companies are called companies participating in the merger. The transferee company may be a company that existed before the merger started, or it may be a company established for the direct merger.

Under article 136/1 (a) of the TCC, if the merger takes place in the form of a company taking over another company or companies, this type of merger is called “merger by acquisition” by the Turkish Commercial Code. Suppose all of the merging companies combine their assets within the body of the newly established company without entering the liquidation process. In that case, this situation is expressed as a “merger as a new organization” in the provision of article 136/1 (b) of the TCC.

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The factors that characterize the merger are the existence of more than one trading company, the fact that the merger process takes place following the Law, the assets of the transferred company being taken over as a whole, and the transferred company being terminated without going into liquidation and is deleted from the trade registry. Although transactions and processes that do not carry these characteristic elements resemble a merger, there is no legal merger.

For example, if a Joint-Stock Company (JSC) acquires all of the shares of another JSC, there is no merger. Again, even if a trading company transfers its commercial enterprise with its assets and liabilities to another trading company in return for cash and then enters the liquidation process and ends, even if it involves results similar to the merger, it is not possible to talk about a merger in the legal sense. The merger is carried out for an economic purpose, such as increasing competitiveness.

However, the restriction on the merger in the Law on the Protection of Competition provisions must be respected for whatever purpose it is carried out.

Merger and Acquisition Process and Transaction Details

Mergers and acquisitions are merging two or more companies into a single company or acquiring another company by one company. Large companies usually carry out these transactions, which can cause significant volatility in the financial markets. The merger and acquisition process consists of many stages and may require approval from various institutions. Strengthening growth strategies, reducing costs, gaining competitive advantage, and increasing market shares are among the reasons why companies undertake mergers and acquisitions.

Who Are The Merger and Acquisition Parties?

According to the provisions of the TCC, mergers are subject to limitations in terms of type. This means that the types of companies that can merge are specified in the provisions of the TCC. Accordingly, valid mergers may take place as follows, pursuant to article 137 of the TCC:

Capital companies can merge with capital companies and cooperatives, and provided that they are the transferee company, they can merge with collective and commandite companies.
Sole proprietorships can merge with sole proprietorships and capital companies, and provided that they are the transferee company, they can merge with cooperatives.
Cooperatives can merge with cooperatives and capital companies, and provided that they are the transferee company, they can merge with sole proprietorships.

Merger Agreement

The regulations regarding the merger agreement to be prepared when there is a merger are found in article 145 of the TCC. Under regulations in the TCC, merger agreements must be made in writing. The merger takes place after this written agreement is signed by the management bodies of the companies where the merger takes place and approved by the general assemblies.

The regulation regarding certain elements must be included in the merger agreement is in article 146 of the TCC. The trade names of the companies where the merger took place, their legal status, and the names of the unlimited liability partners in the companies can be given as examples of the mandatory elements that should be included in the contract pursuant to the relevant regulation.

Merger Report

In the companies where the merger will occur, the bodies in charge of the management prepare a report on the merger status. The report can be prepared jointly by the companies to be merged, or it can be prepared separately. If the merger is realized with the new establishment method, the contract of the new company to be established should be attached to the merger reports prepared by the companies’ Boards of Directors (BoD).

Merger Decision

The company’s management body submits the merger agreement to the general assembly. For the merger to occur, the general assembly must approve this transaction. Details on the quorums sought in taking the decision are found in article 151 of the TCC. Following the merger decision taken after the necessary quorums are met at the general assembly, the company’s management bodies apply to the trade registry for the registration of the merger. With the realization of this registration, the transferred company is considered to be officially dissolved.

Partnership Shares and Rights

In the event of a merger, the TCC has included some regulations to protect the partnership rights of the partners in the transferred company due to this partnership. According to these regulations, the shareholders of the transferred company have the right to claim the shares and rights of the transferee company at a value corresponding to the existing partnership shares in the company and the rights attached to these shares.

Various aspects are considered while calculating this right of claim granted to the partners of the transferred company. Examples of matters to be taken into account are the values of the assets of the companies participating in the merger and the distribution of the voting rights of the company’s shareholders. It may be possible to pay equalization to the partners of the transferred company during the merger phase. However, this condition is conditional on staying within one-tenth of the real value of the partnership shares allocated to the partners of the transferred company. It is also possible to have non-voting shares in the transferred company.

In this case, what needs to be done is to give shares with the same value, lacking votes or voting rights, to the shareholders holding these non-voting shares. Attaching privileges and rights to shares in the transferred company may be possible. In this case, the acquiring company must provide rights or an appropriate response equivalent to these privileges.

In the contract they have prepared for the merger, the companies where the merger has taken place may offer the company partners the opportunity to choose between acquiring the shares and partnership rights of the transferee company or giving them as separation funds.

Required Procedures Regarding Company Mergers and Acquisitions

In cases where companies prefer to merge through acquisition, the acquiring company must increase its capital. The purpose of this is to protect the rights of the partners of the transferred company. In cases where the time interval between the signing date of the merger agreement and the balance sheet date is more than 6 (six) months, the companies participating in the merger are required to issue an interim balance sheet.

In this case, only in cases where there are major changes in the assets of the companies that will participate in the merger, issuing an interim balance sheet is not optional but a necessity. In the interim balance sheet to be issued, only the accepted values in the last balance sheet are changed by considering the commercial books. In addition, there is no need to take a physical inventory.

Legal Consequences of Mergers and Acquisitions

A company’s acquisition of another company must be registered to be valid. After the registration process is completed, the merger becomes legally valid.

After the registration process, the assets of the transferred company pass to the transferee company without the need for any transaction. All active and passive assets are included in the transferred assets. All partners in the transferee company become partners of the transferee company upon registration. In this case, the transferred company will be dissolved.

Streamlined Merger Method

Considering the documents and processes to be prepared in the merger provisions regulated in the TCC, the merger process is long and arduous. The aim here is to prevent the shareholders of the transferred company, especially the creditors, from losing their rights.

To protect the rights of the creditors, the legislator regulates the points to be considered in this process and the documents that must be prepared absolutely and bring convenience for the transferee and the transferred company in cases where the creditors will not lose their rights.

Under Article 155 and Article 156 of the TCC, the application area and the facilities provided by the facilitated merger of capital companies are regulated. The facilitated merger is an institution recognized by the TCC only for the mergers of capital companies.

In this context, the TCC proposes a merger method in which company mergers are subject to fewer procedural procedures if the relevant conditions are met. Applying the facilitated merger method is possible in 2 (two) cases: where the transferee capital company owns all the shares or at least 90% (ninety percent) of the transferred capital company.

  • Accordingly, in the first case, a capital company that acquires all voting shares of the acquired capital company or a company or a natural person or groups of persons bound by Law or contract, as per Article 155/1 of the Turkish Commercial Code, can merge with the capital companies participating in the merger, if the capital companies are the owners, by using the simplified method.
  • In the second case, if the capital company acquiring under Article 155 of the Turkish Commercial Code owns at least 90% (ninety percent) of the voting shares of the acquired capital company, for the minority shareholders, the merger can be facilitated using the simplified method, provided that an offer is made to provide either equivalent shares in the acquiring company or a cash equivalent equal to the real value of the shares. No additional payment obligation, personal commitment, or liability arises due to the merger.


To ensure that those who have participated in the merger process do not face any legal liability and/or the merger does not become subject to cancellation lawsuit, even if it is subject to a lawsuit, it is in the interest of companies to strictly comply with the procedures and processes envisaged in the Turkish Commercial Code regarding the merger and manage the process with expert personnel.

Mergers and acquisitions are frequently encountered and significant topics in the business world. Companies may engage in mergers and acquisitions for various reasons, such as achieving growth objectives, reducing costs, and gaining a competitive advantage. However, these transactions are complex processes that require expertise in both legal and financial aspects. Additionally, mergers and acquisitions’ economic, social, and political impacts should be considered. Therefore, conducting comprehensive research and seeking consultancy services before making decisions on this matter can assist companies in taking the right steps.

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