According to the first paragraph of Article 5 of the Communiqué on Share Buybacks No. II-22.1 (the “Communiqué”), a share buyback program can only be approved by a general assembly resolution. However, an exception to this rule is provided in the fourth paragraph of the same article, which states that a share buyback program may also be approved by a board of directors resolution without the need for a general assembly resolution, in order to avoid an imminent and serious loss. Additionally, the fifth paragraph of the same article stipulates that if the company’s shares have been trading below their nominal value or have lost more than 20% of their value in the last month before the date of the board of directors resolution, the existence of an imminent and serious loss shall be deemed to be present. Based on this, although a general assembly resolution is required for the approval of a share buyback program, if an imminent and serious loss is present, the program may also be approved by a board of directors resolution.
With the Capital Markets Board’s (“CMB”) Principle Decision No. 16/531 dated March 19, 2025 (the “Principle Decision”), taking into account recent developments in the capital markets in our country and to ensure stability in the market and to protect the rights of shareholders, a number of new regulations facilitating share buyback transactions have been implemented for publicly traded companies and their subsidiaries. These regulations aim to ensure market stability and protect the rights of shareholders.
The regulations that came into effect with the Principle Decision are as follows:
- Publicly listed companies and their subsidiaries may initiate a share buyback program with a board of directors resolution without the need for a general assembly resolution, provided that it is presented to shareholders at the next general assembly meeting for their information. The board of directors resolution must include the purpose of the share buyback, the maximum duration of the buyback program, the maximum number of shares to be repurchased, and the maximum amount of funds to be used. Additionally, the board resolution must be disclosed to the public in accordance with the CMB’s regulations on material event disclosures.
- Publicly listed companies and their subsidiaries with an existing share buyback program may continue their buyback programs under the conditions specified in the Principle Decision without the need for an additional board of directors resolution.
- The nominal value limit on the number of shares that can be repurchased (10% of the total capital) and the daily transaction limit restrictions (25% of the average trading volume over the last 20 days) have been removed for share buybacks conducted under the Principle Decision.
- The public disclosure obligations regarding share buyback transactions, as regulated in Article 12 of the Communiqué, will not be applied. Accordingly, the processes related to the public disclosure of the share buyback program prepared by the board of directors before the general assembly meeting and its publication on the company’s website will not be required.
- Flexibility has been introduced regarding the restriction on share buybacks during capital increase processes, which was previously prohibited under the Communiqué. Under the new regulation, the prohibition on buybacks/sales during capital increase periods will now be limited to cash capital increases only.
- The requirement under the Communiqué for repurchased shares to be either disposed of or cancelled through a capital reduction within a maximum period of one year will not be applied under the Principle Decision.
- Under the Principle Decision, repurchased shares cannot be sold within 30 days from the date of repurchase. The “first in, first out” method will be applied when calculating the 30-day period. After this period ends, the relevant shares may be disposed of within a maximum of three years in accordance with the principles set out in the Communiqué or may be held while complying with the applicable restrictions.
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