Distribution of the Advance Dividends in Joint Stock Companies 7 July 2017

The advance payment of dividends in joint stock companies is regulated by Turkish Commercial Code numbered 6102 (“TCC”) and The Communique on Advance Dividend Distribution (“The Communique”) which is published in the Official Gazette on 9 August 2012. This article describes the important points to be considered in the distribution of dividends in Joint Stock Companies, by explaining the issue in accordance with the provisions of the Communique.

I. What are the conditions of distributing the dividends?

According to the article 5 of the communique, the company should make profit in accordance with the interim financial reports of three, six or nine months, which are prepared in the period when the dividend shall be distributed, and the General Assembly of the company should adopt a resolution on the distribution of the dividends.

In order to adopt a resolution, the shareholders who have at least 1/4 of the capital, or their representatives should attend to the General Assembly meeting and a decision should be taken by majority of votes.

a. The Content of The Resolution of The General Assembly:

Article 6 of the Communique determines the content of the resolution which shall be adopted by the General Assembly regarding the distribution of the dividends. Accordingly, the resolution should have that;

if there is not enough profit at the end of the related financial year to meet the amount of the advance dividend payment distributed within the year;

the amount of advance dividends which exceeds the net profit of the year, shall be deducted from the free reserve funds of the previous year, if any; in case the free reserve funds could not meet the amount of the advance dividends, the overpaid advance dividends should be repaid to the company by the shareholders, upon the warning of board of directors,

if the company in loss at the end of the related financial year;

after deducting the amount of loss from legal and free reserve funds, the balance free reserve fund should deducted from the distributed advance dividends, and upon the deduction, if the amount of distributed advance exceeds the amount of the balance free reserve fund, the exceeded amount should be provided by the shareholders to the company, upon the warning of board of directors.

Additionally, the amount of the advance dividends which are paid before the related financial year, should be deducted from the profit of the related financial year. Without completing this process, the General Assembly cannot decide on distributing the dividends or paying the advance dividends.

II. How shall the amount of the Advance Dividends be calculated?

According to the Article 7 of the Communique; “advance dividend shall be calculated by deducting prior years’ losses, taxes, funds or its financial equivalence, legal and free reserve funds, the amounts for privileged shareholders, dividend share owners, from the amount of interim profit. Advance dividend amount which shall be distributed cannot exceed the half of the amount which is calculated in accordance with the explanation above.

In case the company makes profit in interim periods in the same financial year, the advance dividend to be distributed should be calculated by deducting the paid amount of advance dividend in previous interim periods, in addition to the explanation above. Advance dividend amount which shall be distributed cannot exceed the half of the amount which is calculated in accordance with this procedure.”

III. Who has the right to receive the advance dividend payment?

Advance dividend shall be paid to the shareholders in accordance with their share proportions, without considering privilege shares. No one can receive advance dividend payment other than dividend share owners, board of directors members who are not shareholders, and shareholders.

IV. What are the steps to be taken by the board of directors during the distribution of advance dividends?

In case the company makes profit in accordance with the interim financial statements and a resolution is adopted by the General Assembly, the board of directors should proceed as follows;

A report regarding the distribution of the advance dividend should be prepared and this report should include that;

• the interim financial statements which are the basis of distribution of advance dividends, are prepared in accordance with the Article 515 of the Law numbered 6102, which states that “such a report should be prepared to state the reality as trustingly and clearly, by showing the assets, debts and liabilities, equities, and the results of the activities of the company”
• and the amount of the advance dividend to be distributed is calculated in accordance with the Article 7 of the Communique, which is explained above.

Any document which proves that the other conditions and conditions regarding the calculations have been fulfilled, should be attached to the report.

Later, a decision should be taken by the board of directors on the procedure of distributing the advance dividend to the shareholders.

Advance dividends should be paid within 6 weeks as of the decision of the board of directors.

In case of having any situation stated in Article 6/1 of the Communique, overpaid advance dividend should be collected from the shareholders by the board of directors.

V. Conclusion:

As explained above, the advance dividend distribution is possible in accordance with the conditions specified in the Communique, which are that the company should make profits based on the interim financial statements of three, six or nine months, and the General Assembly should adopt a resolution on the distribution of the advance dividends.

Türkçe Versiyonu İçin

http://www.kasaroglu.av.tr/tr/27995/Anonim-Sirketlerde-Temettu-K-r-Payi-Avansi-Dagitimi