30 November 2011, London

Av. Dr. Umut KolcuoğluAv. Dr. Umut Kolcuoğlu

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General General OverviewOverview

I. INTRODUCTION TO THE NEW COMMERCIAL CODE

II. INCORPORATION

III. BOARD OF DIRECTORS

IV. AUDIT

V. GENERAL ASSEMBLY

VI. SHARE AND SHARE CAPITAL

VII. SHAREHOLDERS

VIII. STRUCTURAL CHANGES

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Main Objectives of the New Turkish Commercial Main Objectives of the New Turkish Commercial Code Code (“New TCC”)(“New TCC”)

Technological DevelopmentsTechnological Developments

Transparency / Access to Information Transparency / Access to Information

Compliance with European Union LegislationCompliance with European Union Legislation

Introducing International Corporate Governance Standards Introducing International Corporate Governance Standards

Introducing Internationally Accepted Auditing and Introducing Internationally Accepted Auditing and Reporting StandardsReporting Standards

Increasing Shareholder Value Increasing Shareholder Value

IntroductionIntroduction to the New Commercial to the New Commercial CodeCode

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A. A. Minimum CapitalMinimum Capital

Minimum amount of share capital of a joint stock company (“JSC”) is TRY 50,000, while this amount is TRY 100,000 for non-public JSCs adopting the registered capital system (Start-up Capital).

B. B. Public Offering at the IncorporationPublic Offering at the Incorporation

Public offering is available at the incorporation stage.

C. C. Renouncing the Principle of Ultra ViresRenouncing the Principle of Ultra Vires

JSCs will be able to carry out any transactions that fall within the scope of their business.

I. I. IncorporationIncorporation (i) (i)

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D. D. Single Shareholder CompaniesSingle Shareholder Companies

The New TCC launches JSC with single shareholder in line with the 12th European Union Directive numbered 89/667. This reform also enables a shareholder to buy other shareholders’ shares and convert the company into a single shareholder company. In such case, the board of directors (“BoD”) must register the single shareholder with the relevant trade registry within seven days following the transfer date.

I. I. IncorporationIncorporation (iii) (iii)

Limitations for JSCs having a Single Limitations for JSCs having a Single ShareholderShareholder

Transactions between the single shareholder and the company must be in writing except for the ordinary day-to-day transactions.

JSC cannot acquire its shares and be converted into a single shareholder JSC.

Limitations for JSCs having a Single Limitations for JSCs having a Single ShareholderShareholder

Transactions between the single shareholder and the company must be in writing except for the ordinary day-to-day transactions.

JSC cannot acquire its shares and be converted into a single shareholder JSC.

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E. E. Capital ContributionsCapital Contributions

Values that can be contributed as capital have been diversified.

Intellectual property rights and virtual environments including electronic media, domain names and websites can be contributed as capital.

I. I. Contributions in cash Contributions in cash

At least ¼ of the nominal share value must be paid at JSC’s registration whereby the remaining portion must be paid within 24 months following the registration.

II. II. Contributions in kindContributions in kind

Assets that are not subject to any seizures, pledges or any similar encumbrances may be contributed as capital in kind. Receivables that are not due, service acts, personal works and commercial reputation may not be contributed.

I. I. IncorporationIncorporation (iv) (iv)

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A. A. Criteria of MembershipCriteria of Membership

One member BoD is introduced.

BoD members are not required to be a shareholder.

At least one BoD member who is authorized to represent the company must reside in Turkey and be a Turkish citizen.

At least one fourth of the BoD members must have a graduate degree. This requirement is not applicable for BoDs consisting of one member.

Legal entities may become a BoD member (significant change in the liability regime). Legal entity’s representative will be registered with the trade registry and the registration will be announced on the company’s web site.

II. Board of Directors (i)II. Board of Directors (i)

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B. B. Meetings of BoDMeetings of BoD

Meetings of BoD may be held through electronic media.

The meeting quorum for BoD of half-plus one of the directors, as provided by the Turkish Commercial Code No. 6762 (“Existing TCC”), is abolished. The presence of the majority of BoD members is adequate.

C. C. Assignment of DutiesAssignment of Duties

The BoD may delegate its management rights to certain BoD members or third parties that are not BoD members. As a result, the BoD members may be classified as executive and non-executive members.

The non-assignable duties of BoD are explicitly set.

II. Board of Directors (ii)II. Board of Directors (ii)

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D. D. RepresentationRepresentation

As a result of abolishment of the ultra vires principle, transactions concluded between JSCs’ authorized representatives and third parties that are beyond the purpose and scope of the company are binding for JSC unless the third party is aware or should be aware of the fact that the transaction is beyond the purpose and scope of the company.

E. E. Prohibition to become Indebted to the Prohibition to become Indebted to the CompanyCompany

BoD members and their related parties specified in the New TCC cannot borrow from the company. The company cannot provide surety, guarantee or security for these persons and cannot take over their liabilities.

II. Board of Directors (iii)II. Board of Directors (iii)

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F. F. Invalid ResolutionsInvalid Resolutions

The New TCC provides examples of invalid decisions of BoD, without being exhaustive. According to Article 391 of the New TCC, the BoD decisions;

violating the principle of equality, violating the principle of equality,

conflicting with the essential character of the corporation and conflicting with the essential character of the corporation and principle of maintenance of capital, principle of maintenance of capital,

violating the fundamental rights of the shareholders; or violating the fundamental rights of the shareholders; or

violating non-assignable powers of other corporate bodies violating non-assignable powers of other corporate bodies

are invalid..

Determination of the invalidity of the BoD decisions may be requested from the court.

II. Board of Directors (II. Board of Directors (iiv)v)

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III. Auditing (i) III. Auditing (i)

A. A. IndependentIndependent AuditorAuditor

Internal auditor that was among the mandatory organs of JSC is replaced by external independent audit mechanism.

Audit is carried out by;

independent audit firms for big sized companies;

sworn financial advisors (Yeminli Mali Müşavir) or independent accounting financial advisors (Serbest Muhasebeci Mali Müşavir) for medium and small sized companies.

Audit is performed in accordance with the Turkish Auditing Standards which are identical with IFRS.

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B. B. Transaction AuditorTransaction Auditor

Transaction auditors audit certain transactions of JSC such as incorporation, capital increase and decrease, merger, de-merger, conversion and issuance of securities.

C. C. Special AuditorSpecial Auditor

Any shareholder may request appointment of a special auditor from the general assembly (“GA”). A special auditor will be appointed by court if GA accepts the request.

III. Auditing (ii) III. Auditing (ii)

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A. A. General General Overview Overview

The non-assignable and exclusive authorities of GA are listed.

Nullity of GA decisions is regulated. The provisions of nullity stated in the New TCC are not numerus clausus.

The shareholders may participate to GA, submit proposals and vote through electronic media.

Executive BoD members, one BoD member, independent auditor and transaction auditor must attend GA meeting.

The right to call GA meetings has also been granted to liquidators.

An internal regulation must be prepared by BoD in relation to the conduct of GA meetings.

IIVV. General Assembly (i). General Assembly (i)

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B. B. Capital IncreaseCapital Increase

Unless the share capital is completely paid up, GA cannot decide to increase its capital, except for the capital increase through internal funds.

The corporate body authorized to decide on the increase is the GA in the issued capital system and the BoD in the registered capital system.

IV. General Assembly (ii)IV. General Assembly (ii)

BoD must prepare a report with respect to the type of BoD must prepare a report with respect to the type of the capital increase. The transaction auditor appointed the capital increase. The transaction auditor appointed by BoD must evaluate the by BoD must evaluate the BoD BoD report and audit report and audit whether the capital increase is in line with the law and whether the capital increase is in line with the law and the Turkish Accounting Standards. the Turkish Accounting Standards.

BoD must prepare a report with respect to the type of BoD must prepare a report with respect to the type of the capital increase. The transaction auditor appointed the capital increase. The transaction auditor appointed by BoD must evaluate the by BoD must evaluate the BoD BoD report and audit report and audit whether the capital increase is in line with the law and whether the capital increase is in line with the law and the Turkish Accounting Standards. the Turkish Accounting Standards.

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I. I. Capital Increase through External FundsCapital Increase through External Funds

• The first portion representing 25% of the capital must be paid at the time of registration of the capital increase and the remaining 75% must be paid within 24 months following the registration.

• The provisions under the Capital Market Law regarding capital increase in the registered capital system for public JSCs are reserved.

II. II. Capital Increase through Internal FundsCapital Increase through Internal Funds

• In a capital increase through internal funds, (i) statutory reserves not allocated for a certain purpose, (ii) part of the statutory reserves that may be freely utilized and (iii) funds that may be included to the capital and the balance sheet are converted to capital.

IIVV. General Assembly (i. General Assembly (iiiii))

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IV. General Assembly (iv)IV. General Assembly (iv)

III. III. Conditional Capital IncreaseConditional Capital Increase

• The New TCC introduces conditional capital increase mechanism.

• AoA may grant a right to receive new shares by exercising an option or conversion right to;

employees;

owners of debt instruments of the company or its subsidiaries.

• The capital will be increased upon the exercise of the conversion or option rights without further action.

• Conditional capital increase is an exception of the fixed capital system.

The total nominal value of the capital which The total nominal value of the capital which is increased conditionally may not exceed is increased conditionally may not exceed 50% 50% of the share capital of the company.of the share capital of the company.

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C. C. Restriction of Pre-Emption RightsRestriction of Pre-Emption Rights

Each shareholder has the right to acquire newly issued shares on a pro-rata basis.

The pre-emption right may only be restricted or removed by a GA resolution,

if there is a just cause (e.g., acquisition of a business or a part if there is a just cause (e.g., acquisition of a business or a part thereof, participation of the employees in the company); andthereof, participation of the employees in the company); and

upon the affirmative votes of the shareholders representing upon the affirmative votes of the shareholders representing 60% of the share capital. 60% of the share capital.

This provision also applies to BoD resolutions in the registered capital system.

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IV. General Assembly (v)IV. General Assembly (v)

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A.A. General Overview General Overview

Minimum nominal value per share is 1 Turkish kuruş.

Share without a nominal value is not recognized.

Distribution of advance profit is introduced also for non-public companies.

Registered capital system for non-public JSCs is introduced. Accordingly, capital increases of non-public JSCs can be effectuated up to the registered capital limit through a BoD decision.

V. V. Share and Share Capital (i)Share and Share Capital (i)

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B. B. Privileged SharesPrivileged Shares

Privilege may be granted regarding (i) dividend, (ii) liquidation share, (iii) pre-emption and voting rights or (v) another shareholding right not specified by law.

I. I. Creation of Privileged SharesCreation of Privileged Shares

• Privileges may be stipulated by the AoA.

V. V. ShareShare and Share Capital and Share Capital (ii)(ii)

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II. II. Privilege on Voting Rights Privilege on Voting Rights

•Privilege on voting rights may be provided by granting unequal voting rights to shares of equal nominal value.

•Each share may entitle its owner maximum of 15 votes. This limitation may not apply if the corporate governance principles require to do so or in the presence of a valid reason, in any case upon court decision.

VI. Share and Share Capital (ii)VI. Share and Share Capital (ii)

Privileged voting right cannot be exercised for the following Privileged voting right cannot be exercised for the following resolutions: resolutions:

amendment of AoA;amendment of AoA;

appointment of transaction auditors;appointment of transaction auditors;

release and liability claims of BoD members. release and liability claims of BoD members.

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III. III. Representation of Share Groups in the BoDRepresentation of Share Groups in the BoD

•In principle privileges are granted to shares and not to shareholders. However, Article 360 of the New TCC sets forth an exception:

Certain share classes;

shareholders who form a group in terms of their characteristics; and

the minority shareholders

may be granted the right to be represented in the BoD.

VI. Share and Share Capital (iii)VI. Share and Share Capital (iii)

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IV. IV. Privileged Shareholders Special Committee (“PSSC”)Privileged Shareholders Special Committee (“PSSC”)

• The following resolutions of the GA that may infringe the rights of privileged shareholders, require approval of the PSSC:

amending of the AoA;

authorizing BoD regarding the capital increase; and

BoD resolutions on the capital increase.

• The BoD may initiate an action for annulment against the resolution of the PSSC within one month from the date of the resolution.

VI. Share and Share Capital (iv)VI. Share and Share Capital (iv)

If the privileged shareholders approve the amendment of If the privileged shareholders approve the amendment of the AoA in the GA meeting, no PSSC meeting is necessarythe AoA in the GA meeting, no PSSC meeting is necessary..

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C.C. Share TransfersShare Transfers

In principle, shares can be transferred without any restriction unless otherwise provided by the New TCC or the AoA.

I. Restrictions arising from Law

• Registered shares, which have not been totally paid up, may only be transferred with the approval of BoD.

• BoD may refuse to grant its approval, if the transferee’s ability to pay raises doubts and the security requested by the company is not provided.

VI. Share and Share Capital (v)VI. Share and Share Capital (v)

The provision of the Existing TCC restricting the transfer of The provision of the Existing TCC restricting the transfer of shares corresponding to capital in-kind for a period of two shares corresponding to capital in-kind for a period of two years has been abolished.years has been abolished.

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II. Restrictions arising from AoA

• AoA may regulate that the registered shares may only be transferred with the company’s approval.

• Transfer of the non-listed registered shares may only be disapproved based on an important reason laid down in the AoA.

• The disapproval grounds are stipulated in the New TCC.

• The transferability restrictions cannot be aggravated by the AoA.

• If BoD disapproves transfer of shares, the ownership of the shares and all the rights related thereto shall remain on the transferor.

VI. Share and Share Capital (vVI. Share and Share Capital (vii))

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D. D. JSC’s Acquisition of its own Shares JSC’s Acquisition of its own Shares

The New TCC allows JSCs to acquire up to 10% of their own shares subject to the following conditions:

GA must authorize BoD for the acquisition.

Shares subject to the acquisition must be fully paid-up.

Net assets minus the price paid for the value of the acquired shares cannot be less than the sum of issued capital and non-distributable reserves.

If there is an imminent and serious loss, JSC may acquire its own shares in the absence of a GA resolution authorizing the BoD.

JSC cannot subscribe for its own shares.

VI. Share and Share Capital (vVI. Share and Share Capital (viiiiii))

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A. A. General OverviewGeneral Overview

I. Equal Treatment

• Every shareholder must be treated equally under equal circumstances.

II. Prohibition to become Indebted to the Company

• Shareholders may not become indebted to the company excluding debts arising from their share subscriptions.

• However, if the debt is related to a transaction with the company within company’s scope of activity and business of a shareholder and if such debt is on arm’s lenght terms, this prohibition may not be applicable.

VII. Shareholder (VII. Shareholder (ii))

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B. B. Shareholder RightShareholder Rightss

I. Voting Rights

• Voting right is determined in accordance with the nominal value of the share.

• Each shareholder has at least one vote and if a shareholder holds more than one share, his/her voting rights may be limited with the AoA.

• The right to elect BoD members by way of cumulative voting is introduced to non-public companies; the Ministry of Industry and Trade is authorized to regulate cumulative voting with a communiqué.

VII. Shareholder (VII. Shareholder (iiii))

In order to have the voting right, the minimum In order to have the voting right, the minimum share capital determined by law or by AoA must be share capital determined by law or by AoA must be paidpaid up. up.

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II. Right to Information

• Shareholders’ right to information is expanded.

• Legal remedies are strengthened.

• Limitation of right to information of a shareholder is strictly defined.

• Website Requirement Website Requirement Every JSC has to create a Every JSC has to create a website website

The following and other similar information should be announced on the website:

Documents and notices regarding GA meetings and the means for electronic GA and BoD meetings and for electronic voting

Year-end and interim financial statements and merger and de-merger balance sheets, audit reports, valuation reports, etc.

VII. Shareholder (VII. Shareholder (iiiiii))

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III.Right to request Special Audit

• Every shareholder has the right to request special audit from GA.

• As a new minority right, if GA does not accept special audit request of a shareholder, the minority shareholder may request appointment of a special auditor from the court.

VII. Shareholder (VII. Shareholder (iiiiii))

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B. B. Minority RightsMinority Rights

The New TCC includes new minority rights for those owning

10% of the shares in private companies; and

5% of the shares in publicly held companies.

VII. Shareholder (VII. Shareholder (iviv))

AccordingAccordingly ly minority shareholders mayminority shareholders may;;

apply to court for appointment of a new apply to court for appointment of a new auditor; auditor;

request from BoD to print request from BoD to print share share certificates;certificates;

demand company’s dissolution on just demand company’s dissolution on just cause; and cause; and

nominate nominate a BoD a BoD candidate. candidate.

AccordingAccordingly ly minority shareholders mayminority shareholders may;;

apply to court for appointment of a new apply to court for appointment of a new auditor; auditor;

request from BoD to print request from BoD to print share share certificates;certificates;

demand company’s dissolution on just demand company’s dissolution on just cause; and cause; and

nominate nominate a BoD a BoD candidate. candidate.

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CC. . Squeeze-OutSqueeze-Out

I. Squeeze-Out by the Majority Shareholder

• Shareholders who own directly or indirectly at least 90% of the share capital and the voting rights can squeeze out the minority shareholders if the minority shareholder(s) hinders activities of the company, acts in bad faith, causes distress or acts recklessly.

• In this squeeze-out process, the purchase price of the minority shareholder(s)'s shares will be the stock exchange or actual value.

II. Squeeze-Out in Case of Merger

• The dissolving company may squeeze out the minority shareholders with at least 90% of the total votes.

VII. Shareholder (VII. Shareholder (vv))

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A.A. Group of Companies Group of Companies

New concept of “group of companiesgroup of companies” (controlling shareholder/subsidiary) is introduced.

Group of companies is formed when a company;

owns the majority of voting rights in another company;

can appoint the majority of the members of the BoD pursuant to its bylaws;

has executed a control agreement with another company; or

holds control in any other way.

VIII. Structural Changes (i)VIII. Structural Changes (i)

AAt least one controlling shareholder or the subsidiary t least one controlling shareholder or the subsidiary must be must be in Turkeyin Turkey for for the New TCC the New TCC to to apply. apply.

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Reporting Obligations, Right to Information and Special Audit

•Reporting obligations and right to obtain information among the parent and the subsidiary company are regulated.

•Subsidiary’s shareholders has the right to claim for appointment of a special auditor before the court.

•Abuse of control by the parent company is regulated.

VIII. Structural Changes (iVIII. Structural Changes (iii))

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B. B. MergerMerger

Merger of different types of capital companies is available.

Insolvent companies or companies in the process of liquidation can merge.

Expedited merger procedures are available for group companies and small sized companies.

The merger agreement may provide to the shareholder an option to choose either to have shares in the surviving company or to exit and receive compensation (ayrılma akçesi).

Compensation can be paid to shareholders in exchange for the privileges that will not be preserved after the merger.

Unless the transactional auditor reports that there’s no risk for the creditors resulting from the merger, creditors may request collaterals during the three-month period following announcement of merger.

VIII. Structural Changes (iVIII. Structural Changes (iiiii))

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B. B. De-De-MergerMerger

De-merger is currently regulated only by the Corporate Tax Code and the Communiqué on Mergers of Commercial Companies.

New TCC regulates de-merger and partial de-merger.

Symmetric (ratios are preserved) and asymmetric (ratios are not preserved) de-merger is introduced.

VIII. Structural Changes (iVIII. Structural Changes (ivv))

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Effective DatesEffective Dates