I. Introduction
Under the Energy Market Law (“Law“), legal entities wishing to engage in specified activities are obliged to obtain a license for each activity, except for the exceptions within the scope of this Law and the Regulation, before commencing their activities. The procedures and principles regarding pre-licensing and licensing practices in the electricity market are set out in the Electricity Market Licensing Regulation (“Regulation”). Pursuant to Article 6 of the Law and Article 5 of the Regulation, a legal entity that will engage in generation activities is obliged to obtain a preliminary license.
Electricity market regulations subject the share transfers of joint stock or limited liability companies holding electricity licenses to certain conditions and to the permission of the Energy Market Board (“Board“).
In this study, the regulations and exceptions regarding the share transfers during the preliminary license and license period within the scope of the Law and the Regulation
II. Restrictions on Share Transfer during the Pre License Period
Pursuant to Article 12 of the Regulation, one of the conditions to be met by legal entities wishing to apply for a pre-license is to include a provision in the articles of association of the legal entity that the shareholding structure of the company cannot be changed during the pre-license period. In order to resrict the freedom of share transfer granted under the Turkish Commercial Code, it is mandatory to include such a provision in the articles of association of the company. Thus, the share transfers to third parties during the pre-license period is prevented.
Article 6 of the Law and Article 19 of the Regulation titled “Termination and cancellation of the pre-license” stipulates that the pre-license shall be canceled in the event of a direct or indirect change in the shareholding structure of the legal entity holding the pre-license, transfer of shares or merger and division of shares, except for the reasons of succession and bankruptcy, until the license is obtained, with the exceptions specified.
Article 57 of the Regulation titled “Share Transfers” prohibits the direct or indirect change of the shareholding structure of the legal entity holding pre license, share transfers, and transactions that will lead to the transfer of shares, except for the reasons of inheritance and bankruptcy, until the license is obtained.
However, certain exceptions to this strict share transfer prohibition have been introduced by paragraph 1 of Article 57 of the Regulation. According to this article, the following situations constitute exceptions to the share transfer prohibition during the pre-license period:
• Changes in the shareholding structure of public legal entities and legal entities with a publicly traded legal entity shareholder, resulting from the shares of the said shareholder, limited to its publicly traded shares,
• Legal entities given pre-license for facilities foreseen to be established within the scope of international agreements,
• Indirect shareholding changes that occur in the shareholding structure of a legal entity holding a ations, resulting from share capital increase and/or change of shareholders,
• Within the scope of the provisions of the Turkish Commercial Code numbered 6102, the direct or indirect changes in the shareholding structure of a legal entity holding a pre-license, as a result of direct and indirect acquisition of their own shares by such legal entity and shareholders of such legal entity,
• Direct or indirect share acquisitions in a legal entity holding a pre-license by using foreign resources, carried out by legal entities established abroad or by legal entities controlled by these legal entities and established pursuant to the Turkish Commercial Code numbered 6102,
• Direct or indirect changes in the shareholding structure of a legal entity holding pre-license, as a result of the share transfers between the spouses and individuals who have a direct or indirect share in the shareholding structure of such legal entity with first degree blood kinship,
• Directt or indirect changes in the shareholding structure of a legal entity holding a pre-license whose management was seized by the Savings Deposit Insurance Fund,
• Direct and / or indirect changes in the shareholding structure of a legal entity holding a pre-license issued for YEKA.
At this point, one of the most important exceptions is related to direct or indirect share acquisitions in the pre license holder legal entity by legal entities established abroad or legal entities controlled by these legal entities, by using foreign resources. With subparagraph ı of paragraph 1 of Article 57 of the Regulation, a rather important exception to the restrictions on the transfer of shares during the pre-license period has been introduced by the Board in cases where shares are transferred to or financed by a foreign investor in order to encourage foreign investment during the period when our country needs foreign investment. However, it is important to note that this exception is not directly applicable; in other words, it is not an unconditional
exception. Whether the conditions in Article 57(ı) of the Regulation are met or not is subject to the examination to be made by the Authority based on the application to be made by the relevant parties.
III. Restrictions on Share Transfers during the License Period
Based on the fact that the shareholding structure and control of the company to which the public duty is transferred by granting a license should also be under the supervision and control of the administration, the Board has subjected the transfer of shares above a certain percentage to the permission of the Board. Pursuant to Article 5, Paragraph 3 of the Law, among the legal entities operating in the Electricity Market that are subject to tariff regulation, these companies are required to obtain permission from the Board for capital share changes exceeding 5% in publicly traded companies and 10% in other companies.
Parallel to the Law, Paragraph 2 of Article 57 the Regulation stipulates that the direct or indirect acquisition by a natural or legal person of shares representing ten percent or more of the capital of a legal entity holding a license, or five percent or more of the shares representing five percent or more of the capital of publicly traded companies, and share transfers that result in a change of control in the shareholding structure of the legal entity, or other transactions that result in this result, independent of the aforementioned capital share changes, are subject to the approval of the Board.
The minority shareholding ratios set forth in the text of the Law and the Regulation are five percent in publicly traded companies and ten percent or more in other companies, which are the minority shareholding ratios set forth in the Turkish Commercial Code. Shareholders holding shares at these rates have additional rights that may affect the operation and even control of the company. For this reason, share transfers at or above the aforementioned ratios are considered significant and are subject to the Board’s approval.
Another issue that the Law also imposes a permission obligation under Paragraph 3 of Article 5 is that the Board’s permission is required for all kinds of transactions and operations that may mean a change in the ownership or right of use of the facilities under the control of a licensee company.
Finally, paragraph 2 of Article 57 of the Regulation stipulates that the establishment of a pledge on the shares of the license holder legal entities whose tariffs are subject to regulation and the establishment of account pledges for these legal entities are subject to the approval of the Board each time. Therefore, with this article, share pledges to be given for distribution companies are subject to the permission of the Board.
There are two differences between the Regulation and the elements set forth in the Law. First, while the Regulation includes pledge transactions as well as share transfers among the matters requiring the Board’s permission, right to use, which grant broader rights, are not mentioned. However, according to the express provision of the Law, the establishment of right to use and the transfer of these rights are also subject to the Board’s permission. Another difference is that the term “approval” in the Regulation is different from the term “permission” in the Law. The concepts of permission and approval differ in terms of the timing. Permission must be obtained before the transaction takes place, whereas approval involves confirmation of compliance after the transaction has taken place. Therefore, in the current situation, for transactions involving the conditions specified in the Law and the Regulation, the Board’s authorization must be obtained first, because the Law uses the term permission.
IV. Conclusion
Pursuant to the Electricity Market Law and the Electricity Market License Regulation, certain restrictions have been imposed on the transfer of shares by legal entities wishing to and operating in the electricity market. The purpose of these regulations is to keep the control of the companies holding licenses in the electricity market under certain conditions and to prevent the entry of persons who cannot apply for a license to the market through share transfer. In this way, it is aimed to maintain healthy competition in the sector and to preserve the balance and safety in the market. However, the Law and the Regulation provide for certain exceptions to this strict limitation. It is very important for the legal entities that will operate in the electricity market to consider the limitations mentioned in this study while planning their investments in order to carry out a healthy investment process.
