Compulsory Amendments on the Association Article of Company in the Light of the New License Regulation

Introduction

Following the Electricity Market Law, which came into force at the end of March, it was published by the Unlicensed Regulation. At the beginning of November after the publication of the License Regulation, the electricity market rules became at least theoretically clear. In this context, with the ruling on the minimum capital amount and the transfer of shares which is specified on License Regulation necessity of amendment of association articles arose for legal entities wishing to operate in electricity market.

Legal Framework Under the Amendments

It is mandatory the companies that will operate in the energy market shall have established as a joint-stock or limited liability company in accordance with the provisions of the Turkish Commercial Code. Also if established as a joint stock company in accordance with the capital market legislation all shares excepting listed on the stock exchange are obliged to be registered share certificate. Therefore, the statement that all of the shares of a joint stock company are registered to the name shall be in association articles of company. In addition, when applying for preliminary license or license it is necessary to make sure that the issues specified in License Regulation are included in association articles which is going to be submitted to the Authority.

The Amendments Regarding ‘’ The Share Transfer‘’

In accordance with the License Regulation, one of the ruling which is required to include in association articles of company is issues relating to the transfer of shares. Until license is received, except for inheritance and bankruptcy reasons, the activities/transactions which is reasoned share transfer, the share transfer or the directly/indirectly chancing of shareholding structure of associate who is owner preliminary license shall not be impracticable. Therefore, shares transfer have forbidden within pre-license period and it is obligatory that the legal entities who will apply for the pre-license shall regulate the provision of ‘the company’s partnership structure cannot be changed during pre-license’ in association articles of company. Under the production license applications and the other license applications excepting production license, the association articles which is submitted to the Authority must include the provisions set forth in the License Regulation in terms of the share transfers and mergers and the Contracts which do not include hereby regulations must be harmonized with the legislation.

As a result, the investor who plans an pre-License / license application initiates produce that prepayment of 1/4 of the capital in accordance with the provisions of the Turkish Commercial Code, knowing that the rest should be completed within two years and taking into account the restrictions on share transfer and mergers. In this framework, it is formed in association article of company that the points which is required including in association article and determined in hereby regulation such as capital, share transfer and mergers. Also it must be ensured that deficient issues are completed.

The Amendments Regarding ‘’The Minimum Capital‘’

As known, within the framework of the new regulation introduced by the Electricity Market Law, a pre-license will be given to investors who apply for a production license for a specific process instead of the license and pre-license will be converted into the Production License following completion of the preliminary license’s obligations. The investor will provide that obtained permission, approval, license and similar documents which is required in accordance with the legislation in order to start the production facility investment within this period of preliminary license and he will deemed to obtain ownership or use right of the area which will be established for production facility.

Also License Regulation requires that the Company’s minimum capital;

• for the generation plant, 5 percent of the total investment which foreseen by the Authority

for the establishment of a nuclear power based generation facility, 1 percent of the total amount of investment is estimated.

Therefore, companies that do not meet this requirement have to submit association articles of company to the EMRA. However, it is mandatory that capital of the legal entity applying for more than one application is not less than the amount of the capital provided for each application and if a legal entity having a license or applying for a new pre-license, the capital of the company is not less than the amount calculated by collecting the capital amounts foreseen by the Authority for each preliminary license granted by each license granted without the provisional acceptance of the production facility within the scope of own capital.

In license applications, company’s minimum capital specified in association articles of company it must correspond to;

• 5 percent of preliminary license applications made for the establishment of a nuclear energy based production facility
• 20% of the total investment foreseen by the Authority for the generation facility.

Unless this requirement is met, minimum capital should be increased and association articles of company regarding the increase should be submitted to the Authority.

Except the Production License, in terms of other license applications the capital of the company shall be minimum 2 million TL and it is require that on applying supply license for responsible supply companies and distribution & market operation license must be at the rate and / or amount determined by the Board and it shall be submitted to the Board that hereby necessity is met in association articles of company. The issues related to capital adequacy which is required to provided by legal entities having distribution licenses and supply companies during their license are determined by the Board decision. In addition, through the License Regulation, for legal entities carrying out the activities of which are subject to regulation, the provisions of the company’s purpose and subject, the obligation which is complied with relevant legislation regarding Electricity Market is predicted and the provisions regarding that it is mandatory which is received appropriate opinion of the Authority in amendments of association article concerning provisions related company’s purpose and subject shall be included in association articles of company.