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Turkey introduces amendments concerning capital loss and negative equity calculations

February 2021

5 February 2021 - Due to the weakening of the Turkish Lira, Turkey introduced amendments to Article 376 of the Turkish Commercial Code concerning procedures for capital loss, contingency reserves and negative equity. The changes were introduced via Communiqué No. 6102, which came into effect on 26 December, 2020.

The Amendment covers:

  1. Changes to calculating capital loss and negative equity: half of the sum of expenses arising from leases, amortizations and personnel expenses may now also be omitted in the calculations;
  2. Clarifications on when the sum of the share capital and the statutory reserves may be determined by taking into account the “loss”: at least half of the sum of the share capital and the statutory reserves will be considered uncovered, provided a certain set of conditions are satisfied;
  3. Limitations on the use of loss compensation funds: these may only be used to offset losses;
  4. Changes to decreasing share capital: introduces an opportunity to decrease share capital to the minimum share capital amount, provided certain conditions are satisfied;
  5. Extensive revisions of principles concerning payments of cash contributions in capital increases.

It is recommended to evaluate a company’s financial standing periodically in light of the provisions of Art. 376 to assess whether its financial resources are sufficient. The amendments should also be taken into consideration when making calculations concerning capital loss and negative equity.

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