| Osman Nezih Avgın Lawyer |
ABSTRACT
In practice, publicly traded companies whose shares are traded on Borsa Istanbul A.Ş. Equity Market (“Stock Exchange”) may prefer to utilise their obtained profits by buying back their own shares for various reasons. In Turkish Law, the matter of share buybacks is primarily regulated under Law No. 6102 Turkish Commercial Code (“TCC”) and Law No. 6362 Capital Markets Law (“CML”), as well as in Communiqué No. II-22.1 on Repurchased Shares (“Communiqué on Repurchased Shares”). On the other hand, it is observed that share buybacks increase particularly during periods when mass events negatively affect capital markets, and the Capital Markets Board (“Board”) also guides the practice in a manner encouraging share buybacks by issuing press releases or principle decisions during such periods. In our article, we first address why companies prefer share buybacks. Subsequently, it is explained how share buybacks are regulated in our legal system primarily through the TCC and CML, as well as through the Communiqué on Repurchased Shares and the Board’s regulatory transactions.
Keywords: Stock Exchange, Share Buyback, Capital Markets Board, Joint Stock Company.
INTRODUCTION
One of the most fundamental management issues for companies is how to utilise the obtained profit. One of the methods for publicly traded companies whose shares are listed on the Stock Exchange to utilise their obtained profits is to purchase their own shares (acquisition). In this article, the legal dimension of share buybacks by publicly traded companies whose shares are traded on the Stock Exchange is examined. However, first, the main reasons why companies resort to purchasing their own shares will be briefly explained.
I. REASONS FOR COMPANIES TO PURCHASE THEIR OWN SHARES
In our country, an increase has been observed in the number of companies announcing share buyback programmes in recent years. Companies may prefer share buyback programmes for various economic and strategic reasons. For instance, a company that believes the price of its shares traded on the Stock Exchange does not reflect their true value and is traded at levels lower than they should be may buy back its shares, thereby both sending a message to the market in this direction and aiming to ensure that the share price approaches what is considered its fair value.¹ Indeed, for this reason, particularly during the pandemic period, following the earthquake disaster that occurred in 2023, and most recently after the political developments that took place in March 2025, numerous publicly traded companies announced share buyback programmes as a result of the declines experienced in the Stock Exchange. Another rationale for share buybacks is to increase earnings per share. One of the key indicators that investors consider when evaluating company financials is the amount of earnings per share. Since the company’s acquisition of its own shares will reduce the number of shares in circulation, the amount of earnings per share will increase even if the total profit remains unchanged.² The appearance of a high earnings per share amount may also make the company attractive in the eyes of investors. Additionally, companies that implement share option plans or issue debt instruments convertible into shares may use the company shares they buy back to fulfil their obligations arising from the relevant transactions.³
II. SHARE BUYBACKS WITHIN THE SCOPE OF THE TCC
During the period of the Abolished Turkish Commercial Code No. 6762 (“former TCC”), except for certain exceptions, it was not possible for joint stock companies to acquire their own shares for consideration pursuant to Article 329 of the former TCC.⁴ With the entry into force of the TCC, joint stock companies have been granted the opportunity to acquire their own shares. Share buybacks, which have been carried out in the United States since the 1980s,⁵ constitute a relatively new practice in our country. Although joint stock companies whose shares are traded on the stock exchange are primarily subject to capital markets legislation, in cases where there are no special regulations, it will be necessary to resort to the provisions of the TCC, which has the nature of a general law. Therefore, Article 379 of the TCC and subsequent provisions regarding companies’ acquisition of their own shares must also be taken into consideration.
a. Share Buyback Conditions Set Forth in the TCC
Pursuant to Article 379/1 of the TCC, a joint stock company may acquire its own shares for consideration, provided that it does not exceed one-tenth of its nominal or issued capital, or as a result of a transaction that will not exceed this ratio. With this provision, the TCC has granted companies the opportunity to buy back their own shares; however, it has aimed to protect capital and creditors by limiting this opportunity to a certain extent. For companies to be able to acquire their own shares within the scope of the aforementioned provision, it is mandatory that authorisation be granted to the board of directors by the general assembly. This “authorisation condition” is explicitly regulated in the TCC, and the duration of the granted authorisation is limited to a maximum of five years. Furthermore, the following matters must also be explicitly stated in the authorisation decision: (1) the number of nominal values of the shares to be acquired, (2) their total nominal value, (3) the lower and upper limits of the price that can be paid for the shares in question. In the third paragraph of Article 379 of the TCC, an additional financial limitation regarding share buybacks has been stipulated. Accordingly, after deducting the prices of the shares to be acquired, the remaining company net assets must be at least equal to the total of the nominal or issued capital and the reserve funds that are not permitted to be distributed pursuant to the law and the articles of association. With this regulation, the principle that the share buyback should not undermine the company’s financial stability and the protection of capital has been observed. On the other hand, pursuant to the fourth paragraph of Article 379 of the TCC, only shares whose prices have been fully paid may be subject to buyback. This provision aims to prevent the company from weakening its capital structure by buying back shares that have been committed but not fully paid.
b. The Concept of Avoiding an Imminent and Serious Loss
Article 381 of the TCC provides an exception to the condition that the general assembly must authorise the board of directors. If it is necessary to avoid an imminent and serious loss,⁶ the company carrying out the share buyback may acquire its own shares even without a decision of the general assembly regarding authorisation. In the rationale of Article 381 of the TCC, it is stated that the word “imminent” in the concept of “imminent and serious loss” expresses both direct loss and loss that may immediately produce consequences; and the word “loss” encompasses damage. Furthermore, again in the rationale of the relevant article, examples of imminent and serious danger are listed as follows: “the inability to collect a receivable from a person who is insolvent if the company cannot acquire its own shares, the sudden decline or potential decline of shares on the stock exchange, the transfer or potential transfer of company control to another group”.⁷ In any case, the board of directors of the company that will acquire its shares through this method must provide written information at the company’s first general assembly meeting regarding (1) the reason and purpose of the acquisition, (2) the numbers of the acquired shares, the total of their nominal values and what portion of the capital they represent, (3) the price and payment terms. While flexibility is granted to the company management here, in accordance with the principle of transparency, the general assembly must be informed, thereby also aiming to protect the shareholders’ right of control.
c. Exceptions to Share Buyback Conditions
Pursuant to Article 382 of the TCC, if a company:
i. Applies the provisions of Articles 473 (Reduction of Nominal Capital) to 475 regarding the reduction of its nominal or issued capital;
ii. Is required by the rule of universal succession;
iii. Arises from a legal purchase obligation;
iv. Provided that their prices have been fully paid and is aimed at collecting a company receivable through compulsory execution;
v. The company is a securities company;⁸
it may acquire its own shares without being subject to the conditions specified in Article 379.
III. SHARE BUYBACKS WITHIN THE SCOPE OF THE CML AND THE COMMUNIQUÉ ON REPURCHASED SHARES
a. In General
In the Abolished Capital Markets Law No. 2499, there was no specific provision regarding the buyback of their own shares by publicly traded joint stock companies.⁹ In the CML, however, matters regarding share buybacks for publicly traded companies have been regulated separately. Article 22 of the CML stipulates that publicly traded companies may purchase their own shares within the framework of the conditions determined by the Board. Furthermore, in the same article, regulatory authority has been granted to the Board, and it is stated that “the Board shall also regulate the conditions, transaction limits for publicly traded companies to purchase their own shares, the disposal or cancellation of repurchased shares, and the procedures and principles regarding the public disclosure of these matters”. In this direction, the Board has put the Communiqué on Repurchased Shares into effect.
b. Share Buyback Conditions in the CML
First, in the first paragraph of Article 5 of the Communiqué on Repurchased Shares, parallel to the TCC, it is stated that it is essential for the general assembly to authorise the board of directors for the company to carry out a share buyback. In this framework, in companies wishing to carry out a share buyback, a buyback programme must be prepared by the board of directors. If this prepared programme is approved at the general assembly meeting, the board of directors is deemed to have been authorised. Thus, a share buyback can be carried out in a manner appropriate to the procedure stipulated pursuant to capital markets legislation.
c. Exception to the Authorisation Condition Within the Scope of the Communiqué on Repurchased Shares
An exception has been granted to the authorisation condition for publicly traded companies whose shares are traded on the stock exchange. According to the fourth paragraph of Article 5 of the Communiqué on Repurchased Shares, the aforementioned companies may carry out buybacks with a board of directors decision without seeking the authorisation condition in order to avoid an imminent and serious loss. In this case, they must comply with the obligations regarding public disclosure set forth in Article 12 of the Communiqué on Repurchased Shares. Unlike the TCC, in the Communiqué on Repurchased Shares, the situations in which the existence of an imminent and serious loss will be accepted are limited in number.¹⁰ Outside these circumstances, in order for a buyback to be carried out with a board of directors decision, the company must obtain Board approval prior to the transaction.
d. Limitations Regarding Repurchased Shares
In order to prevent the misuse of share buybacks and limit the negativities¹¹ that may arise as a result of these transactions, various restrictions have been stipulated within the scope of Article 9 of the Communiqué on Repurchased Shares:
i. Proportional Limitation (Art. 9/1): The nominal value of shares repurchased by companies within the scope of the Communiqué on Repurchased Shares, including previous purchases, shall not exceed 10% of the company’s paid-in or issued capital. When calculating this ratio, shares disposed of during the programme period of the repurchased shares will not be taken into account as a deduction item in the calculation of this ratio.
ii. Limitation with Shares Traded on the Stock Exchange (Art. 9/2): It is stipulated that publicly traded companies whose shares are traded on the stock exchange may only buy back their shares of the type that are traded on the stock exchange. In other words, the buyback transaction must be carried out through shares listed on the stock exchange. However, an exception has been introduced to this limitation, and subject to obtaining the Board’s favourable opinion, companies traded on the stock exchange have also been enabled to carry out buybacks through tender offers within the scope of Article 6 of the Communiqué on Repurchased Shares, which contains provisions for companies not traded on the stock exchange.
iii. Financial Resource Limitation (Art. 9/3): The total amount regarding repurchased shares cannot exceed the total of resources that can be subject to profit distribution within the framework of the Board’s regulations. This provision reveals that companies must finance their share buybacks only with distributable equity, thereby aiming to protect the capital structure.
e. Circumstances in Which Buyback and Sale Transactions Cannot Be Carried Out
In order to prevent share buybacks from leading to market manipulation or being misused in a manner that will violate the principle of capital protection, Article 10 of the Communiqué on Repurchased Shares specifies the circumstances in which buyback and sale transactions cannot be carried out. In order to ensure fair market conditions for stock exchange investors, companies must present their insider information to the public in an equal and transparent manner. In this regard, there are regulations in capital markets legislation regarding how the public will be informed and the information to be provided to investors. Pursuant to the first paragraph of Article 10 of the Communiqué on Repurchased Shares, in the event that there is insider information whose disclosure by the company has been postponed, no share buyback or sale transaction can be carried out within the scope of the Communiqué on Repurchased Shares. On the other hand, pursuant to the second paragraph of the aforementioned article, if companies in the nominal capital system have taken a general assembly decision regarding capital increase, from the date the general assembly decision is taken; and if companies in the registered capital system have taken a board of directors decision regarding capital increase, from the date the board of directors decision is taken until the date the capital increase transactions are completed, they cannot carry out buyback and sale transactions. With this provision, it is particularly aimed to prevent transactions that may result in the return of company capital and constitute a violation of the principle of capital protection.
IV. CURRENT PRACTICE IN SHARE BUYBACKS WITHIN THE FRAMEWORK OF THE BOARD’S DIRECTIVES
Within the scope of the authority arising from Article 22 of the CML, the Board can regulate the conditions for publicly traded partnerships to purchase their own shares, transaction limits, the disposal or cancellation of repurchased shares, and the procedures and principles regarding the public disclosure of these matters. Regarding share buybacks, however, the Board has been guiding the practice through various announcements and principle decisions made to the public since 2016.
a. The Board’s Press Release Dated 21.07.2016¹² and Additional Explanation Dated 25.07.2016¹³
Following the coup attempt that occurred on 15 July 2016, the Board, in order to ensure the healthy and stable functioning of capital markets, decided with its press release dated 21.07.2016 that certain limitations regarding share buyback transactions of publicly traded companies whose shares are traded on the Stock Exchange would not be applied until a second announcement. In this announcement, in particular, the obligation to obtain authorisation from the general assembly within the scope of the Communiqué on Repurchased Shares, the limitation that the nominal value of shares that can be bought back cannot exceed 10% of the company capital, and the limitation that it cannot exceed 25% of the daily trading volume were temporarily suspended. On the other hand, the expression “without any limit” contained in the aforementioned announcement caused some doubts in practice; and a need for explanation arose regarding whether publicly traded partnerships could buy back their shares traded on the Stock Exchange without being subject to any legal limitations. In this direction, the Board published an additional explanation dated 25.07.2016 for the purpose of ensuring uniformity in practice and informing companies and investors. In the relevant explanation, it was stated that companies carrying out buybacks must take a board of directors decision containing the purpose of the transaction, the maximum number of shares to be bought back, and the maximum fund amount to be allocated for the transactions, and that this decision must be disclosed to the public. Furthermore, it was expressed that the repurchased shares could not be sold for 30 days from the purchase date, and the “first in, first out” (FIFO) method would be taken as basis in calculating this period. In addition, it was announced to the public that transactions carried out within this framework would not be considered within the scope of market fraud or abuse of information.
b. Press Release Made Within the Scope of the Board’s Bulletin Dated 23.03.2020¹⁴
In its bulletin dated 23.03.2020, the Board announced to the public that the COVID-19 pandemic had caused various negativities in financial markets in Turkey as in the rest of the world, and that certain decisions were taken at the Board meeting dated 19.03.2020 in order to reduce the effects of these negativities. Within the scope of the relevant decisions, share buyback transactions of publicly traded partnerships were also included. Accordingly, it was stated that publicly traded partnerships with an existing buyback programme could continue their buyback activities within the framework of the provisions of the Communiqué on Repurchased Shares. Furthermore, it was shared with the public that publicly traded partnerships wishing to benefit from the exceptional practices contained in the Board’s press release dated 21.07.2016 should take a board of directors decision in this direction. However, it was particularly emphasised that the press releases dated 21.07.2016 and 25.07.2016 were still in force; thus, the Board clearly demonstrated that the regulatory flexibility it granted in 2016 under extraordinary market conditions was also valid during the COVID-19 pandemic period.
c. The Board’s Principle Decision Dated 14.02.2023 and No. 9/177¹⁵
Following the Kahramanmaraş-centred earthquakes that occurred in February 2023 in our country, capital markets entered a turbulent process once again. In the face of this extraordinary situation, in order to protect investors and limit the impact of negativities in the markets, the Board made a new regulation regarding share buybacks of publicly traded partnerships with its Principle Decision dated 14.02.2023 and No. 9/177 (“Principle Decision dated 14.02.2023”). With the Principle Decision dated 14.02.2023, it was stated that the announcements dated 21.07.2016 and 25.07.2016, which were previously implemented under extraordinary conditions, were abolished. Thus, the Board created a new framework adapted to current conditions regarding exceptional regulations on share buybacks. Pursuant to the Principle Decision, publicly traded partnerships whose shares are traded on the stock exchange can now initiate a buyback programme directly with a board of directors decision, without the condition of the general assembly authorising the board of directors. However, in the relevant board of directors decision, it must be stated that the purpose of the buyback, the estimated maximum duration of the programme, the maximum number of shares to be acquired, and the maximum fund amount to be used must be presented to the knowledge of the partners at the first general assembly meeting to be held and disclosed to the public in accordance with the Board’s regulations on special situation disclosures. In addition, the Principle Decision also stipulated that certain limitations contained in the Communiqué on Repurchased Shares would not be applied temporarily. Accordingly, the 10% limit of repurchased shares in proportion to capital and the financial limitations regarding the fund allocated for buyback not exceeding distributable resources were suspended. Furthermore, certain provisions of the Communiqué on Repurchased Shares regarding certain public disclosure obligations, transaction principles, and the disposal of repurchased shares were also excluded from application.
d. The Board’s Principle Decisions Dated 01.08.2024 (No. 41/1198) and 19.03.2025 (No. 16/531)
During the period when the Principle Decision dated 14 February 2023 was in force, upon it no longer being deemed necessary to grant flexible buyback opportunities to companies in market conditions for the purpose of encouraging them to buy back their own shares, the Board made a new regulation with its Principle Decision dated 01.08.2024 and No. 41/1198¹⁶ (“Principle Decision dated 01.08.2024”). With this principle decision, the Principle Decision dated 14.02.2023 was abolished; thus, a return was made to the exact application of the provisions of the Communiqué on Repurchased Shares in share buyback practices once again. Thus, a return was made to the application in the form stipulated in the legislation of limitations such as the obligation for companies to take a general assembly decision to initiate a buyback programme, the nominal value of shares that can be bought back not exceeding 10% of the company’s paid-in or issued capital, and the daily buyback amount not exceeding 25% of the average trading volume in the last 20 business days. With this decision, the Board announced that the temporary facilities granted during the extraordinary period had been terminated and the normal regulatory framework had regained functionality. Approximately seven months after the principle decision was abolished, as a result of sharp sales and price fluctuations experienced in the Stock Exchange due to political developments that occurred in March 2025, the Board reintroduced certain flexibilities regarding share buybacks with its Principle Decision dated 19.03.2025 and No. 16/531¹⁷ (“Principle Decision dated 19.03.2025”). Many publicly traded companies whose shares are traded on the Stock Exchange announced buyback programmes by taking board of directors decisions in compliance with this principle decision.¹⁸ Thus, companies aim to protect their investors from abnormal price movements in the share price. With the Principle Decision dated 19.03.2025, it was stipulated that a share buyback programme could be initiated with only a board of directors decision, without seeking a general assembly decision. However, this decision must be presented to the knowledge of shareholders at the first general assembly meeting to be held. In addition, the facilities regarding the 10% capital limit and the daily trading volume limit, which were abolished with the Principle Decision dated 01.08.2024, were put back into effect. Furthermore, some of the public disclosure obligations will again not be applied for a temporary period, but minimum disclosures that will protect investors’ right to information will continue. It has been stated that the repurchased shares cannot be sold for a period of 30 days from the purchase date, and after this period, they must be disposed of within a maximum of three years. In addition, it was explained that the buyback and sale prohibition is only valid for paid capital increases, and free capital increases will not be evaluated within this scope. A few days later, the Board announced in its Bulletin dated 23.03.2025 that, pursuant to the Principle Decision dated 19.03.2025, in share buybacks to be carried out until the end of the session on 25.04.2025: (i) the provisions that the buyback order cannot exceed the current best buy/price offer or the last sale price, (ii) time restrictions for opening, midday single price and closing sessions and the sanctions linked to non-compliance with these, and (iii) the upper limit regarding the total amount of repurchased shares would not be applied. In the following months, the Board, with announcements made consecutively, extended the measures and practices specified in the announcement dated 23.03.2025 until the end of sessions on 30.05.2025, 04.07.2025, and 29.08.2025, respectively. As of the end of September 2025, no decision abolishing the Principle Decision dated 19.03.2025 has been announced by the Board.
CONCLUSION
In general, regulations regarding companies buying back their own shares are set forth in the TCC. For publicly traded companies whose shares are traded on the Stock Exchange, however, the Communiqué on Repurchased Shares, which has been issued in line with the authority granted by the Board and the Law, is taken as basis. In our legal system, although the way is open for companies to acquire their own shares, when both the TCC and the Communiqué on Repurchased Shares are examined, it is seen that this authority is subject to various limitations. It can be stated that the aforementioned limitations are stipulated for the purpose of preventing the share buyback practice from being misused in different ways. On the other hand, particularly due to capital markets being affected by adverse developments experienced both at the global level and within the country, the Board has acted with the aim of protecting investors and decided that certain limitations in the legislation would not be applied for companies wishing to announce a share buyback programme, until otherwise decided. Consequently, as of September 2025, at the point reached in practice, the Board’s Principle Decision dated 19.03.2025 is still in force. With this principle decision, publicly traded companies whose shares are traded on the Stock Exchange can announce a share buyback programme with only a board of directors decision, without seeking a general assembly decision and without being subject to certain limitations set forth in the legislation. Indeed, numerous publicly traded companies traded on the Stock Exchange have taken board of directors decisions in line with this regulation and announced share buyback programmes.
1 Stock Buybacks: Background and Reform Proposals, United States Congressional Research Service, Last Access Date: September 30, 2025, https://crsreports.congress.gov/product/pdf/LSB/LSB10266
2 Stock Buybacks: Why Do Companies Buy Back Shares?, Investopedia, Last Access Date: September 30, 2025, https://www.investopedia.com/terms/s/sharerepurchase.asp#:~:text=Key%20Takeaways,risk%20that%20it%20will%20fall
3 SASA Polyester Sanayi A.Ş. Special Situation Disclosure dated 06.09.2022, https://kap.org.tr/tr/Bildirim/1060657
4 Acquisition of Company’s Own Shares Pursuant to the New TCC, Orak Çelikboya, Leyla, Last Access Date: October 1, 2025, https://www.erdem-erdem.av.tr/bilgi-bankasi/yeni-ttk-uyarinca-sirketin-kendi-paylarini-iktisabi
5 Stock Buybacks: Background and Reform Proposals, United States Congressional Research Service
6 According to Tekinap, the concept of “imminent and serious loss” expresses “losses directed towards the continuation of the company’s activities, its assets, its development or the implementation of its plans, or which may cause the deterioration of its stability and the harmony among shareholders, and whose consequences may arise in the not-too-distant future.” (Ünal TEKİNALP, “New Law of Capital Partnerships”, Istanbul 2015, p. 112)
7 Rationale of Turkish Commercial Code No. 6102 Announced in the Official Gazette dated 14/2/2011
8 Company whose business subject is securities trading (Ünal TEKİNALP, “New Law of Capital Partnerships”, Istanbul 2015, p. 115)
9 Fatma Betül ÇAKIR ÇELEBİ, “D.E.Ü. Faculty of Law Journal, Tribute to Prof. Dr. Durmuş TEZCAN”, Vol. 21, Special Issue, 2019, pp. 2545-2581
10 Pursuant to Article 5/5 of the Communiqué on Repurchased Shares, “In cases where the daily weighted average price of partnership shares a) trades below its nominal value or b) loses more than twenty percent in the last month prior to the board of directors decision date, the existence of an imminent and serious loss is accepted.”
11 For example, the company suffering loss as a result of the buyback transaction due to disposal at a price below the repurchased price, elimination of the division of authority among company organs, alteration of the share ownership structure in the company for personal interests, manipulation of trading prices of shares on the stock exchange, etc. (Fatma Betül ÇAKIR ÇELEBİ, “Conditions for Companies Whose Shares are Traded on the Stock Exchange to Acquire Their Own Shares”, Vol. 21, Special Issue, 2019, pp. 2551-2553)
12 Capital Markets Board’s Press Release dated 21.07.2016
13 Capital Markets Board’s Press Release dated 25.07.2016
14 Capital Markets Board’s Bulletin dated 23.03.2020 and No. 2020/19
15 Capital Markets Board’s Bulletin dated 14.02.2023 and No. 2023/10
16 Capital Markets Board’s Bulletin dated 01.08.2024 and No. 2024/37
17 Capital Markets Board’s Bulletin dated 19.03.2025 and No. 2025/16
18 Pyramid Securities Share Buyback Table, Last Access Date: September 30, 2025, https://www.piramitmenkul.com.tr/Arastirma/ArastirmaRaporDosya/47736