Veto Rights in Turkish Merger Control Regime

Pursuant to the Guidelines on the Concept of Control, joint control exists where two or more undertakings or persons have the possibility of exercising decisive influence over another undertaking. The main feature of joint control materializes when two or more parent companies have the right to reject strategic decisions and to create a deadlock situation in the decision process. The Guidelines on the Concept of Control provide the following definition with respect to the concept of decisive influence: The power to block actions which determine the strategic commercial behaviour of an undertaking. Accordingly, if the minority shareholders retain veto rights for the decisions which are essential for the strategic commercial behaviour, then joint control would occur in terms of that joint venture.

While the veto rights that allow decisive influence over strategic decisions and business policies could effectively grant joint control, the veto rights of minority shareholders that protect the financial interests of the investors (i.e., changes in the master agreement of the joint venture, increase or decrease in the capital or liquidation) would not do so. Paragraph 53 of the Guidelines on the Concept of Control exemplifies the veto rights that confer joint control as follows: decisions such as the budget, the business plan, major investments or the appointment of senior management. Importantly, it is not relevant whether or not the acquirer of joint control would, in fact, exercise its decisive influence. Accordingly, it is sufficient that such a right simply exists.

Minority shareholders are not required to hold all or even a majority of the mentioned decisive influence veto rights. Paragraph 54 of the Guidelines on the Concept of Control sets forth that the points of consideration on this matter are (i) the content of the veto right and (ii) the significance that said right carries within the operations of the joint venture. The Guidelines on the Concept of Control summarize some of the important veto rights such as (i) appointment of senior management and determination of a budget, (ii) business plan, (iii) investments, and (iv) market-specific rights.

For more information on veto rights in Turkish merger control regime, please feel free to reach out to ELIG Gurkaynak at +90 212 327 1724 or through gonenc.gurkaynak@elig.com.