The Central Bank of Turkey amended the Capital Movements Circular (“Amendment“). The Amendment entered into force on 4 November 2019.
The Amendment foresees that any proceeds a foreign shareholder provides to a Turkish company for a future capital increase must be converted into capital within three months.
According to Articles 345 and 459 of the Turkish Commercial Code regarding capital contribution payments for capital subscriptions in cash, if a capital increase in cash is not completed within three months, the bank must refund the capital contribution payment in cash to the shareholder. Since all references made to capital advance were removed from the Circular No. 2013/YB-7 of the Central Bank of the Turkish Republic, a capital contribution deposited to bank and not converted into capital within three months would be considered a shareholder loan.
The Amendment clarifies that these requirement relating to capital injection will also apply to payments in foreign currencies.