What is the financial assistance prohibition?
The financial assistance prohibition (TTK Art. 380) bars a Turkish joint-stock company from advancing funds, making loans or providing security for the purpose of enabling a third party to acquire its own shares. Transactions violating the rule are null and void. The provision was imported from EU company law to protect capital and creditors — and it is the single biggest structural constraint on leveraged acquisitions in Türkiye.
What it catches in practice
The classic LBO pattern — acquisition debt secured by the target’s own assets or serviced by its cash flows under a security package signed at closing — sits squarely in the danger zone. So do subtler forms: target guarantees for the buyer’s acquisition loan, upstream security granted “post-closing” but planned pre-closing, and vendor-financing structures where the company itself funds the exit of a shareholder. The purpose test is substantive: papering the assistance after completion does not cure a financing that was arranged for the acquisition.
How Turkish deals are structured around it
Three lawful patterns dominate. The holding-company merger: the buyer’s acquisition vehicle borrows, acquires, and later merges with the target, converting acquisition debt into the merged entity’s debt under merger rules with their own creditor safeguards. Debt pushdown via dividends: the target distributes lawful distributable reserves, which the buyer applies to the loan — capital-maintenance rules, not Art. 380, set the limits. And time-and-purpose separation: refinancing target-level working capital on standalone commercial terms after closing, documented as independent of the acquisition. Exceptions in the statute itself are narrow: transactions by banks and financial institutions in the ordinary course, and share acquisitions by or for employees — each still subject to reserve requirements.
Does Art. 380 apply to limited companies (Ltd.)?
The prohibition is written for joint-stock companies; it does not extend to limited şirket by its terms. But creditor-protection and capital rules still constrain aggressive structures, and lenders’ counsel typically applies Art. 380 discipline by analogy.
What happens if a deal breaches it?
The assisting legal acts are void — meaning the security package evaporates precisely when the lender needs it. That is why banks, not just targets, police the rule intensely in Turkish acquisition finance.
Related: joint-stock company, private equity.