Category: Turkiye

Although the economic needle of the Turkish compass suffers through changes and deviations in the recent years, energy sector (mainly renewable/sustainable) remains true to its nature of sustainable growth and energy.

In the recent couple of years Turkey enacted key legislations to regulate and help the renewable energy sector flourish under the global trends. Licenses and resources management and allocation underwent a comprehensive structural change in the legal infrastructure and implementation. These renovations paved the way for new ideas and projects from the private sector. Of course new ideas and projects were not the singular force of effect due the changes. Co-operations, joint ventures, mergers and acquisitions took a fresh new breath in the recent climate as well.

Joint ventures, mergers and acquisitions are an anatomically essential part of the general private sector. Renewable energy sector is a definite target for M&A transactions since the legislation does not allow transfer of licenses. With the helping hand of the government regulating a new system for the management and allocation of renewable energy resource areas that mainly belongs to the government (YEKA); those essential parts became even more restless. The introductory provision of the regulation hammers out the scope and aim of the renovation pretty summarily; to speed up the assignment process of government, treasury or private owned lands for procuring energy resource areas which can be allocated for large renewable energy production projects. It would be an understatement to summarize the regulation based solely upon this description. The regulation also implements a new system for the support of research and development of local technology to be used in this sector.

Naturally, with these new regulations in place, following and supporting the recent years’ licensing regulations renewal private and corporate cogs started to gain more traction in their movements. Projects met with equity, research met with cooperation and results soon followed. Both foreign and domestic investments played active roles in mergers and acquisitions across the national board. For example; a leading investment bank reflected current trends of the previous stage by the end of 2014 in an article  describing and analysing the M&A trends of the Electric Energy Sector in Turkey, “Foreign investors focused on active and/or large capacity projects in the WPP sector, while the domestic investor focused on the licenses and projects they possessed.” Renewable energy, being one of the most powerful advancement trends of the world, pushed every outside interference possibility aside and followed its personal economic trend. Political changes, stock market trends, foreign exchange rates or any other possible major interference threat did not pose a critical effect for the plans of the sector. Perhaps one effect may be of importance to mention; the wide range of projects and opportunities of Turkey forced companies and sector players in to deals and cooperation. Singular companies and investors were too few to mention. What breathed fresh air to the growing fire of the sector were joint ventures, mergers and acquisitions.

It is important to designate the scope and aim of every legislation and regulation since not every regulation is directly responsible for the sustainable activity of any sector. It must be clearly stated that, the licensing infrastructure change brought forth the comprehensive and resourceful aspects of the investments and projects. Serious projects which have been researched and thoroughly developed rose to the top and the licensing renovations rewarded these projects. So the technical talent had to merge with the financial power, financial parties merged with or acquired strategic investors. The licensing regulation and infrastructure played a key role in the livening of the M&A scene in the renewable energy sector. 

Present day. The newly enacted regulation, which we talked about above, regarding the allocation and designation of resource areas, is richening the scene and the sector following the licensing infrastructure renovation. This new implementation adds a new branch to the scene in which strategic alliances will work together with the government and within the private sector for the development, allocation and management of the resource areas and the projects to be created from these resource areas. Not to mention the support for the research, development and production of national technology for the sector. Naturally the M&A scene have livened even more in reaction, preparation and anticipation.

To summarize, in the light of regulative developments the M&A activity on renewable energy market has livened and matured to the point that it has helped the whole sector stabilize itself. While the sector has been stabilizing its dynamics and regulations, prosperous and effective projects have reached their final addresses and lesser projects (ones bearing technical complications, insufficient R&D etc.) have seen their fair share of review and critique, which also lead to their betterment and/or termination. This push/pull movement actually reflected on the sector as a gearing-down effect, which in turn may have shown a decrease in the M&A numbers, but in the end it proved to be a classic quality over quantity battle, in which quality eventually triumphed. Moreover with the new allocation and management legislations, the proved projects and effective players will have a suitable operating ground for their alliances and joint ventures thanks to this result. This livening and dynamic activity is grossly owed to the new regulation regarding the management and allocation of resource areas. The regulation played the greater role in the betterment and enrichment of the sector while helping categorize the M&A scene both in effectiveness and in volume, directing the key and major players toward specialized partnerships and co-operations which are better suited for the high-supply and effective projects.      

By Vefa Resat Moral, Managing Partner, and Karaca Kacar, Senior Associate, Moral Law Firm

Is Sustainability Possible in Family Businesses? 

As is known, family businesses carries a crucial importance not only in Turkey but also in global sense in economic life. Family companies contribute nearly %75 of GNP and %85 of employment in Turkey. 

Family companies have very substantial role in increasing economic durability as well as taking on the role of “keystone” in Turkish economy.

The issue of durability of family companies is based on the principle of sustainability. On the other hand percentages are relatively weak at the point of transferring family companies to next generations throughout the world. There is no official research in Turkey except the studies and analyses of audit firms and also some academic work products regarding this situation. Moreover it can be observed that the numeric data are far behind the Far East, parallel to worldwide. Well, is sustainability possible in family companies? It can be said that the answer is positive in the situation of proceeding with correct steps towards “Internalized Institutionalization”. In this article we have reviewed the issue of corporate governance in family companies in introductory level based on our experiences accumulated in a long time period with respect to institutionalization of family companies.

Institutionalization and Corporate Governance in Family Businesses

Although institutionalization signifies becoming a uniform system under an accountable and transparent management approach, this situation should be examined dichotomously as “institutionalization of the company” and “institutionalization of family relations” in sense of family businesses. The sum of this distinction will also form the concept of “Internalized Institutionalization”. 

Mechanisms That Can Be Created Within the Process

Family – Company Relationship:

Primarily, it is necessary to mention the importance of family-company relationship. The featured element of healthy family businesses is having “good family relationships” (focusing between love – respect – tolerance – empathy – distance). In the family businesses which have good family relations, practices that mentioned below, such as family constitution, family council and shareholders agreement are only instruments in the context of providing continuance of the company.

Family Council:

Constituting family councils where family members are participants is important in order to make the relationship clearer among the individuals. Unlike the Board of Directors which is the basis of a company, the most important feature of the Family Council is openness and participation. However it should not be forgotten that the purpose of the Family Council is composing a consultation platform; not managing the company.

Family Constitution:

The basic reason of disappearance of the Family Businesses is nonexistence of a plan and a defined process for transition to next generations regarding family assets and family company. Within this context, the significance of organizing a family constitution is major in a family that internalizes institutionalization. Basically, a family constitution includes; mission, share proportion of the company and assets, transfer/alteration of duty, education of family members, rules and conditions of participation of family members to the company management, vision of the business, where the family wants to be in future, election criterions of board members by the company, performance measurement and also management of the family properties.

Shareholders Agreement:

Even the Shareholders Agreement may be thought as part of the family constitution, it regulates the relationship among the shareholders in more detail and more strictly. Generally, restrictions on the transfer of shares owned by the shareholders in the company – in this context, especially preemption right, right of share buy-back and call option, management rights and decision-making mechanisms, competition restrictions- and other rights and obligations of the shareholders related to the company are regulated in this agreement. 

A Decent Board of Directors:

Apart from all the mechanisms that aim to determine the relationship among the family members by written rules, it is necessary not to deny the importance of the board of directors which is the principle unit of a company. According to the Turkish Commercial Code, duties and responsibilities of the Board of Directors are considerably high. It is essential for continuity of the company that the board of directors, which has considerable importance for the company, should not be overwhelmed by emotional bonds in practice within the family businesses.

It is important to remember that the mechanisms mentioned in this article are not limited, and very different policies can be determined in compliance with the characteristics of the family and the company.

Conclusion:

The remedy to the short life cycle of the large part of family businesses and formidable problems that they are facing is internalized institutionalization and corporate governance provided in this direction. Principally, in order for corporate governance to be implemented as required throughout the whole of the family business, the current situation of the company, the appropriate solutions as well as actions to be taken in this case should be determined realistically and these determined actions should be implemented properly. Lastly, it should be carefully followed that everyone implements such solutions and actions with the required diligence. There is no doubt that family businesses shall have a durable, reliable and sustainable structure as a result of the mentioned actions that are taken properly and the determination of ways to be followed both in legal and strategic terms as well as implementation of these without compromise. 

By Vefa Resat Moral, Managing Partner, Moral Law Firm

Although mediation process entered into force about 5 years ago, due to many reasons, it has not caught up the expected effect yet, however, it seems determined to change this trend. It is possible to resort to mediation for resolving all kinds of private legal disputes arising from acts or transactions of real and legal persons.

Mediation is one of the most practical alternative dispute resolution methods providing a road map based entirely and solely on the will of the parties and carried out by impartial professionals called as mediators through amicable negotiations.

Today, the number of requests for mediation has increased considerably, and the total number of disputes that have been resolved through mediation in the past few years has reached a total of 9000. This year, only in January, the number of disputes resolved by mediation corresponds to 3000, proudly says M. Rıfat Hisarcıklıoğlu, the president of Turkish Union of Chambers and Exchange Commodities.

Mediation mainly focuses on parties’ interests and intentions rather than the own discretion of the mediator, and therefore, it enables the parties to decide on procedural matters such as meeting place, dates and period of limitations. In addition, the parties act in a more comfortable and confident way on the strength of not to have an adverse award which is not approved by them at the end of the process. The confidential process of mediation is also one of its tools that makes it attractive. Statements made by the parties during the mediation process are kept strictly confidential and cannot be used as evidence against them in court if no agreement can be reached.

Besides its alternative dispute resolution nature, together with the enactment of the Draft Law on Labour Courts, mediation will become a mandatory pre-condition before applying to Labour Courts for the disputes deriving from re-employment and labour receivables.

Apparently, mediation, which is already adopted by certain sectors of the business world, will try to do its best to first establish and then strengthen its place in the future together with the enactment of the mandatory mediation in labour law. To do so, at first entire community should give it a bold chance and all institutions and mediators should use their best endeavours to keep mediation attractive and useful. 

More importantly, if Turkey wishes to establish Istanbul as a hub for Alternative Dispute Resolution, it should have been already taken into consideration that foreign companies and investors may naturally wish to resolve their disputes, especially with a Turkish company not with a Turkish mediator but through services of a mediator who is citizen of a neutral country but current legislation does not allow that and it is still mandatory to be a Turkish citizen in order to be registered as a mediator.

 

Hence, rather than simply exporting legal institutions from west, we should do more and extend our perspective and plan not only the next move but also the endgame if we really wish to play an important role in international arena.

By Ahmet Efe Kınıklıoğlu, Partner, and Ekinsu Çebi, Trainee Lawyer, Moral Law Firm