With the Banking Regulatory and Supervisory Authority’s [the “BRSA”] decision numbered 10250 and dated 24 June 2022 [the “Restriction Decision”], TRL borrowing by Companies [“Companies”], other than banks and financial institutions, which are subject to independent audit has become subject to a foreign currency asset [“FX-Asset”] restriction was introduced.
By publishing a new decision [the “Decision”] on 7 July 2022, the BRSA clarified some regulations introduced by the Restriction Decision and brought some flexibility upon their implementation.
Regulations Clarified and Softened by the Decision
With the Decision, in evaluating whether the Companies whose FX-Assets exceed 15 million TRL and the greater amount of the total assets of the Company or the Company’s net sales revenue for the last year exceeds the %10 of the threshold specified above can borrow TRL cash commercial loans; the following documentation will be required by the bank (i.) for Companies subject to independent audit the most recent financial statements, including the provisional tax periods, submitted to the tax office in the annexes of the tax declaration, regulated by the relevant provisions of the Tax Procedure Law No. 213; (ii.) for Companies that are obliged to prepare consolidated financial statements, the financial statements audited by independent audit firms will be taken as basis however, foreign subsidiaries and affiliates will not be included in such assessment.
On the other hand, pursuant to the Restriction Decision, for Companies whose TRL equivalent of the FX-Assets do not exceed 15 million TRL, or even if it exceeds, whichever is greater than the total assets or the last year's net sales revenue that do not exceed 10% of the specified threshold amount, certain conditions had to be met to borrow cash commercial loans in TRL. In this respect, it was required to declare and undertake that they would receive loans through the reports they would submit within the first 10 business days of each month according to the previous month's balance sheet, stating that they would not exceed the specified conditions. With the Decision, the aforementioned liability was softened by having Companies to submit their declarations and undertakings that are valid from 30 June 2022 and provide supporting documentation to the relevant bank by the end of the last business day of the month following the end of each quarter. Accordingly, the most recent financial statements submitted to the tax office in the annexes of the tax returns for the Companies subject to audit will be used in the evaluation process whereas, the most recent consolidated financial statements audited by independent audit firms for the Companies that are obliged to prepare consolidated financial statements are to be used for such calculation.
With the Restriction Decision, Companies which are not able to borrow foreign currency loans and have a foreign currency net position gap within the three-month period following the loan application date could borrow cash commercial loans in TRL limited to the said position gap, but only if they were approved by the authorized independent audit firms. From now on, certified public accountants can also confirm that the Companies have a net short position in the quarter following the loan application date, while submitting the required documentation to the relevant bank by the last business day of the month following the end of the relevant quarter.
Other Novelties Brought by the Decision
It is stipulated that the provisions of the Decision will not be applied to Companies, whose audit obligation will begin at the end of 2022. If the bank has hesitations as to whether a Company is subject to independent audit, a one-month period will be provided to submit documents for the respective Company to prove that it is not within the scope of the Decision.
With the Decision, the scope of FX-Assets was expanded and participation shares of exchange traded funds that are indexed to gold or foreign currency owned by the Companies or that follow such indices have also been included. As another amendment, within the scope of TRL cash commercial loan carried out by the Companies with the banks, the amounts borrowed in TRL by lending foreign currency, including gold, on the spot, will also be considered as SWAP transactions. In addition, the Decision will also be applied in case the Companies use loans from foreign branches of the banks.
By Yasemin Keskin, Senior Associate, and Beliz Boyalikli, Legal Intern, Guleryuz & Partners