An Overview to Financing Agreements in Terms of COVID-19
As measures against the COVID-19 pandemic impacts business life, the aftermath also brings with it the necessity to re-visit financing agreements by the parties.
In order to fully analyze the consequences of the pandemic, each and every agreement of a specific transaction should be analyzed, in detail. The crucial matters to assess regarding financing agreements may be summarized, briefly, as follows:
- Does the agreement contain any force majeure clause? Which occasions are defined as force majeure, and which conditions are foreseen with respect to force majeure (such as notification obligation, documentation, or measures to be taken for reduction of damage)? Is there any catch-all wording under the provision?
- Is there any market disruption provision under the agreement? What is the calculation method stipulated in the provision?
- What is the scope of the representations and warranties under the agreement? Is there any repeating representation that may cause misrepresentation due to the COVID-19?
- What are the periodic covenants and the scope of information covenants under the agreement? Would it be possible for an obligor to still fulfill its undertakings? What are the limitations for the undertakings?
- Is there a period foreseen in order to complete any outstanding information and documentation that are required as per the Regulation on Credit Transactions of Banks? Has any suspension been made in line with the decision of the Banking Regulatory and Supervisory Agency?
- What are the remedies or cure periods prescribed under the agreement?
- Is there any material adverse change provision?
- Is there any risk of foreclosure of security? What are the financial support mechanics under the agreement?
- Are there any other agreements that would be affected by the financial agreement? Is there any cross-default risk?
- Are any measures to be taken by the company that are convenient in terms of maintenance of the operations and the performance of the obligations possible?
- Is there any grace period? Is there any provision that would enable parties to suspend payment of a loan or repayment thereof?
- What are the consequences of default of an obligor or a lender? Is there any provision that enables the obligor to change the defaulting lender?
- Is there any risk of insolvency?
- What are the feasible mechanics under the agreement? What will be the most crucial points in the negotiations when a dispute arises? Which law governs the agreement?
- Does the project fall under the scope of the Circular issued by the Presidency of the Republic of Turkey dated 2 April 2020?
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The Regulation on the Information Systems of the Banks and Electronical Banking Services (“Regulation”) is published in the Official Gazette dated 15 March 2020 and numbered 31069. Regulation will enter into force on 1 July 2020.
Important amendments are made through the Communiqué ("Communiqué No. 2020/11"), regarding the Amendment of the Communiqué on Procedures and Principles Regarding the Fees That Banks Can Charge Their Commercial Clients ("Communiqué No. 2020/4"), published in the Official Gazette dated March 29, 2020 and No. 31083. The Communiqué No. 2020/11 shall enter into force on April 1, 2020.
The Banking Regulation and Supervision Board ("Board") published its decision dated 02.04.2020 and numbered 8976 ("Decision") within the scope of the measures taken against COVID-19 outbreak.
Through the press announcement (“Announcement”) dated 05.05.2020 and published on the website of the Banking Regulation and Supervision Agency, the measures taken by the Banking Regulation and Supervision Board (“Board”) with the Decision dated 05.05.2020 and numbered 9010 to be implemented until the extraordinary circumstances arising in relation to the COVID-19 outbreak, have been announced.
The Regulation on the Manipulation and Misleading Transactions on Financial Markets (“Regulation”) entered into force through publication in the Official Gazette dated 07.05.2020 and numbered 31120.
The Presidential Decree dated 08.05.2020 and numbered 2501 on the Amendment to the Decree on State Aids for Investments (“Decree”) entered into force through publication in the Official Gazette dated 09.05.2020 and numbered 31122.
The Communiqué (III-59.1.ç) on the Amendment to the Communiqué on the the Covered Bonds (III-59.1) (“Communiqué”) entered into force through publication in the Official Gazette dated 14.05.2020 and numbered 31127.
Through the Announcement dated 21.05.2020 (“Announcement”) released through the official website of Banking Regulation and Supervision Agency (“Agency”), the decision of the Agency dated 21.05.2020 and numbered 9033 (“Decision”) has been announced.
Through the promulgation of the Presidential Decision No. 2568 (“Decision”), published in the Official Gazette dated 24th May 2020 and No. 31136, the Bank and Insurance Transactions Tax (“BITT”) rate, which should be calculated over the sale amount of foreign exchange transactions is increased to 1%.
Through the promulgation of the Presidential Decision No. 2569 (“Decision”), published in the Official Gazette dated 24th May 2020 and No. 31136, the withholding tax rate is increased to 15% for the income to be obtained from those below & the earnings arising from their disposal:
The Law No. 7247 Amending Certain Laws and Decrees published on the Official Gazette dated June 26, 2020 and numbered 31167 (“Law No. 7247”) amends several laws including the Banking Law numbered 5411 (“Banking Law”) and the Capital Market Law numbered 6362 (“Capital Market Law”).
Through the promulgation of the President Decision No. 3032 (“Decision”), published in the Official Gazette dated 30th September 2020 and No. 31260, the withholding tax rates on the interest earned from Turkish Lira deposit accounts and the dividends paid to participation accounts by participation banks are temporarily reduced.
Through the promulgation of the President Decision No. 3031 (“Decision”), published in the Official Gazette dated 30th September 2020 and No. 31260, the Bank and Insurance Transactions Tax (“BITT”) rate, which should be calculated over the amount of foreign exchange (foreign currency) transactions, is reduced to 2 per thousand.