According to Article 219 TCO, “the seller is liable for the absence of the qualifications communicated for purchase and is also responsible for material, legal or economic defects incompatible with qualifications or the quantity of qualifications and the reduction or transfer of the benefit that the buyer expected to obtain for his use.” The rules relating to the seller`s liability due to the defects of the sales contracts and the impact of defects on the sales contracts are set in detail under Turkish law 6098 (“TCO”). However, there is no specific regime for share sale contracts, which are essentially governed by Turkish Code of Commerce No. 6102 (“TCC”). The reclassification criteria are met two years later and the 100 Class B shares held by Ms. Jones are reclassified as common shares of Liability Limited, which at that time have a market value of $9 per share. As part of the agreement, Ms. Jones received $900 of common shares (100 common shares valued at $9 per share) and had to pay only $100 ($1 per share for 100 Class B shares). Despite a profit of $800, Ms. Jones does not return any income. This is done on the basis of which it acquired the shares (i.e. Class B shares) at their value and that the conversion of Class B shares into common shares is not taxable. The context is that current legislation imposes the difference between the amount paid by a worker for the acquisition of the shares, either directly or after the exercise of an option, and the market value of the shares at the time of the acquisition. Workers are currently responsible for paying taxes on benefits collected on their own returns.
In the event that the insurance and guarantees provided in the agreement relate to the qualifications of the companies concerned, not to the shares (due to the fact that shares are the main theme of share purchase contracts), the question of whether these can be considered as specific qualifications (“representations and guarantees”) under Article 219/1 tCO is controversial4. Liability Limited enters into a share purchase agreement with its partner, Ms. Jones, to acquire 100 Class B shares that are non-transferable and have no voting rights or dividends in Liability Limited. The only right of Class B shares is to reclassify into common shares within two years if certain qualification criteria (for example. B, Liability Limited`s high sales) are filled. Class B shares were valued by the Company at $1 per share, and Ms. Jones paid $100 $US to purchase them, although the market value of Liability Limited`s common shares was much higher at that time. Although shares are the fundamental theme of share purchase contracts1, the purpose of the purchaser through share purchase agreements is generally the acquisition of companies from the company to which the subject shares belong.