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  • NSN Law Bulletin

COVID-19 The Law on Reducing the Effects of the New Coronavirus Outbreak on Economic and Social Life

The humankind has been facing one of the most horrible disasters of history: the new coronavirus (“COVID-19”). As the social distance and self-quarantine measures have crucial consequences on social life and economy, the governments all around the world take measures to slow those devastating consequences down in this undefined period. The Republic of Turkey has been taking measures to keep the economy work and to minimize the effects of the virus after the pandemic. Within this respect, the Law on the Amendment of Certain Laws by the Law on Reducing the Effects of New Coronavirus (COVID-19) Pandemic on Economic and Social Life (“The Law”) numbered 7244, has been published in the Official Gazette no. 31102 dated April 17, 2020 (“Effective Date”) and certain regulations have been entered into force on the same date. The Law, having many significant regulations related to the various fields, constitutes crucial regulations for the Labor Law and the Corporate Law.


1. Prohibition of the Termination of Labor Contracts

Any labor contract regardless of it is within the scope of the Labor Law, is prohibited to be terminated by the employer for three months as of the Effective Date, unless in the event of the cases based on the incompatible with the moral and goodwill rules pursuant to the Article 25/1(II) of the Labor Law. This three-month period can be extended up to six months by the decision of the President of the Republic of Turkey.

The employer has the authority to apply for an unpaid leave not exceeding three months from the Effective Date. The employee shall not terminate the labor contract based on the justified reason due to such unpaid leave.

In case of the violation of the subject termination prohibition, the employer or vice-principal, who terminates the labor contract, shall be sentenced an administrative fine of the monthly gross minimum wage.


2. Approval of the Short-Time Work

The short-time work allowance which will be paid to the employees upon the employer’s short-time work request based on the COVID-19 pandemic shall be made in accordance with the employers' declaration, without waiting for the completion of the conformity examination conducted by the labor inspectors of the competent authority. The Law ensures the implementation of this right as of February 29, 2020.


3. Unemployment Insurance Support

Employees who are subject to unpaid leave in accordance with The Law and who cannot benefit from the short-time work allowance and who cannot benefit from unemployment insurance benefits will receive 39,24 TL in cash per day. This payment will be made during the unpaid leave or unemployment period, providing not exceeding the period of the prohibition of the termination of the labor contract and not benefit from an old-age pension.


4. Restriction on the Distribution of Dividends

New limitation regarding the distribution of dividends for the companies has been enacted to the Turkish Commercial Code (“the Code”) with a provisional article. In accordance with Article 12 of the Code, companies will be able to decide to distribute up to %25 of the net dividend for the 2019 financial year until September 30, 2020. Accumulated dividends and legal reserves may not be distributed and the General Assembly may not decide to authorize BoD for advance dividends until the date.

If the General Assembly has decided to distribute dividends for the financial year 2019, but the shareholders have not yet been paid or partial payments, payments for the portion exceeding twenty-five percent of the net profit for 2019 will be postponed until September 30, 2020.

The President of the Republic of Turkey may extend the period for three months or define a shorter term.

This regulation does not apply to public legal entities and companies that have more than fifty percent of their capital, directly or indirectly, owned by the state.


5. Unfair Price and Stocktaking Evaluation Board

One of the major amendments regulated by the Law is the prohibition of the exorbitant price and stockpiling. The Unfair Price Evaluation Board (“the Board”) is established in order to apply sanctions for exorbitant price increases and stockpiling practices made by manufacturers, suppliers, and retail businesses. The Board has the authority to take any measures such as applying administrative fines and conducting audits to ensure customers' free access to the goods and services and prevent disruption of the market balance and unfair competition. In accordance with the Law, it is aimed to prevent unfair price increases in the market and victimization due to unusual demands for certain product groups.


6. Authorized Zone of the Research and Development Centers

The Ministry of Industry and Technology may allow the R&D activities which are carried within the scope of (i) the Technology Development Zones Law and (ii) the Law on Supporting Research, Development and Design Activities, to carry out outside of the authorized zone for 4 months from March 11, 2020. This period can be extended for an additional 3 months by the decision of the Minister of Industry and Technology.


You can find the related Official Gazette via the link: https://www.resmigazete.gov.tr/eskiler/2020/04/20200417-2.htm


Authors: Bilge Derinbay, Hande Ülker