CONDITIONS FOR THE COMPANIES FOR BEING SUBJECT TO INDEPENDENT AUDIT AS OF 1 JANUARY 2023
We would like to inform you that the Decree Regarding the Determination of the Companies Subject to Independent Audit numbered 6434 (in Turkish, “Bağımsız Denetime Tabi Şirketlerin Belirlenmesine Dair Karar, the “Amending Decree”) was published in the Official Gazette on 30 November 2022 and numbered 32029.
On a brief note, as per our previous Newsletters, we informed you that the Decree of the Council of the Ministers dated 19 December 2012 and numbered 2012/4213 (adopted as per Article 397 of the Turkish Commercial Code numbered 6102, the “Decree”) concerning the determination of the companies that are subject to independent audit came into effect after being published in the Official Gazette dated 23 January 2013 and numbered 28537.
The Decree was amended 4 times subsequently with four other Decrees of the Council of the Ministers; the criteria for which companies will be subject to independent audit were updated in 2014, 2015, 2016 and 2018 respectively.
With the Amending Decree, the said criteria have been determined once more as follows, to be effective as of 1 January 2023.
Companies Subject to Independent Audit:
As per Article 3 of the Amending Decree, the companies falling into the scope of the Annex I thereof are subject to independent audit.
Additionally, the companies who, solely or together with the affiliated companies and subsidiaries, meet at least two of the three following criteria for two (2) consecutive accounting periods are subject to independent audit:
- Companies with total assets equal to or above TRY 75,000,000.- (which was TRY 35,000,000 or more” before the Amending Decree);
- Companies with annual net revenues equal to or above TRY 150,000,000.- (which was “equal to or above TRY 70,000,000.-” before the Amending Decree); and
- Companies with total employees equal to or above 150 employees (which was “equal to or above 175 employees” before the Amending Decree).
Companies whose capital market instruments are not traded in a stock exchange or other organized markets but considered publicly traded within the scope of the Capital Markets Law and exceed the threshold values of at least two of the following three criteria for two consecutive accounting periods, are subject to independent audit:
- Companies with total assets equal to or above TRY 30,000,000.- (which was TRY 15,000,000 or more” before the Amending Decree);
- Companies with annual net revenues equal to or above TRY 40,000,000.- (which was “equal to or above TRY 20,000,000.-” before the Amending Decree); and
- Companies with total employees equal to or above 50 employees (which was “equal to 50 employees” before the Amending Decree).
Furthermore, the companies falling into the scope of the Annex II of the Amending Decree solely or together with their affiliated companies and subsidiaries, taking into account the limitations stated thereunder, shall also be subject to independent audit:
- Companies with total assets equal to or above TRY 60,000,000.- (which was TRY 30,000,000” before the Amending Decree);
- Companies with annual net revenues equal to or above TRY 80,000,000.- (which was TRY 40,000,000.-” before the Amending Decree); and
- Companies with total employees equal to or above 100 employees (which was “125 employees” before the Amending Decree).
Companies Which Are Outside The Scope of the Amending Decree:
a) Companies subject to the Law on Privatization Practices (in Turkish, “4046 Sayılı Özelleştirme Uygulamaları Hakkında Kanun”) dated 24/11/1994 and numbered 4046, excluding those included in the list of companies provided in Annex I;
b) With the exception of the companies specified in the list of companies provided in Annex I and the companies specified in 5(b) of the list of companies provided in Annex II, those with at least 50% of the capital belongs to the State (“Devlet”), special provincial administrations (“il özel idareleri”), foundations established by law (“kanunla kurulmuş vakıflar”) and other public institutions and organizations (“diğer kamu kurum ve kuruluşları”);
c) Saving finance companies for which the liquidation process is decided by the Banking Regulation and Supervision Agency within the scope of the 4th paragraph of the temporary article 7 of the Financial Leasing, Factoring, Financing and Savings Financing Companies Law dated 21/11/2012 and numbered 6361, and the liquidation process is conducted by the liquidation commissions of the Savings Deposit Insurance Fund (“Tasarruf Mevduatı Sigorta Fonu”).
Principles Related to the Implementation of the Amending Decree:
The companies subject to independent audit shall be excluded from the scope of such audit, if (i) they remain below the limits of at least two of the said criteria for two consecutive fiscal years, or (ii) they remain 20% or more below the limits of two of these three criteria for one fiscal year starting from the following fiscal year.
In accordance with Article 5 of the Amending Decree, in order to determine whether the criteria designated in the said Decree have been exceeded or not; (i) the financial statements of the previous two fiscal years, with regard to the total amount of assets and net revenue of the company, and (ii) the average number of employees for the previous two fiscal years, with regard to the number of employees, shall be taken into account.
Our Law Firm remains at your disposal for any further clarifications you may need.