REQUIREMENT OF FINANCIAL ANALYSIS IN BUSINESSES
A- GENERALLY
As a result of very rapid political, economic and technological developments in the world, the disappearance of time and space differences causes the crises experienced by countries and commercial organizations to tend to spread rapidly to large geographies due to intertwined relations. This causes, organizations with unhealthy financial structures, to be eliminated from the market in a very short time.
For this reason, it is vital for companies to strengthen their financial and managerial structures and turn the crisis environment into an opportunity before these negative environments occur.
The main measures in this regard can be collected under the following headings;
- Creating a transparent and healthy company organization and accounting structure,
- Establishing the company’s internal and external control mechanisms to ensure that the system maintains itself in a healthy manner,
- Checking, whether all assets and debts of the company are healthy, establishing a financial structure that will provide future planning purposes in order to maintain its activities and investments in a healthy and efficient manner, and analyzing, controlling and evaluating it in certain periods (such as monthly, 3-6 months and annually),
- The analyzes and evaluations to be made are prepared in the form of reports by the managers and presented to the partners at periodic meetings, so that the system operates properly and the measures to be taken, if necessary, are effectively put into effect,
It is a great necessity.
- The most important instrument of the issues listed above is FINANCIAL ANALYSIS METHODS.
- These methods, company financial values;
- Vertical and horizontal comparisons,
- Static and dynamic comparisons,
It is done by interpreting the ratios obtained through .
B-AREAS WHERE FINANCIAL ANALYSIS WILL BE USED
- For the company continues its activities in a healthy manner,
- Subsidiaries operate in accordance with the consolidated structure,
- To guide the Company’s Distributor / Franchise organizations to operate in a healthy manner through periodic analysis and thus to prevent the damage they may cause to the Company.
C-SUCCESS CONDITIONS OF FINANCIAL ANALYSIS
- The most important condition for success in financial analysis is the existence of an effective and transparent organization.
- Another important requirement is that the accounting and information system is sufficient to allow financial analysis.
- Although financial analysis is to present the figures in the form of ratios, like all studies that depend on people’s comments and evaluations, the expert who performs and interprets the analysis:
- Having knowledge of legislation, financing and analysis techniques,
- Having sufficient experience,
- Being creative and guiding, having vision, common sense and foresight,
It is very important in terms of analysis, evaluation and solution generation.
D-CONSEQUENCES OF NOT ESTABLISHING A FINANCIAL ANALYSIS STRUCTURE
Unfortunately, if companies do not install such systems, success will be random.
When companies that go bankrupt and have to withdraw from the market, which are very common in the world, are examined, it is seen that a healthy control system has not been established or that various company bodies disrupt this structure and prevent rationality. It is known that large companies with very large balance sheet profits had to withdraw from the market due to the fact that important statements and monitoring / evaluation studies such as cash flow and fund flow were not carried out effectively.
Financial analyzes are equally effective in ensuring that the investments are made feasible and at the most appropriate costs and in the most appropriate time period (time is also a very important cost), as well as the healthy continuation of activities.
Ahmet BALTA
Certified Public Accountant
- Published in Genel
DUE DILIGENCE IN MERGERS AND ACQUISITIONS
Following the latest technological, social and political developments, our world has now become smaller. Producers and consumers can move between countries according to their needs in a very short time and easily, and this has accelerated company takeovers and acquisitions. This has revealed the need for Due Diligence to be carried out very meticulously.
Due Diligence must first be carried out by a competent and experienced team in this regard, otherwise, unreal asset/liability amounts of the merged/acquired company will be invested.
The Due Diligence process is given briefly below.
- The legal structure of the company, whether the transactions are legal or not, commitments, etc. should be examined in detail.
- The company’s existence of a transparent and healthy accounting system, authorizations and internal control mechanisms should be evaluated.
- Whether taxes, public receivables and obligations to personnel have been fulfilled on time, and whether there are any unpaid debts in this regard should be examined.
- The trend in the market shares of the products over the years should be examined; is there an outdated product group? How are price comparisons with competitor products over time?
- In the company’s financial statements, receivables, debts, doubtful parts, the status of profit and equity capital and whether there are healthy figures, stock movement ratios, waste and losses should be examined and analyzed.
Carefully carrying out all of the above-mentioned issues and any additional investigations that may arise during the process will ensure that later disputes between the parties can be prevented from the very beginning.
Ahmet Balta
Certified Public Accountant
- Published in Genel
Obtaining Residency Permit In Turkey
Foreigners who intend to extend their stay in Türkiye beyond the time limit specified in their visa, those who require a visa exemption or intend to stay for more than ninety days (90) must obtain a residence permit.
- Short-Term Residence Permit for Foreigners
For short-term residence permits, foreigners who own real estate in Türkiye or intend to establish a business or make business connections in Türkiye must submit the following documents to the relevant Provincial Directorate of Migration Management (İl Göç İdaresi Müdürlüğü) once an application is submitted through the e-residence system. (e-ikamet.goc.gov.tr)
Short-term residence permits are issued for a maximum of two years (2) as a principle. However, foreigners who intend to invest in Türkiye in amounts and scopes attested by the Council of Ministers, along with their spouse and children, may be granted a five-year short-term residence permit. Furthermore, these investors may apply for acquisition of Turkish citizenship or a long-term residence permit.
- Initial Application
According to Turkish legislation, to initiate the initial application for residency Permit, Natural Person Foreigners shall prepare and submit the following documents to the related Immigration Authority:
- Residence permit application form
- Copy of passport or equivalent travel document
- Four biometric photographs
- Proof of financial sufficiency and regular means of subsistence for the duration of the stay
- Documents/receipts for the payment of residence permit fee and card fee
- Title deed proving the applicant’s ownership (required for foreigners who own immovable property in Turkey)
- Valid health insurance
Legal Person Foreigners who intend to apply for a short residence permit by establishing a business or making business connections in Turkey shall submit the following additional documents:
- Letter of invitation from the person or company(ies) to be contacted
- Notarized company activity certificate Notarized tax registration certificate
- Notarized trade registry gazette
- Notarized signature circular
Foreigners who intend to apply for a short residence permit by investing in amounts and scopes attested by the Council of Ministers must meet any of the following criteria:
- Making a minimum fixed capital investment of USD 500,000 or equivalent foreign currency, as attested by the Ministry of Industry and Technology
- Acquiring a property worth a minimum of USD 400,000 or equivalent foreign currency with a title deed restriction on its resale for at least three years, as attested by the Ministry of Environment, Urbanization and Climate Change
- Creating jobs for at least 50 people, as attested by the Ministry of Labor and Social Security
- Depositing a minimum of USD 500,000 or equivalent foreign currency in banks operating in Türkiye with the condition that it is not withdrawn for at least three years, as attested by the Banking Regulation and Supervision Agency
- Buying government bonds worth a minimum of USD 500,000 or equivalent foreign currency with the condition that they are not sold for at least three years, as attested by the Ministry of Treasury and Finance
- Buying real estate investment fund shares or venture capital investment fund shares worth a minimum of USD 500,000 or equivalent foreign currency with the condition that they are not sold for at least three years, as attested by the Capital Markets Board of Türkiye
- Depositing a minimum contribution of USD 500,000 or equivalent foreign currency in funds determined by the Insurance and Private Pension Regulation and Supervision Agency with the condition that it remains in the private pension system for at least three years, as attested by the Insurance and Private Pension Regulation and Supervision Agency.
- Application for Extension
For obtaining extensions, foreigners shall submit the following documents to the relevant Provincial Directorate of Migration Management (İl Göç İdaresi Müdürlüğü) by mail within five business days once an application is submitted through the e-residence system. (e-ikamet.goc.gov.tr). Applications for extension of the residence permit may be made sixty days prior to its expiration, but under no circumstances shall this be done after the expiry date.
- Residence permit application form
- Notarized copy of passport or equivalent travel document
- Four biometric photographs
- Submission of the previous residence permit document
- Proof of financial sufficiency and regular means of subsistence for the duration of the stay
- Title deed proving the applicant’s ownership (required for foreigners who own immovable property in Turkey)
- Letter of invitation from the person or company(ies) to be contacted (required for foreigners who intend to establish business or make business connections in Turkey)
- Valid medical insurance
- Long-Term Residence Permit for Foreigners
For long-term residence permits, foreigners who have continuously resided in Türkiye for at least eight years must submit the following documents to the relevant Provincial Directorate of Migration Management (İl Göç İdaresi Müdürlüğü). Long-term residence permits are issued indefinitely; therefore, no extension application is required.
- Application
Natural Person Foreigners shall prepare and submit the following documents to the related Immigration Authority:
- Residence permit application form
- Original and copy of passport or equivalent travel document
- Copy of the previous residence permit document
- Four biometric photographs
- Proof that the applicant has not received any social aid from governmental institutions and organizations in the last three years
- Proof of financial sufficiency and regular means of subsistence for the duration of the stay
- Police record document
- Valid medical insurance
Author:
Atty. Mustafa Kemal Balta, LL.M.
Managing Partner
- Published in Law
Aircraft Finance In Turkey
The volume of aircraft financing in Turkey has recently increased due to the reduction of costs in general and securities as well as the stable economic atmosphere in Turkey.
It is not necessary for individuals and legal entities willing to purchase an aircraft to have the total cash in order to purchase the aircraft outright. Even though they have the cash available, tax or cash flow implications may dictate against paying in cash for the aircraft. Thus, these individuals and businesses may purchase their aircraft using financing provided by a third-party.
Aircraft financing includes many players such as financial institutions and lenders that will finance the aircraft for the ones interested to purchase these aircrafts. However, it is a fact that only a limited number of these lenders and financial institutions are experienced with aircraft financing. Therefore, except those, other lenders and financial institutions may not be able to process aircraft financing transactions as efficiently or economically as lenders and financial institutions with more aircraft finance experience.
Thanks to the adoption of the Convention on International Interests in Mobile
Equipment (the “Convention”) and the Protocol to the Convention on Matters Specific to
Aircraft Equipment (the “Protocol” and, together with the Convention, the “Cape Town
Convention”) by 2013, the Republic of Turkey has become a country which is very fit for aircraft finance in all aspects.
It is known that third parties providing the necessary finance of the purchase of aircrafts are
preferred by the buyers. There are many financial institutions and lenders in the aircraft
finance market that may finance the purchasing of aircrafts as the third parties.
Aircraft leasing should be considered as one of the main means of aircraft finance.
Moreover, it should be noted that aircraft finance is very common and popular in Turkey. This is because of their nature and the option to buy at the end of the termination of the term.
Although the processes and procedures involved in an aircraft finance transaction are similar to other finance transactions, an aircraft finance transaction involves many nuances and unique aspects. Having a general understanding of the nuances associated with an aircraft finance transaction can assist a borrower in successfully closing an aircraft finance transaction.
Direct Lending
Real and legal persons interested in financing the purchase of an aircraft should find a
lender who can satisfy his/her needs and aims.
Procedures of financing certainly gets more complicated once the features of the aircraft and the financed amount increases.
To assess the whole transaction, the lender, requires information regarding the aircraft including the model, year, registration and proposed purchase price submitted by the borrower.
The lender would require financial information, a bunch of corporate documents from the borrower
such as articles of association and resolutions regarding the approval and authorization of
the transaction.
It is quite likely that the lender would require an appraisal of the aircraft in order to
ensure that the value of the aircraft is consistent with the lender’s expectations for the
particular transaction.
The lender will further carry out a title search on the aircraft to detect the current owner and whether any security interests, liens or other encumbrances are registered
against the aircraft before the civil aviation authority where the aircraft is registered.
Should any liens, encumbrances or other title defects are revealed upon this research, then the
lender would require that any obstacles to be released or otherwise resolved prior to the
closing of the transaction. Researches on the judgments regarding the aircrafts will also be
performed to ensure that clear title of the aircraft gets transferred to the borrower.
The lenders have security interests over the financed aircrafts, for insuring their rightful
interests; it is common for the lenders to purchase the title insurance of the aircrafts. By doing so,
accurateness of the registration documentation and that the transaction and security
documents’ being filed in a timely manner will be ensured by the aircraft title insurer.
In case of any title issues arising after the transaction closes, the title insurer will be responsible for securing the lender’s interest in the aircraft and resolving any title defects covered in the insurance.
The loan documents typically associated with a basic aircraft finance transaction include
a loan agreement, aircraft security agreements, guaranty and authorization documents.
The Loan Agreement contains the terms and conditions of the loan and the borrower’s promise
to repayment of the loan pursuant to those terms and conditions. The Loan Agreement also
provides the lender with remedies if the borrower does not perform its obligations under
such agreement.
The aircraft security agreement or mortgage agreement pledges the aircraft as security
for the loan agreement. In the event that the borrower fails to repay the loan, the lender
will have the right to collect the debt through aircraft under the possible means applicable under Turkish Law.
In the financing transactions in which the loan is being guaranteed by a third party,
the relevant real or legal person third party would need to execute a guaranty that obligates the
guarantor to repay the loan in the event that the borrower defaults.
The lender will require that the appropriate parties execute the loan documentation and
also other transaction documentations such as a mortgage agreement pursuant to their
terms and conditions.
The mortgage agreements shall be duly registered to the Civil Aviation Registry under
Turkish Laws in order to protect the property rights against third-party claims, together with
the aircraft itself or after the registration of the aircraft to the Turkish Civil Aviation
Registry.
It should also be noted that related loan agreements are enjoying tax advantages in
Turkey. Only the mortgage agreement is subject to stamp tax under the laws of Turkey.
Thus, Turkish aviation practice enjoys a lot of that as well.
On the other hand, the Turkish Party of the transactions should also be careful about the Special Tax called as Resource Utilization Support Fund (KKDF). The maturity of the loans shall be a factor for the assessment of this particular tax.
Financial Leasing
Financial leasing is the most used type of aircraft finance in Turkey mostly because of various tax advantages.
Financial leasing transactions are governed by the Financial Leasing Code numbered
3226 (“the Code”).
The lessor should be a financial leasing institution duly established either in Turkey or abroad. Upon the lessee’s choice and request, the lessor purchases or provides the Leased
Property described in details under the Financial Leasing Agreement (“Agreement”) from
a third party and transfers solely its possession to the lessee. The lessor does not cease
being the owner of the Leased Property during the Agreement’s term.
However, the lessee may be granted with the option to acquire the ownership of the Leased Property upon termination of the Agreement with a purchase price agreed therein.
The lessee’s main obligation is to pay the agreed lease amount to the lessor under the Agreement.
As a formal requirement, financial leasing agreements are required to be in writing and executed before a notary public in the Republic of Turkey.
The Code does not set forth any specific registration procedure for aircrafts. However, if the lessor is a foreign entity which does not have any branch in Turkey, the financial leasing agreement is required to be registered by the Banking Regulation and Supervision Agency (“BRSA”)
The financial lease agreements whose subject matter is the leasing of the aircrafts are also required to be registered with the Aviation Registry pursuant to Civil Aviation Code numbered 2920.
Protecting the lessor against any third party claim with respect to the leased aircrafts is the main function and aim of these registrations.
Author:
Atty. Mustafa Kemal Balta, LL.M.
Managing Partner
- Published in Law
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