Reference: agio contribution
Reference information:
Agio is a commitment, which exceeds nominal value of shares, undertaken by a shareholder within the framework of capital commitment. Shareholder contributing agio does not acquire any shares in consideration of agio. In addition to this, agio cannot be paid back to the shareholder. Even in the event of capital decrease, the payments shall be allocated to the shareholders pro rata to their shareholdings in the company regardless of the agio amount paid by the individual shareholders. Also in caluclation of the dividends to be distributed, agio should not be taken into consideration.[Ünal Tekinalp (Reha Poroy/ Ersin Çamoğlu), Corporate Law I, 13. Edition, Istanbul, 2014, No. 910]
In order to oblige a shareholder to contribute agio payment, the articles of association of company should include a provision in this respect during the incorporation process and/or the general assembly should adopt a resolution to this regards in addition to the capital contribution fee in capital increases [Tekinalp, No. 9-11]. In principle, the shareholders determine agio contribution under an agreement. In the absence of such agreement, it is quite rare for the board of directors to directly offer to the general assembly a capital increase proposal, which obliges the shareholders to contribute agio in addition to their capital contribution. The doctrine supports that for the companies that adopted registered capital system, issuance of premium share is necessary under certain circumstances in order to get efficiency for this system. İsmail Kırca/Feyzan Şehirali Çelik, Joint Stock Companies Law, Edition I, Ankara, 2013, page 329-330]. It should be noted that issuance of premium shares requires a general assembly resolution in that respect. As per Capital Markets Law, Capital Markets Board may request company to issue premium shares under the specified circumstances. (Capital Markets Law article 12/2).
The main application area of the agio can be observed when there is an agreement between the shareholders. In practice, following the decision on the agio contribution in addition to the capital commitment in capital increase, the shareholders who control the management of the company may ask board of directors to prepare capital increase proposal in this direction. The other practice area where agio is commonly used is restructuring transactions that involve new shareholders participation. In mergers and acquisitions, agio is commonly used in the transactions where the current shareholders, without contributing to the capital increase, transfer their pre-emptive right to the third parties that will become shareholders.
When the pre-emptive right is assigned to persons who are not currently shareholders, agio is applied for the purposes of compensation between the contribution made by current shareholders to company’s equity capital and new shareholders’ contribution. In this case, the agio is calculated over an amount which proportionately balances shareholders’ percentage to that will occur after new shareholders’ participation.
One important application area of agio relates to the operations that aim the improvement of company’s financial status. Shareholders assessing company’s financial status and the “shareholding balance” set forth under the shareholders agreement, may prefer agio contribution in addition to the capital commitment as their financial contribution to the company.
No matter its purpose, there is no upper limit for agio contribution. With respect to agio payment, in line with the agreement between the shareholders and the general assembly resolution based on such agreement, it may be decided that either the shareholders having different categories of shares to pay same or different agio amounts or the shareholders having same group of shares to pay different agio amounts.
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Note added at 1 hr (2015-11-04 10:07:08 GMT)
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peer agreement (net): +3