Shareholders corresponding to one tenth of the capital in non-public joint stock companies are considered as minorities. These minority shareholders have rights to use before joint stock companies in which they have minority shares within the framework of the regulations of the Turkish Commercial Code numbered 6102. The shareholders of the company can also make regulations regarding the provisions protecting the minority shareholders through the shareholders agreement signed among themselves and the revisions made in the Company's articles of association to the extent permitted by the legislation. So, with all these regulations, what are the minority shareholding rights in closed joint stock companies? If we are a minority shareholder, what should we pay attention to in order to protect our rights?
RIGHTS OF MINORITY SHAREHOLDERS ARISING FROM THE LEGISLATION:
- Right to Convene the General Assembly and Add Items to the Agenda:
Minority shareholders; may ask the board of directors to call the general assembly for a meeting by stating the reasons and the agenda in writing or, if the general assembly is already to convene, to put on the agenda the matters they want to be resolved. The board of directors of the company is obliged to respond within seven business days from the date on which the request of minority shareholders is notified. If the board of directors accepts the call, the general assembly is called for a meeting made within forty[1]five days at the latest.
In case that the request of the minority shareholders regarding the invitation or the inclusion of an item in the agenda is rejected by the board of directors, or the request is not answered positively within seven business days, the same shareholders may request the general assembly meeting from the commercial court in the place where the company headquarters is located. If the court approves, a curator is appointed to the relevant company to determine the agenda of the general assembly meeting and to fulfill the general assembly call ceremonies.
- Right to Demand Information:
It is obligatory that the financial statements, consolidated financial statements, the annual activity report of the board of directors, the audit reports and the dividend distribution proposal of the board of directors are available at the headquarters and branches of the company for the examination of the shareholders in the period of 15 days before the ordinary general assembly of joint stock companies. Shareholders have the right to review these reports. Among these reports, financial statements and consolidated statements should be kept available to shareholders at the headquarters and branches of the joint stock company for a period of one year. Each shareholder has the right to request a copy of the income statement and the balance sheet at the expense of the company.
In the joint stock company general assembly; shareholder may demand information about the company's affairs from the board of directors and may ask the auditors about the way and results of the audit. The obligation of giving information involves the Company's affiliates.
The request to provide information can only be rejected in case of the risk of disclosing company secrets or endangering the interests of the other company which need to be protected.
The shareholder whose information or review requests are left unanswered, unfairly rejected or postponed, may apply to the commercial court of first instance in the place where the company headquarters is located within ten days following the rejection.
- Right to Demand Special Audit:
In joint stock companies, each shareholder may request the general assembly to clarify certain events with a special audit, even if it is not included in the agenda, in case that it is necessary for the exercise of shareholder rights and the right to obtain information or review has been exercised before.
If the general assembly approves the special audit request of the shareholder, the company or each shareholder may request the appointment of a special auditor within thirty days from the commercial court of first instance where the company headquarters is located.
In the event that the request for special audit is rejected at the general assembly of a joint stock company, the shareholders (Minority) who constitute at least one tenth of the capital or the shareholders whose total nominal value is at least one million Turkish Liras may request to appoint a special auditor within three months from the commercial court of first instance where the headquarters of the company is located.
If the court considers the request appropriate, it appoints one or more independent senior / special auditors to examine within the scope of the requested matters. The report to be prepared by the special auditors will be able to form the basis of the requests made by the shareholders against the company or the company's board of directors.
- Right to Request Issuance of Registered Share Certificate:
Shares representing the capital in joint stock companies can be bearer or registered shares. If the shares representing the capital of the company are registered, the minority shareholder of the joint stock company has the right to request the issuance of registered shares.
- Right to Demand Postponing General Assembly Meeting:
The discussion of the financial statements and the related matters in the ordinary general assemblies of joint stock companies, upon the request of the shareholders (Minority) who own one tenth of the capital, can be left to a month later by the decision of the chairman of the meeting, without the need for a decision of the general assembly.
- Right to Suit for Annulment:
In the presence of valid grounds, the shareholders (Minority) who own one tenth of the capital, may request a decision to terminate the company from the commercial court of first instance where the company headquarters is located.
However, instead of termination, the court may decide that the plaintiff shareholders shall be paid the actual values of their shares as of the date of the decision, and the plaintiff shareholders shall be dismissed from the company or another appropriate and acceptable solution.
Although the definition of justified reason is not included in the legislation, according to the established jurisprudence of the Supreme Court of Appeal, cases such as deliberate damage to the company, abuse of the power of majority shareholders, risking the achievement of the company's purpose can be considered as justified reason according to concrete conditions.
- Right to Suit for Board Liability:
Company founders, members of the board of directors, executives and liquidators are liable for damages to the company, shareholders and creditors if they violate their obligations arising from the law and the articles of association.
Due to the faults of the members of the board of directors and other persons mentioned above, the shareholders can sue for board liability for the board of directors and as a result of this lawsuit, the court may decide that the members of the board of directors and other related persons shall compensate the damages. 8. The Right to Prevent the Founders, Board Members and Auditors to be Released: As a rule, no liability action can be brought against the board members who have been released. However, as an exception; the responsibilities of the founders, members of the board of directors, auditors arising from the establishment of the company and increase of capital cannot be removed by compromise and release until four years have passed from the date of registration of the company.
At the end of 4 years, as a rule, these people can be released from responsibility at the general assembly. However, at this point, legislation grants minority shareholders an important right, and it has been stated that the compromise and release shall not be approved by the general assembly if the minority shareholders oppose the approval of the compromise and release, even if 4 years have passed from the establishment or increase of capital.
- RIGHTS ARISING FROM SIGNING A SHAREHOLDERS AGREEMENT BETWEEN THE SHAREHOLDERS
By signing a shareholders agreement between the shareholders from time to time, the minority shareholders can be entitled more rights than the rights arising from the legislation. Apart from the rights arising from the legislation with the share ownership agreement to be signed, privileged shareholding can be created, and issues such as the privilege of nominating candidates for the board of directors, privilege in voting, appointment of senior executives, aggravating the general assembly meeting and decision quorums especially for increase & decrease of capital, aggravating the board meeting and decision quorums in terms of essential transactions for the company are frequently regulated in such agreements according to the commercial agreement. In addition, provisions such as the right of pre-purchase and the right to sell together are also regulated in the shareholding agreement and allow the minority to act together with the other shareholder in the possibility of transfer.
- ISSUES IN THE COMPANY'S ARTICLES OF ASSOCIATION
As mentioned above, the daily operation of the company by signing a shareholders agreement between the shareholders of the company and the determination of the rights of the shareholders within the scope of the freedom of contract in accordance with the Turkish Code of Obligations has been frequently encountered in recent years as a common transaction for joint stock companies. To the extent permitted by the legislation, privileges such as allocating the capital to share groups in the company's articles of association, granting privileges to share groups such as nominating candidates for the board of directors, privilege in dividend distribution, voting privilege in general assembly meetings, board decisions and meeting quorums for certain transactions (for example, approval of the annual budget, signing of loan agreements in the amount of money) is one of the methods used frequently within the scope of the articles of association.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
