Corporate Lawand CorporateGovernance

Scope

Corporate law governs the types of companies through which commercial activity is carried out as a joint enterprise, and how they operate. The principal legislation is Turkish Commercial Code No. 6102 (TTK). The formation of joint stock and limited liability companies, the articles of association, capital, share transfers, the powers and liabilities of the board of directors and managers, general assembly meetings, information and minority rights, and the dissolution and liquidation of the company are subjects within this area. Trade registry transactions are conducted in accordance with the Trade Registry Regulation; the transitional rules concerning the entry into force of the Code are set out in Law No. 6103.

In joint stock companies the board of directors, and in limited liability companies the managers, are responsible for the management and representation of the company. The powers of the organs may be extended or restricted by the articles of association, subject to the mandatory provisions of the Code. Corporate governance principles, particularly in publicly held companies, regulate matters such as independent board members, committees such as the audit committee, and public disclosure standards. Groups of companies and controlling company relationships are also addressed in a separate part of the TTK (Art. 195 et seq.).

Frequently encountered matters

• Formation of joint stock and limited liability companies; amendments to the articles of association.
• Preparation of general assembly meetings, the procedure for convening, and meeting and decision quorums.
• Annulment of general assembly resolutions and claims of non-existence or nullity.
• Duties, powers and liabilities of board members; representation and signatory authority.
• Capital increases and reductions, loss of capital and over-indebtedness.
• Share transfers, pre-emption, tag-along and drag-along rights.
• Shareholders’ agreements and minority rights; the right to information and the right to request a special audit.
• Termination for just cause and requests to withdraw from the company.
• Joint venture structures and relationships within groups of companies.
• Liquidation of the company and trade registry transactions.

Process and points to note

Many company transactions are completed by registration with the trade registry and publication; compliance of resolutions and documents with formal requirements is therefore important. For general assembly and board resolutions, the meeting and decision quorums, the procedure for convening and the provisions of the articles of association are examined together. In joint stock companies, an action for annulment of general assembly resolutions must be brought within three months of the date on which the resolution was adopted (TTK Art. 445). As this is a preclusive period, the date of the resolution is determined at the first stage.

The liability of board members (Art. 553 et seq.) may arise separately vis-à-vis the company, the shareholders and the creditors. Shareholders exercise their right to obtain information and to inspect at the general assembly; if this request is refused, an application may be made to the court (Art. 437). A shareholder who has exercised the right to information may ask the general assembly to have certain events clarified by means of a special audit; if the general assembly rejects this request, shareholders who meet the minimum shareholding threshold set out in the Code may ask the court to appoint a special auditor (Arts. 438–439). In limited liability companies, the transfer of shares is subject to a written agreement, notarial certification and general assembly approval (Art. 595). Where half of the company’s capital has been lost or the company has become over-indebted, the board of directors must convene the general assembly and present remedial measures (Art. 376); breach of this obligation may give rise to the liability of the directors. As minimum capital amounts may be increased by Presidential Decision, the capital adjustment obligations of existing companies should be checked against the current regulation.

In commercial cases, for claims concerning a monetary receivable or compensation, mandatory pre-litigation mediation applies: an application must be made to a mediator before an action is brought (Art. 5/A). In publicly held companies, the corporate governance rules in the capital markets legislation also apply.

Our office’s approach

The work consists of preparing formation, registration, resolution and contract texts and reviewing documents in shareholder disputes. Resolution dates and preclusive periods are determined first.