Unlike in common-law jurisdictions, the Turkish corporate law
does not explicitly recognize shareholders' agreement
("ShA") in capital companies. Turkish companies
have only become familiar with the implementation of ShAs in the
last few years. In practice, articles of association
("AoA")1 is much more resorted to in an
effort to cover matters which would ideally be regulated in an ShA.
In other words, the legislative gap as regards ShA is somehow
filled by an effective use of AoA.
Similar to other legal systems, Turkish law requires execution
of an AoA for the due establishment of a capital company. AoA may traditionally be defined as the
combination of the rules governing (i) the relationship among the
shareholders/partners of a capital company and (ii) particularly
the one among the shareholders/partners and the company itself. A
standard AoA typically covers details of the incorporators of the
company, trade name, headquarters, scope/objective and share
capital of such company, share transfer issues, composition and
functioning of the board of directors and general assembly,
distribution of profit, etc.
From a corporate and commercial point of view, each company has
specific needs. Accordingly, although execution of a standard AoA
may be sufficient for the mere establishment of a company, it is
never enough for its sustainable development and survival.
Therefore, the tailoring of its AoA at the incorporation stage in
line with its corporate and commercial needs is of utmost
importance to any capital company.
Considering the above,
Aggravated special quorums may be adopted for board of
directors and/or general assembly of shareholders'
Transfer of shares may be restricted via special
provisions, e.g., rights of first refusal, tag-along
Privileged shares entitling their holders to additional voting
or managerial rights may be created.
Generally, in case an ShA is executed among the
shareholders/partners of a company, its provisions should also be
inserted into the AoA of such company to the expent possible. The
basis behind this approach lies on an ShA's low degree of
enforceability in comparison to AoA. For instance, in the event
that an ShA is executed among the shareholders of a joint stock
company (anonim sirket), since there is no remedy under
the corporate law, such ShA is governed by the general provisions
of the Turkish Code of Obligations on law of contracts. By
incorporating the provisions of an ShA into the relevant AoA, the
parties benefit from an additional protection that the corporate
In addition, the registration of the AoA of a company with the
respective trade registry and its subsequent announcement in the
Trade Registry Gazette reinforce shareholders' rights before
Its AoA constitutes the arterial of a capital company. When
drafted advisedly, it may also be transformed into a very powerful
and effective instrument in any company's management.
Therefore, when first establishing a company or within the
framework of a share purchase deal, a thorough review of the AoA
and its amendment in accordance with the shareholders' business
purposes is an absolute must. By doing so, provisions with a
trouble-causing potential can be spotted and eventual deadlock
circumstances can be prevented for good.
1. Also referred to as "articles",
"articles of incorporation" or
"statuts" (in French).
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Where standard printed terms and conditions of a contract are inconsistent with its special terms and conditions, the special conditions will prevail so as not to defeat the main object and intention of the contract.
The Common Reporting Standard is, like FATCA before it (a regime established by US legislation, the Foreign Account Tax Compliance Act), an information exchange regime aimed at international tax transparency.
An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).