Turkey: Voting Agreements Under Turkish Law

Last Updated: 4 October 2011
Article by Azer Öztürk and Dilara Yürekli

The exercise of voting rights enables shareholders to participate in the decision-making mechanism of a company by expressing their opinions with respect to its operation. Therefore, voting agreements, including undertakings in relation to the exercise of voting rights, are concluded to be effective in the decision-making mechanism. A shareholder may independently exercise his/her own voting rights. In this article, general information regarding voting agreements, the types thereof and legal characteristics, as well as their functions will be explained in depth.

Voting Agreements

Shareholders may undertake, by way of voting agreements, not to use their votes, use them in a particular way or stay noncommittal. In such agreements, shareholders also may undertake to use their voting rights in accordance with instruction given before the general assembly or in line with the suggestion of a specific party in the general assembly. Since voting rights are strictly attached to the shares, voting rights may not be transferred by the owner of the rights to third parties by a voting agreement and that right will remain with the shareholder. Therefore, voting agreements that include provisions of assignment or transfer of voting right(s) without the transfer of the share(s) to third parties or other shareholder(s) are null and void.

Characteristics of Voting Agreements

Voting agreements are legal transactions, the provisions of which only bind the parties who signed and agreed on their contents. For this reason, shareholders for whom it has been undertaken to vote cannot claim that votes exercised contrarily to the voting agreement invalidate the resolutions taken in the respective general assembly. Shareholders or third parties that vote or do not vote contrary to their undertakings in a voting agreement may only face the legal consequences of breach of contract in accordance with Article 96 of the Turkish Code of Obligations.

Voting agreements can be concluded for any and/or all of the agenda provisions in a general assembly meeting for a single occurrence, or can be designed as a continuous voting agreement for a definite or indefinite term. Voting agreements are not regulated specifically in Turkish law. They are subject to related imperative provisions of the Code of Obligations, Corporation Law and Code of Civil Law.

The validity of voting agreements is generally based on the principle of freedom of contract pursuant to the Turkish Constitution Article 48/I and Code of Obligations Article 19/I. However, it should be noted that freedom of contract is not an unlimited principle and is subject to the exceptions arising from the said laws.

Functions of Voting Agreements

The main function of voting agreements is to allow shareholders to acquire influence or control over the constitution and management of the company and to protect, enhance and secure existing influence or control by benefiting from the capital shares and votes of the others.

Voting agreements are not only concluded to have the majority of the votes but also for the purpose of exercising the rights given to minority shareholders by law and/or protecting the minority from the majority. Voting agreements may also be concluded to prevent the shareholders holding the majority of votes from taking decisions on certain subjects for their own interests.

Furthermore, voting agreements are beneficial for preventing the alienation of shareholders and for the management of local and foreign investors entering the company in joint stock companies where the transfer of rights is not restrained.

Voting agreements may sometimes be compulsory for companies to obtain financing from loan institutions or in order to benefit from the other shareholders' capital and/or abilities when it is necessary to reorganize the company.

Voting agreements may also be concluded in order to perform various economic mergers, or with the purpose of improving the market conditions and competition for the contracting parties or a part of them, or may be applied to mergers of the same type of commercial partnerships with each other or for the first stage of the participation of one or more than one commercial partnership and capital partnership in a holding.

Types of Voting Agreements

Voting agreements can be separated into different types according to their legal characteristics and nature. Voting agreements can be concluded as unilateral undertakings, bilateral voting agreements, or as consortiums (multilateral voting agreements). In a unilateral undertaking, a party undertakes to vote or not to vote while the other party undertakes a commitment aside from voting or does not make any commitments. In a bilateral voting agreement, the parties to the agreement mutually undertake to vote or not to vote for a specific purpose. In other words, two or more shareholders or their representatives undertake to use their voting rights or not to use their voting rights as determined in the voting agreement in order to attain a common purpose. Voting consortiums have the characteristics of a general partnership ("adi ortaklık") as set forth in Article 520 of the Turkish Code of Obligations. It should be borne in mind that such voting agreements may be concluded between the shareholders, a third party and the shareholder or between the shareholders and the company or board, as the case may be.

Conditions on the Formation of Voting Agreements

Unless otherwise provided for in the agreement, there is no formal requirement to form voting agreements. In practice, voting agreements can be in writing due to the ease of proof, and, in case of multilateral and long-term consortiums, due to the requirement of organization. They can also be prepared in writing if there is a side agreement connected to the voting agreement and this side agreement has to be in writing. As said, the voting agreement can be concluded between two or more parties. Persons who have not yet been titled as shareholder may also be party to a voting agreement. The parties to the agreement may be real persons or legal entities.

Pursuant to the Code of Obligations, Articles 19/II and 20/I, the subjects of the agreements shall not be contrary to compulsory legal provisions, ethics (morality) and good faith, public policy, personal rights and the subject matter of the agreement shall not be legally impossible to achieve. Otherwise, such agreements are null and void.

Having said so, voting agreements which have been entered into in order to override the compulsory legal provisions of the related regulation are void. For instance, if members of the board of directors or shareholders enter into a voting agreement to affect the outcome of the general assembly meeting even though they are prohibited from doing so by law, such an agreement is void. This occurs where the shareholder undertakes to vote in line with the instructions or suggestions of the board of directors when the agenda of the general assembly is to release the board of directors or votes when there is a conflict of interest. A conflict of interest is present when a resolution is taken regarding an item of business of the company which the shareholder participated in conducting or when a resolution is taken regarding a personal item of business or litigation between the company and the shareholder or his/her spouse, relatives or heirs. Another situation which causes the voting agreement to be voided as violating the law is if the shareholder transfers his/her shares to a third party and enters into a voting agreement undertaking to vote as instructed by the other party even though he/she is prohibited from transferring his/her shares pursuant to Article 404 of the TCC.

A voting agreement is voided as contrary to good faith and/or ethics if, for instance, the shareholders holding the majority of shares enter into a voting agreement and undertake to use their voting rights to the detriment of the minority shareholders and the company in bad faith and without a legitimate reason.

Precautions for Ensuring Compliance with Voting Agreements

There are many ways to ensure that a party to a voting agreement will comply with its provisions. In order to ensure compliance with the undertaking given in a voting agreement, the shareholder for whom it has been undertaken may envisage a penalty clause in the voting agreement. A party who neglects its undertakings in the voting agreement shall compensate the loss of the other party as set forth in Article 159/I of the Code of Obligations.

Another method of assuring compliance with the voting agreement is to have the shareholder who undertakes to vote or not to vote in the voting agreement appoint a representative and entrust its share certificate to the representative. However, since a shareholder who has given proxy to his/her representative and entrusted his/her shares to such representative has the ability to revoke the proxy at any time, in order to further prevent such shareholder from exercising his/her voting rights by informing the company regarding such revocation, this assurance method should be used only in addition to a penalty clause.

Furthermore, if one of the shareholders undertakes to another with respect to the exercise of voting rights, fiduciary transfer and assignment of the shares and share certificates constituting the subject of a voting agreement by such shareholder to a person might be useful.

Another precaution may be to have the shareholders who are parties to a voting consortium entrust their shares and share certificates to such consortiums or to establish a commercial partnership submitting such shares and share certificates as capital.

Termination of Voting Agreements and the Consequences

The general consequences of failure to perform the contractual obligations in the voting agreements are; (i) compensation of the loss sustained, (ii) claim of the payment of the penalty, and (iii) action for specific performance and final judgment regarding the action for a specific performance.

If either party breaches the voting agreement and votes against its undertakings the other party may claim an action for a specific performance and compensation for the delay pursuant to Articles 102 and 106/II of the Code of Obligations or relinquish the request of performance as undertaken in the agreement and claim the consequential damages (the damages incurred as a result of nonperformance including the expenses plus lost profits) in accordance with Article 106/II of the Code of Obligations or can terminate the agreement and claim compensatory damages (the damages incurred as a result of nonperformance including the expenses but not the lost profits) in accordance with Article 108/II of the Code of Obligations. A shareholder who votes contrary to his/her undertaking in a voting agreement shall pay the penalty determined in the agreement. Such penalty may be claimed regardless of whether the person for whom it has been undertaken to vote incurs damages or approval of the damages.

In non-continuous (one-time) voting agreements, the voting agreement is terminated by the one-time use of the voting right as undertaken in voting agreement. Continuous voting agreements shall terminate by themselves or can be terminated by a legal transaction. In the event of the expiry of the voting agreement, withdrawal of the title of the shareholder, dissolution of partnership, or death or retirement of the shareholder, the voting agreement shall terminate automatically. If either a shareholder or partner cannot vote as undertaken in the agreement due to impossibility without their fault, the voting agreement shall terminate automatically as well. Voting agreements may be terminated for just cause. Either party may also terminate the voting agreement, if the other party defaults in voting.

Voting consortiums terminate automatically or may be terminated by a legal transaction or a judge. In the event of the expiry of the voting agreement, death of one the parties of the voting agreement, interdiction or bankruptcy of any shareholders of the consortium, or impossibility of voting consortiums, a voting consortium terminates. Voting consortiums can be terminated with just cause by bringing an action. Since possible just causes are not numerous, the existence of just cause may be determined by a judge in accordance with Article 4 of the Code of Obligations. In indefinite consortiums, either party in a voting consortium may have the right to terminate the voting consortium by a unilateral statement submitted to each party of the voting agreement.


Voting agreements may be concluded for different purposes, i.e. to protect partnerships and/or shareholders that have the minority shares and they enable these respective shareholders to have control and influence over the management of the company. Voting agreements have not been regulated in Turkish law specifically. As mentioned above, they are subject to the related provisions of the Turkish Code of Obligations, the Turkish Commercial Code and Code of Civil Law. Therefore, voting agreements must be in compliance with the restrictions on abuse of rights and shall not be against the good faith and loyalty provisions of the respective laws.


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.

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