Turkey: Minority Actions In Turkish Corporate Governance

Starting with the Cadbury Report, corporate governance has changed its structure over the years in several jurisdictions so as to find the right balance between minority and majority shareholders. In 2011, Turkey has its own significant change with a new Turkish Commercial Code. Within the framework of this new code, it is intended to balance the power of majority shareholders against minority. In order to protect minority shareholder rights against majority, Turkish Commercial Code provides certain measures. Before involving in the actions of minority shareholders it is important to define who can be assumed as minority.

In the context of the code, for non-public companies, shareholders who hold minimum 10% of the shares are considered as minority. For public companies, minority rights shall be effective for the holders of 5% of the shares. Although there are several provisions that is listed on below provided to protect minority shareholders, legislation present balancing measures such as the procedure of squeeze out. According to article 208 of Turkish Commercial Code, in order to prevent bad influences of minority shareholders on the company management, majority shareholders that own 90% of the shares can buy minority shareholders share by stock market value if any, or price determined by article 202. The actions that are provided by the code are listed as follows;

1. Representation on Board of Directors

Under the terms of Turkish Commercial Code, minority shareholders have right to be represented on board of directors. Minority shareholder has a right to be either a member of the board of directors or have a right to offer a person to be a board member if this right is defined in the article of association.

If there is no valid reason exists, the person offered by minority shareholders must be selected by General Assembly to be a member of board of directors. Within the scope of this regulation, the shares that give the right to minority shareholders are considered as privileged shares.i

2. Right to Appoint an Independent Auditor

In general, all shareholders of a company have right to be informed about company's business condition, right to be informed about financial statement of the company, right to examine company's booking records or documents.

In case of a growing concern about mismanagement of the company, any shareholder including minority shareholders, has right to demand an independent auditor to clarify non-transparent matters from the General Assembly. This request can be made even if it is not scheduled on the agenda. In case of General Assembly accept such requests, then either company itself or the shareholder who made such demand apply to national courts in 30 days for an independent auditor appointment. However, if the General Assembly refuses the request, then minority shareholders are entitled to apply to national courts in 30 days for an independent auditor appointment.ii

3. Termination with Justified Reasons

Under the terms of Turkish Commercial Code, minority shareholders that have justified reasons may request the dissolution of the company from national courts where the company's head office is located. Justified reasons are not defined by the code however, in practice is accepted that, infringement of personal rights especially rights to demand information and examination of company's situation (financial statement examinations) are counted as justified reasons. Instead of dissolution of the company, Court may decide elimination of applicant shareholders by paying market values of their shares or decide any other reasonable and fair solution.iii

4. Call for General Meeting

Shareholders holding at least 10% of the shares for non-public companies and 5% of the shares for public companies are entitled to call General Assembly for an extraordinary meeting. In addition to that, minority shareholders are also entitled to include the matters to the agenda that they wish to discuss with General Assembly. Shareholders that hold lesser amount of shares than 10%-5% depending on the type of company shall be entitled to use those rights aforementioned if it is agreed and defined in the articles of association.iv

5. Postponement of Financial Statement Negotiations

Under the terms of Turkish Commercial Code, minority shareholders have a right to demand from General Assembly the postponement of deliberations regarding financial statement and other related issues for 1 month. In that case, the meeting can be simply postponed with the decision of the chairman without any General Assembly resolution.v

6. Issuance of Nominative Shares

For the non-public companies, minority shareholders can ask for issuance of shares in the name of the holder. With the demand of minority shareholders, the board of directors must issue the nominative shares and deliver them to its holders. If it is not demanded by the minority, then the board of directors has no obligation to issue company shares.vi

7. Rejection of Release Board of Directors from Liability

Founders, board of directors and supervisors' liability arising from the establishment of the company and capital increase shall not be released for 4 years starting from the trade registration of the company. After the 4 years period passed, they can release from the liability only with the approval of the General Assembly. However, if minority shareholders of 10% or 5% of the shares use negative vote to release liability, then General Assembly cannot give the approval to release founders, board of directors and supervisors from their liability. Shareholders that hold lesser shares than 10%-5% depending on the type of the company may be entitled to use that right as well if it is determined by the articles of association.vii


Although there is still a great influence of majority in corporate governance, with the new Turkish Commercial Code minority shareholders are no longer fragile as they were before against majority power by extending the rights and actions and eliminating provisions that make them non-effective.

Therefore, instead of non-functional mechanisms of previous commercial code, functional measures and recognised shareholders are brought by.


i. Turkish Commercial Code Number 6102 Article 360

ii. Turkish Commercial Code Number 6102 Article 438

iii. Turkish Commercial Code Number 6102 Article 531

iv. Turkish Commercial Code Number 6102 Article 411

v. Turkish Commercial Code Number 6102 Article 420

vi. Turkish Commercial Code Number 6102 Article 486

vii. Turkish Commercial Code Number 6102 Article 559

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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