According to the Turkish Commercial Code numbered 6102, which
introduced the terminology "group of companies" into the
Turkish laws, the majority shareholder of group of companies
("Majority Shareholder") has right to
purchase the shares of the minority shareholder of group of
companies ("Minority Shareholder") under
certain circumstances. This right, allows the majority shareholder
to cease minority shareholder's status of being a shareholder,
who is preventing or trying to prevent the group of company running
in due course. In this memorandum, we will briefly explain the
right of such squeeze-out and the way to exercise such right.
The main reason of regulating such right is to allow majority
shareholder to purchase the shares of the minority shareholder who
is preventing the company to exercise its activities in due course
and provide better conditions to run the company. The draft of the
Turkish Commercial code numbered 6102 was allowing the majority
shareholder holding minimum 95% of the shares and voting rights of
company to exercise such right. However, this rate has been reduced
to 90% before the law has been adopted.
Requirements of Exercising Such Right
Holding shares & Voting Rights: According
to article 208 of the Turkish Commercial Code, the majority
shareholder, needs to own at least 90% of the shares and voting
rights of the company. According to the TCC, exercising such
squeeze-out right shall be valid after the approval of court which
means, the requirement of holding 90% shares and voting rights,
needs to be kept until the decision of court allowing the use of
Acts of Minority Shareholder: To exercise such
rights, it should be proven by the majority shareholder that
minority shareholder acts against the benefit of the company.
Article 208 has listed several examples that shall be considered as
acts giving the majority shareholder the right to exercise the
right of squeeze-out. According to article 208, the circumstances
that gives the right to exercise such right is not limited to the
examples given, so there may be other circumstances that shall
cause ground to exercise such right. The examples given in article
208 are; acting in a way that prevents the company to carry out its
business in due course, acting contrary to the principle of
honesty, acting without care or causing the company problems during
its operations. However, in any case, the court will decide whether
an act can be considered as a valid reason to exercise such
Determination of the Value of Shares Subject to
Determination of the value of the shares shall be made by the
court. According to article 208 of the Turkish Commercial Code, if
the company is listed, the value of shares will be determined
according to the stock exchange value. Otherwise, an expert shall
be appointed by the court to determine the value of shares.
Procedure of Exercising the Right and Transfer of Shares
The majority shareholder who/which wants to exercise the
squeeze-out right needs to apply to the court and request from the
court to allow itself to exercise the squeeze-out right. The court
will first check whether the applying shareholder holds enough
shares and voting rights of the company subject to squeeze-out as
per the TCC. The second issue that the court will check is whether
there is an act of minority shareholder which shall be considered a
valid reason for exercising squeeze-out right. If both requirements
mentioned above are met, the court shall valuate the shares subject
to squeeze out and give certain time to the applicant for
depositing such amount into court. After such amount is deposited,
the court shall order that the shares of minorty shareholder are
transferred to majority shareholder.
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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