Turkey: Ostracizing Minority Shares As Per Turkish Commercial Code

Last Updated: 19 March 2018
Article by Evrim Uygur Yamaner

The removal institution based on reasons originating from the person of the partner is a foreign concept to the corporations. The Turkish Commercial Code numbered 6102 ("TCC") defines a new set of rights, for joint stock companies, that will end the shareholding relationship between the company and the minority shareholder. The teaching that these rights cannot be assessed as legal qualities and the right to take them out in real terms should be addressed. Article 208 of TCC allows for the purchase of minority shares by the majority. Recognition of the right to purchase; is an important innovation in the context of resolving a number of violations of the interests of the majority and minority shareholders, in respect of protecting the rights of both parties, ensuring the interests of the community and promoting economic intensification.

This issue will be examined under Article 208 of TCC. Some conditions must be fulfilled in order to be applicable. One objective of this article is to prevent the attempts of the minority to hinder conduct of business or general transactions of the group. The conditions of this issue are mentioned in the article;

  1. dominant company has minimum direct or indirect 90 percent of the shares and voting rights of a joint stock company.

    The controlling company that wishes to use this right to purchase pursuant to the relevant article, the other capital the company must own at least 90% of the shares and voting rights direct or indirect. Since the right of removal is only judged by court decision, this ratio must be maintained until the court date.
  2. minority acts in defiance to good faith, which create considerable trouble or careless acts.

    In case there are any conditions the dominant company may purchase the shares of minority on the value determined in second paragraph of Article 202 of TCC.

    The following article also contains some unconstrained behaviors that may lead to minority being removed from the company. According to this arrangement; if minority shareholder exhibits obstructing the company's work with various behaviors, contrary to the rule of honesty, in case they are noticed, or if they act recklessly; the controlling company may apply to court to remove minority shareholders from the partnership.  Relevant behavior whether it is contrary to the rule of honesty will be evaluated by the judge and during this case the burden of proof shall be on the plaintiff's dominant share.
  3. Purchase of minority interest; In case the shareholder exercises the right to issue shares under the TCC, the value to be determined by the court is taken into consideration when the controlling shareholder exercises the right to issue the shares.

    Such right of removal may be used against only that the minority shareholder who is believed to be acting in the above stated manner and not against all minority shareholders due to the alleged behavior of one1.

Pursuant to Article 208 of TCC, in case the specified conditions are met, controlling shareholder it is necessary to apply to the court for the removal of the owners from the partnership. In this process, the court must examine the issue and make a positive decision in the plaintiffs in the provincial jurisdiction of the province and the second is that minority shareholders' honesty through a number of negative behaviors whether they act contrary to the rule. Together these two conditions in cases where it has not been decided by the court to remove minority shareholders from the company the court decided to remove minority shareholders from the company, it can be given. With this decision, minority shareholders' shares are held to a dominant share Pass.

Footnote

1. Nilsson, Şirketler Topluluğu, page 439.

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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