Turkey: Shareholders' Rights To Demand Information And Review In Joint Stock Companies

Introduction

In joint stock companies, the shareholders' right to demand information and review enables the shareholders to access information about the company's operations, economic and financial status, management, future and current status of the company. Especially in joint stock companies, since shareholders are not obliged to be a member of the board of directors or manager, it is a very important right for shareholders to have information about company affairs and the general situation of the company.

Legal Nature of the Right

The right to demand information and review is one of the most fundamental rights of shareholders and is an independent, vested and indispensable shareholder right and is not dependent on the shareholding rate. Despite this, shareholders are not obliged to exercise their right to demand information and review. Moreover, it is not possible for the shareholder to waive this right in advance by the articles of association or general assembly resolution. It is only possible for the shareholder to waive this right on a case-by-case basis.

Right to Demand Information

The shareholder's right to demand information and the review are regulated together in Article 437 of the Turkish Commercial Code. Accordingly, while the first and fourth paragraphs of the article regulate the right to review, the right to demand information is regulated in the second paragraph of the article.

Pursuant to Article 437/2 of the Turkish Commercial Code, the shareholder of a joint stock company may, at the general assembly, request information from the board of directors about the company's affairs, and from the auditors about the manner and results of the audit. Within the scope of this regulation, which aims to enable the shareholders to exercise their rights in an informed manner, it may be stated that the shareholders may request information on issues such as the company's financial data, management affairs, all matters related to auditing, issues covered by the annual report, personnel policies, research and development issues of the company, if any, and organizational structure. In other words, the exercise of this right covers all business and transactions of the company and its subsidiaries within the framework of Article 200 of the Turkish Commercial Code, without any limit in terms of subject matter.

It should be noted that the information requested by the shareholders from the board of directors or the auditor within the scope of this right should be truthful and diligent. As stated in the preamble of the article, when providing information, it is necessary to act in accordance with the principle of accountability, in a manner that is not sloppy, that includes information in response to the question, that does not contain false and deceptive information.

Right to Review

Article 437/1 of the Turkish Commercial Code regulates the right of shareholders to review the financial statements before the general assembly meeting. Accordingly, financial statements, consolidated financial statements, annual report of the board of directors, audit reports and the dividend distribution proposal of the board of directors should be made available for the inspection of the shareholders at the headquarters and branches of the company at least fifteen days before the general assembly meeting. In addition, the financial statements and consolidated statements will continue to be kept open for shareholders' information at the headquarters and branches for one year.

Pursuant to Article 437/4 of the Turkish Commercial Code, in order for a shareholder to examine the commercial books, correspondence, and the parts that are relevant to the shareholder's question, the express permission of the general assembly or the decision of the board of directors is required. In this context, the Turkish legislation does not specify the time and place for the exercise of the right to review. However, it should be noted that the right to review may be asserted during the general assembly meeting, even if it is not included in the agenda.

Limits of the Right

Article 437/4 of the Turkish Commercial Code regulates the limits of the right to demand information. Accordingly, the shareholder's right to demand information is limited only in two circumstances. These are (i) the disclosure of "company secrets" if the requested information is provided and (ii) "other company interests that need to be protected" may be endangered. It should be noted that this regulation also applies to the right to review. This regulation aims to establish a balance of interests against the possibility that only prudent and well-intentioned persons may not be present at the general assembly meetings and against the risk that the general assembly meetings may be monitored by competitors.

Company secret can be considered as information that the competitor company does not know, should not learn, that may be used to the detriment of the company, and that may reduce its competitive power. For example, provided that each case is evaluated on a case-by-case basis, information on price formation, research and development activities, bank secrets, personal data of customers can be considered as certain company secrets, and the company has an obligation not to disclose such information. On the other hand, the customer environment, commercial transactions of the company may be considered as relative company secrets, and the disclosure of this information should be evaluated by the authorized bodies of the company.

Certainly, it is not possible for the board of directors, which is responsible for the exercise of the right to demand information and review, to prevent the right without justification. It should be concretely demonstrated that the company's interest will get into danger, or the alleged danger must be likely to materialize.

It is important to note that the second paragraph of the relevant article refers to the principle of equality among shareholders and aims to protect the interests of minority shareholders in particular. Accordingly, it is expressly regulated that if any shareholder has been provided with information on a matter outside the general assembly, upon the request of another shareholder, the same information shall be provided in the same scope and detail. In such a case, the board of directors will not be able to avoid providing information on the grounds that this information is a company secret or a company interest.

Exercise of the Right Through the Court

The Turkish Commercial Code No. 6102 introduced the right of the shareholder to apply to the court in the event that the shareholder's right to request information and review is unfairly denied. Pursuant to Article 437/5 of the Turkish Commercial Code, the shareholder may apply to the commercial court of first instance where the headquarters of the company is located, in the event that the general assembly or the board of directors unjustly rejects, leaves unanswered, or postpones the request to exercise the right to demand information or review. With this provision, the shareholder's right to demand information and review has been strengthened and the right to direct sanction has been granted. Pursuant to the law, the shareholder is required to apply to the court within ten days following the rejection, and in other cases, after a reasonable period.

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.