The rights of shareholders in joint stock companies are regulated under the Turkish Commercial Code No. 6102 ("Law") in detail. In order to create equality and fairness among shareholders, the Law also grants some special rights to minority shareholders who have a smaller share in the company. In this article, the rights of minority shareholders shall be discussed.

Minority Shareholders and Rights

The concept of minority shareholders is regulated under Article 411 of the Law. According to the relevant article, minority shareholders are shareholders who represent at least 10% of the capital in joint stock companies and at least 5% in publicly traded companies. In joint stock companies, the need to establish a balance of interests between the shareholders representing the majority of the capital and minority shareholders and the need to protect minority shareholders has caused the granting of privileged rights to minority shareholders.

The rights granted to minority shareholders in non-public joint stock companies are set out below, some of which are among the rights given to all shareholders. In addition to the rights granted to minority shareholders by the Law, some rights may also be granted by the articles of association or shareholders' agreement.

i. The Right to Convene the General Assembly to Meeting and to Add Items to the Agenda

In joint stock companies, the right to convene the assembly is an authority granted to the board of directors of the company. In order to resolve any possible conflicts that may arise between the board of directors and minority shareholders regarding the management of the company and to ensure that minority shareholders also contribute to the management of the joint stock company, such authority is also granted to minority shareholders by the Law. The Law also stipulates that the right to convene may be granted to shareholders holding a smaller number of shares by the articles of association.

According to Article 411 of the Turkish Commercial Code, shareholders constituting at least 10% of the share capital, or 5% in publicly traded companies, in other words minority shareholders, may request the board of directors to convene the general assembly or, if the general assembly is already convened, to include the items they wish to be resolved on the agenda, stating the grounds and agenda in writing.

According to the Law, the call and the request to add an item to the agenda shall be made through a notary public. The request to add an item to the agenda shall be received by the board of directors before the date of payment of the announcement fee for the publication of the announcement in the Turkish Trade Registry Gazette. If the board of directors accepts the call, the general assembly shall be called for a meeting to be held no later than 45 days, otherwise the call shall be made by the requesting shareholders.

In the event that the board of directors rejects or fails to respond positively within seven business days to the call for the general assembly meeting or the addition of an item on the agenda, the same shareholders may apply to the court. If the shareholders apply to the commercial court of first instance in the place where the company headquarters is located, the court may decide to call the general assembly meeting by examining the file.

ii. Right to Request Information and Examination

In joint stock companies, the right to request and examine information is a right granted not only to minority shareholders but also to all shareholders. The right to request and review information is regulated under Article 437 of the Law, and the subjects on which shareholders have such right are specified in detail.

Each shareholder has the right to request information about the financial statements, consolidated financial statements, annual report of the board of directors, audit reports and the dividend distribution proposal of the board of directors, the company's business, audits and to examine information and documents related to all these matters. The right to information and examination of shareholders shall not be abolished or restricted by the articles of association or by a decision of one of the company organs.

The information provided to the shareholders must be diligent and truthful in terms of the principles of accountability and honesty. If any shareholder has been provided with information on a matter outside the general assembly meeting due to such status, upon the request of another shareholder, the same information must be provided in the same scope and detail, even if it is not related to the agenda. The request for information may only be refused on the grounds that if the requested information is provided, company secrets will be disclosed or the interests of the company may be jeopardized.

The shareholder whose requests for information or examination are left unanswered, unjustly rejected or postponed, and who is unable to exercise the right to request information or examination, may apply to the commercial court of first instance where the company is headquartered within ten days following the rejection, or in other cases after a reasonable period of time.

iii. Right to Request for Special Audit

In joint stock companies, regardless of the shareholding ratio, shareholders may request the general assembly to clarify certain events through a special audit, regardless of whether it is not included in the agenda, if it is necessary for the exercise of their shareholding rights pursuant to Article 438 of the Law and if the right to obtain or review information has been previously exercised.

If the shareholder exercises his right to request a special audit, the general assembly shall either approve or reject the request. If the general assembly approves the request, the company or each shareholder may, within thirty days, request the appointment of a special auditor from the commercial court of first instance where the company headquarters is located. If the general assembly rejects the request for special audit, minority shareholders or shareholders whose shares have a total nominal value of at least TRY 1,000,000 may request the appointment of a special auditor from the commercial court of first instance where the company headquarters is located within three months.

iv. Right to Request Replacement of the Auditor

Pursuant to Article 399 of the Turkish Commercial Code, upon the request of the board of directors or the minority shareholders, the commercial court of first instance at the place where the headquarters of the company are located may appoint another auditor, after hearing the relevant parties and the elected auditor, if there is a justifiable reason regarding the person of the elected auditor, especially if there is a suspicion that the auditor has acted in a biased manner. However, in order for the minority shareholders to bring this action, they must have voted against the election of the auditor at the general assembly meeting, have their vote recorded in the meeting minutes, and have been a shareholder of the company for at least 3 months from the date of the general assembly meeting at which the election was made.

v. Right to Prevent Settlement and Release

Article 559 of the Law stipulates that the liabilities of the founders, members of the board of directors, and auditors arising from the establishment of the company and capital increases cannot be removed through settlement and release until four years have elapsed from the date of registration of the company. It is also stated in the relevant article that the settlement and release shall only be valid with the approval of the general assembly, and if the minority shareholders are against the approval of the settlement and release, the settlement and release cannot be approved by the general assembly. In this respect, minority shareholders may prevent the founders, members of the board of directors and auditors from obtaining a settlement and release.

vi. Right to be Represented in the Board of Directors

Pursuant to Article 360 of the Law, provided that it is stipulated in the articles of association, certain share groups, shareholders who constitute a certain group with their characteristics and qualifications, and minority shareholders may be granted the right to be represented on the board of directors. In this context, it may be foreseen in the articles of association that the members of the board of directors shall be elected from among minority shareholders and/or minority shareholders may propose nominees. The right of representation to be granted in this manner shall not exceed half of the number of board members in publicly traded joint stock companies.

vii. Right to Request the Issuance of Registered Share Certificates

Pursuant to Article 486 of the Turkish Commercial Code, in joint stock companies, if the minority shareholders requests, registered share certificates must be printed and distributed to all holders of registered share certificates.

viii. Right to Postpone the Discussion of Financial Statements

Pursuant to Article 420 of the Law, the discussion of the financial statements and related matters shall be postponed for one month upon the request of minority shareholders, upon the decision of the chairman of the meeting, without the need for a resolution of the general assembly. The postponement shall be notified to the shareholders by announcement in the same method as the call procedure and shall be published on the website. For the following meeting, the general assembly shall be convened in accordance with the procedure stipulated in the law.

After the meeting has been postponed upon the request of the minority shareholders, in order for the discussion of the financial statements to be postponed again, it is necessary that the relevant parties have not responded to the points of the financial statements that have been objected to and recorded in the meeting minutes, in accordance with the principles of honest accountability.

ix. Right to File a Lawsuit for Dissolution of the Company

Article 531 of the Law grants minority shareholders the right to file a lawsuit for the dissolution of the company if there is a just cause. According to the relevant article, in the presence of just cause, the shareholders representing at least one tenth of the share capital and one twentieth of the share capital in publicly traded companies may request the commercial court of first instance in the place where the company's headquarters is located to decide on the dissolution of the company. However, the court is not obliged to decide on the dissolution of the company. The court may decide that the plaintiff shareholders shall be paid the actual value of their shares as of the date closest to the date of the decision and that the plaintiff shareholders shall be dismissed from the company or may decide on another acceptable solution that is appropriate to the situation.

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.