I. INTRODUCTION
Joint stock companies can play an important role in the competition and market dynamics in the sector, even if they are not publicly traded and are not directly involved in the capital market. The general assembly is the decision-making body of the joint stock company legal entity and the management staff and the future of such companies are shaped by the decisions taken in the general assembly. The request for annulment of general assembly resolutions is a control mechanism granted to shareholders by Article 445 of the Turkish Commercial Code No. 6102 ("TCC"). In some cases, the legal validity of the resolutions may be questioned and their annulment may be requested. In this study, the annulment of general assembly resolutions and the principle of influence in non-public joint stock companies will be discussed.
II. ANNULMENT OF GENERAL ASSEMBLY RESOLUTIONS
Pursuant to Article 445 of the TCC, general assembly resolutions may only be subject to annulment if they are contrary to the law, the provisions of the articles of association or the rule of good faith.
i. Violation of the Law
Article 445 of the TCC does not only refer to the "Turkish Commercial Code". The legislator has specifically regulated the provision in this way, and by ensuring a broad interpretation of the phrase "contravention of the law", the legislator intended to cover all legislative provisions and unwritten rules of law to the extent that they are relevant to a general assembly resolution. Pulaşlı is of the same opinion. For example, the general assembly resolution approving the financial statements may be subject to an action for annulment on the grounds that the financial statements have been prepared in violation of the principle of fair presentation, as well as all provisions of the legislation in force and relevant to the general assembly resolution may also be subject to an action for annulment.
ii. Violation of the Articles of Association
The articles of association of a joint stock company is a contract in which the founders express their will to establish the company, which constitutes the basic order of the company, which regulates the internal and external relations of the company and the rights and obligations of the shareholders towards the company and each other, which contains the mandatory elements set forth in the TCC and which is subject to strict formal requirements. For example, if a company's articles of association stipulates a higher quorum than that stipulated in the TCC, and the general assembly decision is taken without the quorum specified in the articles of association, or if the articles of association contains a provision prohibiting the re-election of the members of the board of directors, but the former member is re-elected, or if the articles of association stipulates the qualifications for board membership such as age and profession, but persons who do not meet these conditions are elected to the board of directors, the annulment of these decisions may be requested. However, it should be emphasized that it is also important to consider whether the resolution that is not adopted in accordance with the quorum stipulated in the articles of association constitutes the legal quorum. This is because, if the resolution meets the legal quorum, it may be annulled due to violation of the articles of association; however, if it does not meet the legal quorum, it shall be concluded that the resolution is "null and void". This is also the assessment of the Court of Cassation.
iii. Breach of the Good Faith
Article 2 of the Turkish Civil Code No. 4721 provides that the annulment of the general assembly resolution may also be requested in cases where the rule of good faith, and therefore the prohibition of abuse of right, is violated. Pulaşlı and Çamoğlu explain that it is not sufficient for the general assembly resolutions to be in compliance with the provisions of the law and the articles of association on the face of it, and when the majority abuses its powers and violates the interests of the minority and individual shareholders, the resolution should be annulled due to violation of rule of good faith. For example, although the capital of the company does not need to be increased, the annulment of the capital increase decision taken for the sole purpose of reducing the share ratios of the shareholders who do not have sufficient economic power in the company may be requested. The 11th Civil Chamber of the Court of Cassation upheld the decision of the court of first instance, which decided to accept the lawsuit on the grounds that it was a necessity for the defendant company to increase its capital, but increasing it 250 times when this could have been done with a smaller amount would damage the interests of the plaintiff and would be contrary to the rules of good faith. As another example, the 11th Civil Chamber of the Court of Cassation ruled that the non-distribution of profits in a joint stock company that always makes a profit can be annulled on the grounds of breach of good faith . In another decision of the 11th Civil Chamber of the Court of Cassation, ruled that the general assembly decision restricting the transfer of shares in a joint stock company should be annulled as it is contrary to the good faith (objective good faith) under Article 2 of the Turkish Civil Code.
iv. Conditions for filing an annulment action
The persons who may request the annulment of the general assembly resolution are regulated under Article 446 of the TCC. Shareholders who are present at the general assembly meeting and vote against the resolution and record their opposition in the minutes may file an action for annulment. Shareholders who do not vote negatively but only oppose the resolutions or abstain from voting may not file an action for annulment. It is sufficient to write the dissenting opinion in the minutes of the meeting, and it is not required to be signed by the shareholder and justified. In addition, shareholders who claim that the invitation was not duly made, that the agenda was not properly announced, that persons or their representatives who are not authorized to attend the general assembly meeting attended and voted, that they were unfairly denied permission to attend the general assembly meeting, and that the aforementioned violations were effective in the general assembly resolution, whether they were present at the meeting or not, and whether they voted negatively or not, are also authorized to file an action for annulment. In addition, the board of directors and each member of the board of directors may request the annulment of the resolution if the execution of the resolution will cause personal liability. For example, the members of the board of directors may file an action for annulment against the decision not to release them.
v. Prescription Period
An annulment action may be filed against the resolutions of the general assembly of a joint stock company before the Commercial Court of First Instance in the place where the company headquarters is located within three months from the date of the resolution. With the expiration of this period, the right to file an annulment lawsuit is lost.
vi. Injuction and Collateral
Pursuant to Article 449 of the TCC, the court may grant the plaintiff's request for an injunction to stay the execution of the decisions of the defendant company; however, the defendant company may always request the plaintiffs to deposit a collateral, at the discretion of the court, against the possible damages of the company pursuant to Article 448 of the TCC. However, the amount of the collateral must be in a size and amount that will not hinder the plaintiff's right of action.
III. PRINCIPLE OF INFLUENCE
In the annulment lawsuit filed by the persons listed in Article 446/b of the TCC, the plaintiff is obliged to prove that the violation requiring the annulment of the resolution was effective in the resolution. Therefore, shareholders who claim that the invitation was not duly made, that the agenda was not properly announced, that persons or representatives who are not authorized to attend the general assembly meeting attended and voted, and that they were not allowed to attend and vote in the general assembly meeting unjustly, are also obliged to prove the effect between the general assembly decision and the contradiction. Otherwise the request for annulment will be rejected even if the decision is illegal. The 11th Civil Chamber of the Court of Cassation has a decision in this direction. It is important to note that, contrary to some opinions in the doctrine, the Court of Cassation applies the principle of influene as the effect of the unlawfulness on the quorums in the general assembly where the decision is taken and gives decisions in this direction. In another decision of the Court of Cassation, accepted that if unauthorized persons attend and vote at the general assembly meeting, the shareholders may request the annulment of the resolutions from the court, but if the votes given by these persons do not have any effect on the resolution, the general assembly resolution shall not be annulled.
IV. CONCLUSION
Preventing lawsuits for the annulment of general assembly resolutions provides a more efficient management by reducing the rate of companies dealing with legal processes. Especially in family-owned companies, general assembly meetings held without taking into account the necessary procedures and principles may cause loss of rights and damages for both the company and the shareholders. Conducting the general assembly meetings in accordance with the procedure and the law and managing them objectively by preventing the above-mentioned divisions will prevent the filing of an annulment lawsuit against the company.
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.
