Pursuant to Article 411 of the Turkish Commercial Code No. 6102 ("TCC"), shareholders who hold at least 10% of the share capital in joint stock companies, and 5% in publicly held companies, are considered minority shareholders. Both the TCC and the Capital Markets Law No. 6362 ("CML") grant certain rights to minority shareholders in joint stock companies in order to prevent majority shareholders from acting against minority shareholders and to protect the balance of interests among shareholders.
The fair and equal treatment of minority shareholders, their effective participation in the management and operations of the company, and the availability of effective remedies in case their rights are violated are among the key elements forming the basis of the "G20/OECD Principles of Corporate Governance" published by the Organization for Economic Co-operation and Development (OECD) and the "Corporate Governance Principles" published by the Capital Markets Board of Turkey (CMB).
Within the scope of the TCC, the rights granted to minority shareholders in non-public joint stock companies are briefly as follows:
- The Right to Request the General Assembly to be Convened and to Request Inclusion of Items on the Agenda (TCC Art. 411)
In joint stock companies, the authority to convene ordinary and extraordinary general assembly meetings and to include items on the agenda belongs , as a rule, to the board of directors, even if its term of office has expired.
However, pursuant to TCC Art. 411, minority shareholders may request the board of directors to convene the general assembly. If the general assembly is already to be convened, they may request that matters to be resolved at the meeting be placed on the agenda.
If the request of the minority is accepted by the board of directors but the board of directors does not convene the general assembly to meet within 45 days at the latest, the authority to convene passes to the minority shareholder who made the request.
If the request made to the board of directors is rejected or if no positive response is given within 7 business days, minority shareholders may request the Commercial Court of First Instance at the company's headquarters to enforce the rejected requests.
- The Right to Obtain Information and Inspection (TCC Art. 437)
At the general assembly, shareholders may request information from the board of directors regarding the affairs of the company, including subsidiaries, and from the auditors regarding the manner and results of the audit.
The shareholder's right to obtain information and inspection may only be rejected exceptionally, on the grounds that company secrets would be disclosed or other company interests requiring protection would be endangered. The right to obtain information and inspection cannot be removed or restricted by the articles of association or by a resolution of any corporate body.
- The Right to Request the Appointment of a Special Auditor (TCC Art. 438)
Each shareholder, if necessary for the exercise of shareholder rights and if the right to obtain information or inspection has previously been exercised, may request the general assembly to clarify certain events through a special audit, even if not on the agenda.
If the general assembly approves the request, a special auditor may be requested from the commercial court of first instance at the company's headquarters within 30 days.
- The Right to File a Lawsuit for Dissolution of the Company on Just Grounds (TCC Art. 531)
In the presence of just grounds, minority shareholders may request the commercial court of first instance at the company's headquarters to decide on the dissolution of the company.
The Turkish Commercial Code does not define just grounds within the relevant article under "dissolution on just grounds." In practice and doctrine, the prevailing view is that the court will assess the justness of the ground according to the concrete case. In this context, reasons such as the company being subject to poor management by the directors, shareholders suffering damage due to financial difficulties, the systematic restriction of minority shareholders' rights, and the continuous rejection of minority shareholders' requests without justification may be cited as examples of dissolution on just grounds.
- The Right to Prevent Release from Liability (TCC Art. 559)
Minority shareholders may prevent the adoption of a release from liability resolution by casting dissenting votes at the general assembly.
Pursuant to TCC Art. 559, in order for resolutions regarding the release from liability of board members to be adopted at the general assembly, the majority of the votes present at the meeting must be in favor. This opportunity for the minority prevents the elimination of the board members' liability for the previous term and paves the way for possible liability lawsuits. Indeed, a resolution for release from liability would eliminate the right to bring liability lawsuits both for the company and the shareholders regarding the transactions covered by such resolution.
Therefore, by blocking the release from liability, minority shareholders protect both their own interests and those of the company. This mechanism also encourages board members to act more diligently, carefully, and responsibly in the performance of their duties.
- The Right to be Represented on the Board of Directors (TCC Art. 360)
Certain share groups, minority shareholders, or shareholders holding a specific amount of shares may be granted the right to be represented on the board of directors through a provision to be included in the articles of association.
Article 360 of the Turkish Commercial Code allows for granting special rights to certain shareholders or share groups in the election of board members. Through this regulation, shareholders outside of the majority's dominance are also ensured to have a voice in management. Such representation, if provided in the articles of association, guarantees the direct participation of minority shareholders in the company's strategic decisions and contributes to the protection of their interests. However, this right does not arise directly from the law itself and may only be exercised if it is expressly provided in the articles of association.
- The Right to Request the Postponement of Balance Sheet Discussions (TCC Art. 420)
Minority shareholders have the right to request the postponement of balance sheet discussions at the general assembly for one month.
Pursuant to TCC Art. 420, upon the request of minority shareholders representing at least one-tenth of the share capital (one-twentieth in publicly held companies), the chair of the meeting shall postpone the balance sheet discussions to the following month without the need for a general assembly resolution. This postponement is announced to the shareholders by public notice and published on the company's website. As a rule, minority shareholders may exercise this right only once; however, if objections regarding the financial statements are recorded in the minutes at the first meeting and such objections have not been addressed in accordance with the principles of fair accountability, it is also possible to request a second postponement.
- The Right to Request the Issuance of Share Certificates (TCC Art. 486)
Minority shareholders have the right to request the issuance and distribution of registered share certificates to all holders of such shares.
Pursuant to TCC Art. 486/3, upon the request of the minority, the board of directors is obliged to issue registered share certificates and deliver them to all registered shareholders. This right not only secures the position of minority shareholders within the company but also facilitates the proof of ownership, the transfer of shares, and the effective exercise of shareholder rights.
In addition to the TCC, the Capital Markets Law also grants rights to minority shareholders in publicly held companies in order to ensure the balance of interests:
- The Right to Squeeze-Out and the Right to Sell-Out (CML Art. 27)
In publicly held companies, when the controlling shareholder reaches at least 98% of the voting rights directly or indirectly, such shareholder has the right to squeeze out the remaining shareholders; in the same situation, minority shareholders may exercise their right to sell their shares to the controlling shareholder.
However, pursuant to CML Art. 27, during the exercise of these rights, the determination of the share price must be made fairly; in this process, independent valuation reports and market conditions are taken as the basis. This regulation both enables the controlling shareholder to manage the company more effectively and ensures that minority shareholders can terminate their investments at a fair price, thereby protecting their interests.
As is apparent, the rights granted to minority shareholders are protective mechanisms that limit the absolute dominance of the majority will in companies and safeguard the balance of interests among shareholders. In addition, within the framework of the TCC and in line with the "G20/OECD Principles of Corporate Governance" and the "Corporate Governance Principles" of the Capital Markets Board of Turkey, minority shareholders are granted the right to file a lawsuit as a remedy in cases where their requests are rejected and/or their rights are violated.
The common feature of these rights is that they ensure minority shareholders play a more active role in company management while at the same time strengthening the corporate structure of the company. Therefore, minority rights are considered not only as instruments for the protection of individual investors but also as essential tools that foster transparency, accountability, and a sustainable governance approach within 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.
