Constitutional Court Annuls The Regime Governing The Exclusion Of Shareholders In Two-Shareholder Limited Liability Companies

With its decision published in the Official Gazette on 17 March 2026, the Constitutional Court brought renewed attention to a significant issue that had long been overlooked in relation to limited liability companies. The Constitutional Court held that requiring a general assembly majority for the exclusion of a shareholder in two-shareholder limited liability companies creates a practical deadlock. Accordingly, the Court annulled, in respect of two-shareholder limited liability companies, the statutory provision requiring a general assembly resolution before filing a court action for the exclusion of a shareholder, one of the non-transferable powers of the general assembly, on the grounds that it was incompatible with the freedom of enterprise and the right to an effective remedy.

Under the Turkish Commercial Code (the “TCC”), the articles of association of a limited liability company may specify the circumstances under which a shareholder may be expelled from the company. Where the grounds stipulated in the articles of association occur (such as a breach of the non-compete obligation or conduct detrimental to the company), the relevant shareholder may be expelled by a resolution of the general assembly. In addition, the TCC allows a shareholder to be expelled by court order upon the company's request where just cause exists. Furthermore, where just cause is present, any shareholder may claim from the court for the dissolution of the company. In such a case, instead of ordering dissolution of the company, the court may order the payment of the fair value of the claimant shareholder's interest and the claimant's exit from the company or may grant another appropriate and equitable remedy.

In the constitutional review initiated through a referral by a court, it was argued that the statutory requirement for (i) filing a court action to expel a shareholder for just cause and (ii) adopting a general assembly resolution to expel a shareholder on the grounds set out in the articles of association -requiring both at least two-thirds of the votes represented at the meeting and the majority of the entire voting share capital- renders the exclusion of a shareholder impossible in two-shareholder limited liability companies and is therefore unconstitutional.

Under the existing provisions of the TCC, an action seeking the exclusion of a shareholder from a limited liability company may only be brought following a general assembly resolution adopted by the required majority. However, in a two-shareholder limited liability company, a shareholder who does not hold a majority of the share capital cannot secure the general assembly resolution required to bring an action against the other shareholder. Consequently, in companies with two shareholders experiencing serious disputes, particularly where the shareholders hold equal shares or where the required voting threshold cannot be achieved, the statutory exclusion mechanism becomes ineffective in practice. The Court of Cassation had likewise accepted that an exclusion action could not be initiated in two-shareholder companies because the required quorum could not be achieved.

The Constitutional Court explained the purpose of the institution of exclusion for just cause in limited liability companies, emphasizing that the exclusion mechanism is not merely an individual sanction aimed at removing a shareholder from the company. Rather, it serves as a structural mechanism that prevents the interruption of the company's operations, restores cooperation among shareholders, and enables the company to maintain its economic existence. In this respect, the Constitutional Court concluded that the exclusion mechanism should be regarded not only as an internal corporate governance measure but also as an element protected under the constitutional freedom of enterprise.

In its decision, the Constitutional Court examined the practical effects of the challenged provision and focused on the structural problem arising in two-shareholder limited liability companies. The Court observed that, in companies with two shareholders holding equal shares, it is practically impossible to obtain the required majority for a general assembly resolution because the shareholder whose exclusion is sought is also in a position to block the adoption of such a resolution. As a result, even where just cause exists, the exclusion mechanism cannot be operated. Although the mechanism exists in theory, it becomes entirely ineffective in practice, producing consequences that affect not only the relationship between the shareholders but also the company's existence and commercial activities.

The Constitutional Court further held that an action for dissolution of the company cannot be regarded as an effective alternative to the exclusion mechanism in disputes between shareholders. In dissolution proceedings, although the judge may, instead of ordering dissolution, decide to expel the claimant shareholder whose request is based on just cause, this possibility does not provide an effective legal mechanism for removing the shareholder whose conduct prevents the company from continuing its business. Accordingly, the Court concluded that the legal instrument intended to preserve the company has, in its current form, become unusable for two-shareholder limited liability companies. By majority vote, the Constitutional Court held that the relevant provision of the TCC violates the constitutional freedom of enterprise and the right to an effective remedy.

In conclusion, this decision identifies, at the constitutional level, a structural problem that has long been experienced in practice but remained unresolved in relation to two-shareholder limited liability companies. It highlights both the need for legislative reform and the importance of ensuring that companies have access to effective legal mechanisms capable of functioning during periods of corporate deadlock.

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