Legal Consequences Of Non-Compliance With The Call Procedure In Joint Stock Company General Assemblies

Legal Consequences of Non-Compliance with the Call Procedure in Joint Stock Company General Assemblies

Pursuant to the Turkish Commercial Code No. 6102 (“TCC”), the general assembly is the most fundamental establishment through which shareholders of a joint stock company participate in the management and audit of the company. The ability of the general assembly to convene in accordance with the law and the articles of association, and to validly express its will, is directly related to the duly calling of shareholders to the meeting. In this article, the legal framework of the call procedure in joint stock company general assembly’s arising from non-compliance with this procedure, and the sanctions imposed on, the legal consequences corporate resolutions due to these non-compliances are examined.

As is known, protecting minority rights and ensuring the full exercise of shareholding rights in capital companies are among the most critical elements of corporate governance. The rights to attend the general assembly, to vote, and to obtain information are indispensable rights of a shareholder. Shareholders who are not duly invited to assembly meetings are effectively prevented from exercising these rights. TCC’s aim by establishing the general assembly call mechanism is to increase shareholder awareness, prevent unvetted developments over corporate resolutions, draw attention to potential risks, and encourage the formation of a transparent corporate will. Additionally, subjecting the call procedure for the general assembly to formal requirements enables the shareholders to provide capital to oversee the board of directors, which is the organ responsible for the management of the company.

1. Overview of the Call Procedure for General Assemblies in Joint Stock Companies

A general assembly call is essentially a corporate act performed by the board of directors—even if its term of board has expired, inviting shareholders to a meeting to deliberate on a specific agenda. If the circumstances require, liquidators may also call the general assembly to a meeting regarding matters related to their duties, or a single shareholder may do so upon making a court decision.

Under the TCC, the form, period, and channels of the call are explicitly regulated. The call for the general assembly must be made at least two weeks before the meeting date, excluding the days of publication and the meeting. This period is the minimum time granted for shareholders to review the agenda, make necessary preparations, and formulate a participation plan for the meeting. The call channels are established by a dual mechanism under the law: While the call for the general assembly must be announced in the Turkish Trade Registry Gazette (“TTRG”), if the company is obligated to set up a website, it must also strictly be published on the corporate website. Furthermore, the call must be notified by registered letter (or, in modern practice, by secure electronic means such as registered electronic mail -, if provided for in the articles of association) to the shareholders registered in the share ledger and to those shareholders who have previously delivered share certificates or proof of shareholding with the company and provided their addresses. It is essential, in the context of the notice, that the date, time and venue of the meeting, the agenda items and the body issuing the notice are clearly stated, in accordance with the principles of corporate transparency and integrity.

If a procedure other than those specified in the TCC is stipulated in the articles of association, the call must also comply with these procedures.

2. Concepts of "General Assembly Without Call" and "Irregular Call"

One of the concepts highlighted within the framework of the TCC that constitutes an exception to the requirement of a call is expressed as the “General Assembly Without Call” (TCC Art. 416). A general assembly without call is a legal exception allowing the general assembly to convene and adopt resolutions without complying with the call procedure, provided that all shareholders or their representatives are present, none of them objects to holding the meeting, and the meeting quorum is maintained throughout the meeting.

Conversely, unvetted meetings arising in cases where not all shareholders are present, or where even a single shareholder objects to the irregularity, constitute an “Irregular Call” (or “Non-Compliance with the Call Procedure”. Today, irregular call scenarios are no longer a theoretical risk for many partnerships; they have become a frequently encountered subject of dispute within daily commercial operations, particularly in family businesses and multi-shareholder structures. Circumstances such as the board of directors failing to comply with the notice period, serving the notice of meeting only to certain shareholders, or keeping the agenda vague, with the aim of sidelining the minority, increase the risk that these decisions—which appear to have been taken by the general meeting—may be annulled. This situation creates an area of legal complexity that could complicate companies’ governance processes.

3. Primary Risks and Forms of Violation Arising from Non-Compliance with the Call Procedure

Failure to observe the call procedure in general assembly processes brings serious risks that disrupt the administrative stability and legal certainty of the company:

1. Risk of Auditability and Transparency: General assemblies held without being subjected to statutory announcement and notification mechanisms prevent shareholders from auditing the financial status and management activities of the company. It becomes difficult to determine which resolutions were adopted for what purpose.
2. The Determination of Whether a Resolution Serves the Corporate Interest: Resolutions adopted at the initiative of a dominant group, without the broad participation and deliberation of shareholders, may produce erroneous results that run counter to the interests of the company. This situation risks the commercial future of the company.
3. Administrative Instability and Loss of Reputation: Lawsuits to be filed due to call irregularities may lead to a stay of execution and the annulment of strategic resolutions adopted at the general assembly—such as capital increases, election of the board of directors, or dividend distribution—thereby damaging the institution's credibility before stakeholders in the market.
4. Violation of the Right to Information and Examination: Financial statements, consolidated financial statements, the annual activity report of the board of directors, audit reports, and the dividend distribution proposal of the board of directors are made available for the examination of shareholders at the company headquarters and branches at least fifteen days prior to the general assembly meeting. Failure to make these documents available results in a violation of the shareholders' right to information, which directly constitutes a violation of the law.

4. Legal Consequences Arising in the Event of Non-Compliance

The fate of resolutions adopted at a general assembly convened without observing the call procedure is examined under three distinct invalidity states within the framework of Turkish commercial law doctrine and the jurisprudence of the Court of Cassation, according to the severity and nature of the irregularity:

1. Nullity

Resolutions adopted in the event of a deficiency in the constitutive elements of the general assembly are null and void. Resolutions adopted when no invitation whatsoever has been issued to the shareholders, and the shareholder is unable to attend the meeting because they were not notified, are null and void as they do not reflect the corporate will.

In cases where the invitation is issued by people who lack the authority to call the general assembly to a meeting and not all shareholders are present in full, the convening body cannot acquire the status of a general assembly; therefore, the resolutions adopted are null and void.

1. Absolute Nullity

Pursuant to Article 447 of the Turkish Commercial Code, resolutions of the general assembly that (i) restrict or eliminate the indispensable rights of the shareholder arising from the law, such as attending the meeting, minimum voting rights, and applying to legal remedies; (ii) narrow the rights to obtain information, examine, and audit beyond legal limits; and (iii) violate the basic structural principles of the joint stock company and the principles of protection of capital, are null and void.

Resolutions that result in the restriction or complete elimination of non-transferable and indispensable rights of the shareholder arising from the law—such as participation in the general assembly, filing a lawsuit, and minimum voting rights—fall under this scope. Indeed, shortening the statutory two-week call period, granting voting rights to holders of dividend certificates, distributing profits without setting aside mandatory reserve funds, or preventing representation by proxy are resolutions of this nature.

Without prejudice to the exceptional cases explicitly regulated under the TCC, resolutions that restrict the shareholders' rights to obtain information and examine, as well as the right to file lawsuits to be pursued to secure these rights, or that eliminate information access for certain shareholders, are defective with absolute nullity.

In order to determine the point where the absolute nullity of general assembly resolutions intersects with non-compliance with the call procedure, the nexus between the non-compliance with the call procedure and the resulting outcome must first be established. If the general assembly convenes without making a call within the period specified by law, and if statements indicating that documents subject to the shareholders' right of examination will be made available at the company headquarters and branches are absent from the text of the call, the shareholders' right to information and examination will be violated; thus, general assembly resolutions adopted in this manner shall be null and void.

1. Annulability

To analyze whether non-compliance with the meeting call procedure constitutes a ground for annulment of general assembly resolutions, one must first focus on the specific ways in which the deficiency in the general assembly call procedure occurred.

Failure to comply with the two-week period stipulated in the law, or failure to make announcements in the proper channels (Turkish Trade Registry Gazette, company website, Public Disclosure Platform, electronic general assembly system, etc.) are formal deficiencies. However, the presence of these formal deficiencies does not automatically lead the courts to rule for the annulment of the general assembly resolution.

Pursuant to TCC Art. 446/1-b, a shareholder claiming that the call was not made duly must prove that this irregularity was effective in the adoption of the resolution in order to have the general assembly resolutions annulled. Additionally, they must allege and prove that the resolutions adopted at the general assembly meeting also violate the law, the articles of association, or the rules of good faith.

An action for annulment based on non-compliance with the call procedure must be filed within 3 months from the date of the resolution. This period is structured as a statute of limitations. Shareholders who were present at the meeting, voted against the resolution, and had their dissent recorded in the minutes, as well as shareholders—whether present at the meeting or not, and whether they voted against or not—who assert that the call was not made in accordance with the procedure, that the agenda was not duly announced, that persons or their representatives lacking authority to participate attended and voted, that they were unfairly denied participation and voting, and that the aforementioned non-compliances were effective in the adoption of the general assembly resolution, possess the standing to institute this lawsuit.

5. Conclusion

The call procedure in joint stock company general assemblies is a fundamental safeguard that protects the rights of shareholders, ensures the formation of corporate will on a legal foundation, and confers legality upon company transactions. Deficiencies and violations in call procedures bring risks such as nullity, absolute nullity, or annulability into the company's business processes. However, considering the dynamism and speed of commercial life, having every minor formal deficiency automatically eliminate all resolutions of the company or completely paralyzing commercial operations through rigid prohibitive approaches is not accepted as a realistic or economic approach.

Indeed, while the law offers practical solutions through the institution of the general assembly without call, it has adopted a balanced approach by requiring that the irregularity affect the resolution in an action for annulment. Therefore, to avoid encountering irreparable damages and prolonged annulment lawsuits, it is of great importance for joint stock companies to establish clear corporate policies regarding call processes, strictly observe statutory deadlines and notification channels, display an approach aligned with the principle of good faith safeguarding minority rights, and proactively take technical and administrative measures to ensure legal risk management.

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.