PART TWO
In the first part of our article, we stated that minority rights are not defined under the Turkish Commercial Code (“TCC”), that only the rights granted to minority shareholders are regulated, and that, similarly, minority rights are not expressly defined in legal doctrine; instead, the rights granted to minority shareholders under the TCC are examined under two headings: “Positive Minority Rights” and “Negative Minority Rights.” We also discussed the legal nature of the concept of minority rights in joint stock companies and negative minority rights.
You can access the first part of the article via the https://en.universalhukuk.com/protection-of-minority-rights-in-joint-stock-companies-part-one link.
In this part, which continues our article, we will provide our explanations regarding positive minority rights, which refer to the exercise of a right by the minority through a justified request or legal action by means of a declaration of will despite the will of the majority,1 and we will also include the conclusion of the article.
- Positive Minority Rights
With respect to positive minority rights, the minority is required to make a specific request in matters where the law grants it a right.2 Unlike negative minority rights, merely casting a negative vote is not sufficient. Minority shareholders exercise these rights through a certain degree of coordination and conduct. 3
- 2.1- The Minority’s Right to Be Represented on the Board of Directors, Provided That It Is Stipulated in the Articles of Association
The right granted to the minority to be represented on the board of directors is expressly regulated under Article 360 of the TCC, titled “Representation of Certain Groups on the Board of Directors.” The relevant provision expressly states that, provided it is stipulated in the articles of association, certain groups of shares and the minority may be granted the right to be represented on the board of directors, as well as the right to nominate candidates for board membership. Through this right, minority shareholders are enabled to play an active role in the management of a joint stock company and are provided with an instrument for protecting their interests.
The right of representation may be granted to minority shareholders in the articles of association either at the incorporation stage of the company or subsequently through an amendment to the articles of association. However, Article 360/2 of the TCC is important at this point. Article 360/2 expressly provides that shares to which the right of representation on the board of directors is granted pursuant to this article are deemed privileged shares. Accordingly, the relevant amendment to the articles of association must be made by satisfying the quorum requirements under Article 421 of the TCC, which we discussed in detail above.4
- 2.2- The Right to Convene an Extraordinary General Assembly Meeting and to Add Items to the Agenda
The procedure for convening the general assembly of joint stock companies and the persons authorized to call such meetings are regulated under Articles 409, 410, 411 and 412 of the TCC.
Article 409 of the TCC provides that general assemblies may convene in two forms, ordinary and extraordinary; that the ordinary general assembly meeting is held within three months following the end of each financial period; and specifies the matters that may be discussed at such meeting. It also provides that the general assembly may be called to an extraordinary meeting when necessary.
Article 411 of the TCC regulates the minority’s right to call the general assembly to a meeting. Pursuant to Article 411/1 of the TCC, shareholders representing at least one-tenth of the share capital, or one-twentieth in publicly held companies, may request in writing that the board of directors convene the general assembly by stating the reasons necessitating the meeting and the agenda, or, if the general assembly is already to convene, may request that matters they wish to have resolved be included on the agenda. The articles of association may grant the right to request a meeting to shareholders holding a smaller proportion of shares.5
The minority must first submit to the board of directors, in writing and with reasons, its request either to convene the general assembly for an extraordinary meeting or to add an item to the agenda of an upcoming general assembly meeting for discussion. This is because the board of directors has discretion to examine the matters stated by the minority as necessitating reasons and to determine whether such reasons are sufficiently compelling.6 In any event, the board of directors must respond to the minority’s application within seven days. If the board does not consider the reason sufficient and rejects the minority’s request, the minority may thereafter seek the convening of the general assembly only by applying to the court. Even where the board considers the minority’s reason appropriate, it may reject the request to convene a meeting or add an item to the agenda within the scope of its discretion.7 However, where the board of directors rejects the minority’s request arbitrarily, unfairly and without justification, liability may arise under Article 553/1 of the TCC.8
- 2.3- The Right to Request Postponement of the Discussion of Financial Statements (Balance Sheet) and Related Matters
One of the fundamental rights arising from share ownership is the right to obtain information and conduct an examination. The right to request a special audit and the postponement of discussions, which are among minority rights, constitute more detailed and specific manifestations of the right to obtain information and conduct an examination. As an example of this right, Article 420 of the TCC grants minority shareholders the right to request postponement of the discussion of financial statements and related matters in joint stock companies, thereby preventing the minority from being overpowered by the majority.
Pursuant to Article 420/1 of the TCC: “The discussion of the financial statements and related matters shall, upon the request of shareholders holding one-tenth of the share capital, or one-twentieth in publicly held companies, be postponed for one month by the chairperson of the meeting without the need for a resolution of the general assembly. The postponement shall be announced to the shareholders in the manner set forth in the first paragraph of Article 414 and shall be published on the website. The general assembly shall be called to the subsequent meeting in accordance with the procedure prescribed by law.” Through this provision, the minority is granted the right to have both the discussion of the financial statements and the discussion of matters related to the financial statements postponed at the general assembly.
Financial statements (balance sheet) are statements prepared in accordance with accounting principles and standards that contain information concerning a company’s (enterprise’s) profit, income, expenses, capital characteristics and other aspects of its financial position.9 As regulated under Articles 424 and 515 of the TCC, approval of the balance sheet by the general assembly results in the release of the members of the board of directors. Therefore, approving a balance sheet despite the belief that it is inaccurate may prejudice the interests of the minority vis-à-vis the majority. Accordingly, granting minority shareholders the right to request postponement of the discussion of the financial statements and related matters serves to protect minority interests.
If, despite the minority’s request for postponement, the discussion of the financial statements and related matters is not postponed at the general assembly, the minority may bring an action for annulment before the commercial court of first instance within three months from the date of the resolution pursuant to Article 445 of the TCC.10 In order for the minority to exercise this right, a statement that they voted against the resolution must be recorded in the minutes of the general assembly resolution.
- 2.4- The Right to Apply to the Court for the Appointment of a Special Auditor
Article 437 of the Turkish Commercial Code regulates shareholders’ right to obtain information and conduct an examination, and the right to request a special auditor, regulated under Article 438 et seq. of the TCC under the heading “Right to Request a Special Audit,” may also be regarded as a continuation of this right granted to shareholders.
Article 438 of the TCC provides as follows: “Each shareholder may request the general assembly, even if the matter is not included on the agenda, to clarify certain events through a special audit where this is necessary for the exercise of shareholder rights and where the right to obtain information or conduct an examination has previously been exercised. (2) If the general assembly approves the request, the company or any shareholder may, within thirty days, request the commercial court of first instance at the place where the company’s registered office is located to appoint a special auditor.” As is clear from the wording of the provision, although the legislator has granted every shareholder the right to request a special audit, it has left the decision on whether to grant such request to the discretion of the general assembly. Therefore, if the general assembly rejects the request, an individual shareholder does not have the right to apply to the court for a special audit to be conducted.
Article 439 of the TCC, on the other hand, provides that: “If the general assembly rejects the request for a special audit, shareholders representing at least one-tenth of the share capital, or one-twentieth in publicly held joint stock companies, or shareholders whose shares have an aggregate nominal value of at least one million Turkish Liras, may, within three months, request the commercial court of first instance at the place where the company’s registered office is located to appoint a special auditor. (2) A special auditor shall be appointed where the applicants convincingly demonstrate that the founders or company bodies have violated the law or the articles of association and thereby caused loss to the company or the shareholders.” Through this provision, the right to request a special audit is granted to the minority. This is because, where a request for a special audit raised by the minority at the general assembly is rejected, the minority may apply to the court and seek enforcement of its request. In this respect, the right to request a special audit is not an individual shareholder right, but a minority right.11
For a special auditor to be appointed to a joint stock company, the right to request a special audit must have been raised before the general assembly; the shareholder requesting the special auditor must previously have exercised the right to obtain information and conduct an examination under Article 437 of the TCC; a special audit must have been requested in relation to the matter on which information was sought; the special audit must be necessary for the exercise of shareholder rights; there must be a need for a special auditor in order to clarify specific events; and the general assembly must have issued either a positive or negative decision regarding the request. The legislator has not prescribed a special meeting or decision quorum for a special audit.
Accordingly, by granting minority shareholders the right to request a special audit, the law enables conduct by the majority in its own favor and against the minority to be examined and, where appropriate, prevented through a special audit, thereby protecting minority interests.
- 2.5- Request for the Removal of the Auditor and the Appointment of a New Auditor
Under the TCC, auditing ceased to be a mandatory corporate body of the company. Under the new system introduced by the TCC, certain joint stock companies, namely companies designated by the President, are required to undergo independent audits pursuant to Article 398 et seq. of the TCC and the provisions of Decree-Law No. 660. Other joint stock companies not designated by the President are, except for exceptional provisions, subject to an audit system regulated separately by the President and are not subject to the audit regime under the TCC.12
Article 400/1 of the TCC regulates who may act as an auditor by providing that: “For the purpose of conducting an independent audit, the auditor may be a certified public accountant or a certified public accountant and financial adviser licensed pursuant to Law No. 3568 dated 1/6/1989 on Certified Public Accountancy and Sworn-in Certified Public Accountancy, who is authorized by the Public Oversight, Accounting and Auditing Standards Authority, and/or a capital company whose shareholders consist of such persons…”13
Although the appointment of the auditor is among the non-transferable powers of the general assembly pursuant to Article 408/c of the TCC, Article 399/4 of the TCC introduces an exception in order to prevent the majority from using this authority as an oppressive power over minority shareholders and grants the minority the opportunity to have the auditor replaced where certain conditions are met.14
Article 399/4 of the TCC grants minorities in companies that are subject to independent auditing by the President, including joint stock companies, the right to request the removal of the auditor elected by the general assembly and the appointment of a new auditor. This request is made before the commercial court of first instance.
Pursuant to Article 399/4 of the TCC, the commercial court of first instance at the place where the company’s registered office is located may, upon the request of the board of directors or the minority and after hearing the relevant parties and the elected auditor, appoint another auditor where a justified reason relating to the person of the elected auditor so requires, particularly where there is a suspicion that the auditor is acting with bias.
As expressly stated in Article 399 of the TCC, the minority’s request to replace the auditor must be supported by reasons. It is clear that the impairment of minority interests may constitute such a reason. Accordingly, minority rights are protected by granting the minority the right to replace an auditor who acts in a manner that prejudices their interests.
- 2.6- Request for the Issuance of Share Certificates
In a joint stock company, a share certificate serves to prove that its holder is entitled to exercise the rights provided under the law and the articles of association and to carry out legal transactions relating to the share. A share comes into existence upon the registration of the joint stock company with the trade registry. Shares issued before the registration of the company are invalid, while obligations arising from the subscription undertaking remain valid.15 The person issuing share certificates prior to registration is liable for losses arising from such certificates. Since the share and corporate rights are integrated, corporate rights cannot be asserted separately from the share and such rights cannot be transferred independently. In this respect, share certificates are causal instruments, and when the company ceases to exist, the share certificates also cease to exist.16 Due to differences in their issuance requirements, share certificates may be issued either to bearer or in registered form; the type of share certificate is stipulated in the articles of association and, unless otherwise provided therein, the type of share may be converted through amendments to the articles of association.17
There is no statutory obligation for companies whose shares are not traded on a stock exchange to issue share certificates. Pursuant to Article 484 of the TCC, the full subscription price of bearer shares must be paid before bearer share certificates may be issued. Following such payment, the share certificates are issued and distributed to the shareholders within three months.18
Prior to the TCC, in non-public joint stock companies, boards of directors could refrain from issuing share certificates, or could withhold distribution of issued certificates, in order to place minority shareholders under pressure and prevent them from transferring their shares. However, paragraph 3 of Article 486 of the TCC, titled “Issuance of Share Certificates,” provides that “If the minority so requests, registered share certificates shall be issued and distributed to all holders of registered shares.” Thus, the minority has been granted the right to request the issuance of share certificates, thereby preventing the majority from prejudicing minority interests.
- 2.7- Request for the Dissolution of a Joint Stock Company for Just Cause
One of the most significant powers introduced by the TCC is the right to request the dissolution of a joint stock company for just cause. Pursuant to Article 531 of the TCC: “Where just cause exists, shareholders representing at least one-tenth of the share capital, or one-twentieth in publicly held companies, may request the commercial court of first instance at the place where the company’s registered office is located to order the dissolution of the company. Instead of dissolution, the court may order that the plaintiff shareholders be paid the real value of their shares as of the date closest to the date of the judgment and be expelled from the company, or may order another solution that is appropriate and acceptable in the circumstances.”
Although the legislator requires the existence of just cause for the minority to request the dissolution of the company, it has neither defined the concept of just cause nor established a specific framework for it. Therefore, the existence of just cause must be assessed separately in each concrete case. In this context, abuse by the majority of its controlling power, thereby prejudicing minority interests, may be considered just cause. However, such abuse must not consist merely of a future act that has not yet occurred; the conduct must have commenced.19 Likewise, although no limitation period has been prescribed for the exercise of this right by the minority, if the minority remains silent during the abuse and requests dissolution for just cause only after the conduct has ended, this would constitute a violation of the principle of good faith under Article 2 of the Turkish Civil Code.20
The articles of association may contain provisions specifying matters that may be regarded as just cause.21 However, such provisions must not conflict with mandatory rules and must not limit the scope of just causes. Otherwise, they will be invalid. Where an action for dissolution is brought concerning an event expressly designated in the articles of association as a ground for dissolution for just cause, the judge should not reassess whether the event constitutes just cause, but should determine whether the stipulated event has occurred.22
In an action for the dissolution of a joint stock company for just cause brought upon the request of the minority, the judge examines whether the plaintiff was at fault in the occurrence of the just cause and dismisses the action if the plaintiff is grossly at fault. 23
In an action brought by the minority for the dissolution of a joint stock company for just cause, although differing views exist in legal doctrine due to a practice inherited from the former legislation, under the provisions currently in force the minority is not required to deposit its shares as security at a place determined by the court.24
Another matter that must be taken into consideration is that, pursuant to the principle of ultima ratio (last resort), before seeking the dissolution of a joint stock company for just cause, the minority should attempt to resolve the existing problem by exercising its other rights and should exhaust the other available remedies.
Accordingly, by granting the minority the right to request the dissolution of a joint stock company for just cause, the law seeks to prevent the majority from abusing its controlling power in a manner that prejudices minority interests.
CONCLUSION
The protection of minority interests against majority control, which has existed since the emergence of company law, has given rise to the concept of “Minority Rights.” Certain rights have been granted to minorities, which are in a disadvantaged position within companies, thereby bringing the interests of the minority and the majority into a more balanced position.
In our study, these balancing rights granted to minorities have been examined separately under the headings of positive minority rights and negative minority rights. As stated above, the rights granted to minorities by the legislator are intended to balance the majority and the minority. Accordingly, minority rights may not be exercised in a manner that harms the interests of the joint stock company; at the same time, under the provisions of the TCC currently in force, the aim is to ensure that minorities are not prejudiced by majority control by enabling them to exercise their positive and negative minority rights in accordance with the law, and this objective has, in general terms, been achieved.
Footnotes
1. Sert Canpolat, Selin, TBB Dergisi, Sayı 74, 2008, s.161
2. Birsel, Mahmut, Anonim Şirketlerde Azınlık Hakları”, İmran Öktem’e Armağan, Ankara 1970, s.639
3. Sert Canpolat, Selin, TBB Dergisi, Sayı 74, 2008, s.165
4. İkiz, Meltem, “Anonim Şirketlerde Azınlık Hakları”, (Antalya Bilim Üniversitesi Lisansüstü Eğitim Enstitüsü Özel Hukuk Tezli Yüksek Lisans Programı Yüksek Lisans Tezi), Antalya 2022, s.35
5. Karayalçın, Yaşar, Anonim Şirkette Çoğunluk-Azınlık İlişkisi Bakımından Kontrol (Blok) Satışı ve Genel Alım Önerisi”, Prof. Dr. Haluk Tandoğan’ın Anısına Armağan, Ankara 1990, s. 361; Seda Ulaş Kısa, “Anonim Ortaklıkta Yaşanan Çıkar Çatışmasının Azınlıkta Kalanlara Zarar Vermemesi İçin Öngörülen Önleyici Hukuki Araçlar”, Prof. Dr. Ünal Tekinalp’e Armağan, İstanbul 2003, s. 522.
6. Gencer, Hakan, Anonim Şirketlerde Azınlık ve Azınlık Hakları,2019 Ankara, s.83
7. Can, Mustafa Erdem, “Azlığın Genel Kurulun Toplantıya Çağırılması ve Gündemin Belirlenmesi Konusundaki Yetkileri”, Anonim Şirketlerde Bireysel ve Azınlık Pay Sahibi Hakları, Editör: Erol Ulusoy, Ankara 2014, s.87
8. Altıntaş, Hasret, “6102 Sayılı Türk Ticaret Kanunu Çerçevesinde Anonim Şirketlerde Azınlık Hakları,”, (Gazi Üniversitesi Sosyal Bilimler Enstitüsü Özel Hukuk Anabilim Dalı Hukuk Bilim Dalı, Yayınlanmamış Yüksek Lisans Tezi), Ankara 2015, s.32
9. İkiz, Meltem, “Anonim Şirketlerde Azınlık Hakları”, (Antalya Bilim Üniversitesi Lisansüstü Eğitim Enstitüsü Özel Hukuk Tezli Yüksek Lisans Programı Yüksek Lisans Tezi), Antalya 2022, s.44
10. Bozbel, Savaş, “Azınlığın Bilanço Görüşmelerini Ertelemesi,TTK m.420”, https://www.academia.edu/36543153/Azınlığın Bilanço Görüşmelerini Erteletmesi TTK m.420
11. Kaya, Arslan, “Özel Denetim İsteme Hakkının Bilgi alma ve İnceleme Hakkı ile İlişkisi”, BATİDER,C.31.,S.1, Ankara Mart 2015, s.67.
12. Günay, Gözde Engin, Anonim Ortaklıklar Hukuku’nda Özel Denetim, İstanbul 2018, s.313
13. İkiz, Meltem, “Anonim Şirketlerde Azınlık Hakları”, (Antalya Bilim Üniversitesi Lisansüstü Eğitim Enstitüsü Özel Hukuk Tezli Yüksek Lisans Programı Yüksek Lisans Tezi), Antalya 2022, s.57
14. Gencer, Hakan, Anonim Şirketlerde Azınlık ve Azınlık Hakları,2019 Ankara, s.83 GENCER Hakan, Anonim Şirketlerde Azınlık ve Azınlık Hakları,2019 Ankara, s.120
15. Türk Ticaret Kanunu, 1.5.6102.pdf (mevzuat.gov.tr)
16. Gencer, Hakan, Anonim Şirketlerde Azınlık ve Azınlık Hakları,2019 Ankara, s.83 GENCER Hakan, Anonim Şirketlerde Azınlık ve Azınlık Hakları,2019 Ankara, s.124
17. Türk Ticaret Kanunu, 1.5.6102.pdf (mevzuat.gov.tr)
18. İkiz, Meltem, “Anonim Şirketlerde Azınlık Hakları”, (Antalya Bilim Üniversitesi Lisansüstü Eğitim Enstitüsü Özel Hukuk Tezli Yüksek Lisans Programı Yüksek Lisans Tezi), Antalya 2022, s.61
19. Şahin, Cansu, “Anonim Ortaklığın Haklı Sebeple Feshi İsteminde Mahkemenin Fesih Dışındaki Çözümlere Karar Verme Yetkisi”, (Yeditepe Üniversitesi Sosyal Bilimler Enstitüsü Hukuk Yüksek Lisans Programı, Yüksek Lisans Tezi), İstanbul 2019, s.18.
20. Şahin, Cansu, “Anonim Ortaklığın Haklı Sebeple Feshi İsteminde Mahkemenin Fesih Dışındaki Çözümlere Karar Verme Yetkisi”, (Yeditepe Üniversitesi Sosyal Bilimler Enstitüsü Hukuk Yüksek Lisans Programı, Yüksek Lisans Tezi), İstanbul 2019, s.18
21. https://www.muglabarosu.org.tr/Upload/files/pdf/TTK%20Madde%20Gerekçeleri.pdf (E.T.22.11.2021)
22. Ayoğlu, Tolga, “Anonim Ortaklıklarda Haklı Nedenle Fesih”, Prof. Dr. Oğuz İmregün’e Saygı Sempozyumu, 26.10.2013, Galatasaray Üniversitesi Hukuk Fakültesi Dergisi, 2013/2 Sayı, s.226
23. Şahin, Cansu, “Anonim Ortaklığın Haklı Sebeple Feshi İsteminde Mahkemenin Fesih Dışındaki Çözümlere Karar Verme Yetkisi”, (Yeditepe Üniversitesi Sosyal Bilimler Enstitüsü Hukuk Yüksek Lisans Programı, Yüksek Lisans Tezi), İstanbul 2019, s.48.
24. Yakupoğlu Eren, Özge, “Anonim Şirketlerde Pay Sahipliği Sıfatını Sona Erdiren Haller”, (Bursa Uludağ Üniversitesi Sosyal Bilimler Enstitüsü Özel Hukuk Anabilim Dalı, Yüksek Lisans Tezi), Bursa 2021, s.119
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