Articles between 445 and 451 of the new Turkish Commercial Code No. 6102 ("TCC") regulate annulment and nullity of shareholders' general assembly resolutions. Although these articles are set forth in the section of joint stock companies, they are also applicable for the limited liability companies as per Article 622 of the TCC.
Annulment of general assembly resolutions was regulated by the former Turkish Commercial Code No. 6762, whereas the nullity of general assembly resolutions was accepted only by the doctrine and Turkish Supreme Court decisions. With the enactment of the TCC, the legal ground for the nullity of general assembly resolutions has also been established.
I. ACTION FOR ANNULMENT
General assembly resolutions to be annulled under the TCC are deemed valid until the court's decision becomes final and such resolutions are considered void after the annulment decision of the court.
Annulment of the general assembly resolutions set forth in Article 445 et seq. of the TCC.
As per Article 445 of the TCC, the general assembly resolutions which are contrary to the TCC or the articles of association and especially good faith rule may be challenged. The resolutions adopted due to the personal interests of the controlling shareholders and which do not serve the purpose or interest of the company shall be considered against the good faith rule. The resolutions against the principle of equity may also be challenged due to the breach of good faith rule.1
If the grounds under Article 445 of the TCC are met, below stated persons are allowed to initiate an action for the annulment of the relevant general assembly decisions:
- Shareholders who have attended to the general assembly meeting, voted negatively and written their oppositions in the meeting minutes
- Shareholders, whether or not attended to the meeting or
voted negatively, asserted a claim that;
- the call for the general assembly was not duly made, or
- the agenda was not announced in line with the law, or
- unauthorized persons or their representatives attended to the general assembly meeting and voted for the resolution, or
- he/she was wrongfully not allowed to attend the meeting and to vote for the resolution, and
- the above-mentioned breaches had an effect on adopting the general assembly resolution.
- The board of directors (the "BoD")
- Each BoD member, if the execution of the resolution results in his/her responsibility
The TCC regulates a three-month period to initiate an action for annulment, in order to avoid any continuous threat on the shareholders and potential investors of the company. Therefore, the action for annulment shall be filed before the commercial court which is located at the headquarters of the company within 3 (three) months as of the date of the general assembly resolution. The hearings shall not begin until the expiration of three months so as to enable the joinder of claims, if more than one action is filed within the specified term.
II. ACTION FOR NULLITY
The general assembly resolutions subjected to the nullity are either contrary to the mandatory rules, public order or morality and therefore they are void ab initio and cannot gain validity post facto.
Article 447 et seq. regulates nullity of the general assembly resolutions and exemplifies the nullity cases in form and subject matter.
In this sense, the general assembly resolutions which, in particular;
- restrict or remove the shareholders' right to attend the general assembly meeting, their voting rights, their rights to take an action and their irrevocable rights deriving from the law,
- restrict the shareholders' rights to obtain information, to inspect and to audit (regulated under Articles 437 and 438 of the TCC) beyond the legally permissible degree,
- distort the main structure of the company (e.g. imposing additional payment obligation to shareholders in order to cover the balance sheet losses, which is contrary to the principle of limited liability)
- breach the provisions on capital protection (such as, the resolutions contrary to Article 343 of the TCC which requires court valuation in case of capital in kind contributions, or contrary to Article 344 of the TCC which regulates the payment terms of the capital in cash, or contrary Article 509 of the TCC which regulates that dividend shall only be paid from the net profit for the period and freely disposable reserves)
are deemed null.
Any interested person may bring a declaratory action for the nullity of the general assembly resolution. Shareholders, the BoD members and even competitors have the right to bring an action depending on the concerned resolution.2 The court, however, is not bound by the request of the above-mentioned persons and is entitled to examine null resolutions ex officio.
There is no time limit to file an action for the nullity of a general assembly resolution. This will indeed entails the risk of being invalid for the transactions, which were based on the null resolution, between the company and the shareholders, investors, creditors and other third parties even after a long period of time. In this sense, the courts are expected to assess the concerned resolution in depth to provide transaction security and they shall first consider the applicability of annulment, unless the resolution falls under the scope of Article 447 of the TCC and thus is null.3 As explained in the preamble of Article 447, according to the principle of subsidiarity for nullity, the courts should rule for the nullity of the resolutions, which are not mentioned under Article 447, unless the annulment of such gives adequate and satisfactory results.
III. COMMON PROVISIONS ON THE ACTION FOR NULLITY AND ANNULMENT
The BoD shall announce that an action for nullity or annulment is filed against the relevant general assembly resolution and inform about the date of such action. Moreover, as for the companies required to open a website according to Article 1524 of the TCC (the companies which are subject to independent audit as per the decision of the Council of Ministers), the BoD of the company shall also announce such information at the company's website.
The court may ask the plaintiffs to provide security against likely damages, upon the request of the company. It should be noted that providing security is not a cause of action but rather regulated as a protection for the company against malicious litigation.
The court may suspend the execution of the general assembly resolution against which an action for annulment or nullity is filed, after receiving the opinions of the BoD members.
The final decision of the court regarding the annulment or the nullity of the general assembly resolution will become effective for all shareholders. The BoD shall also register the court decision with the relevant trade registry office. As for the companies required to open a website according to Article 1524 of the TCC, the BoD of the company shall also publish the decision of the court at their website.
Finally, Article 451 of the TCC states that the malicious plaintiffs filing for the annulment or the nullity of the general assembly resolution will be jointly and severally responsible for the losses of the company, if their intention to damage and thus their bad faith is proven.
- E. MOROĞLU, Anonim Ortaklıkta Genel Kurul Kararlarının Hükümsüzlüğü, İstanbul 2009, pg.194
- Karahan/Huysal, Şirketler Hukuku, 1. Baskı, Konya 2012, pg. 525
- Karahan/Huysal, Şirketler Hukuku, 1. Baskı, Konya 2012, pg. 525, 527
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.