1. General

Question is often asked whether a custodian may be appointed to a company by courts to replace or co-exist with the current management and if so under which circumstances. Understandably and rightfully so, courts are reluctant to intervene in an active and operating company's management. Only in cases where the law explicitly bestows upon such authority or in exceptional circumstances, courts may decide to appoint a custodian to perform a specific (and usually limited) duty. Turkish Commercial Code ("TCC") or insolvency law specifically requires a custodian to be appointed by courts usually upon insolvency stage leading to a financial reorganization (konkordato) request by the company or creditors or where formal bankruptcy of a company is declared1. Those are easily understood specific examples where appointment of custodian by courts with deliniated powers is justified and is out of the scope of this article. However, if and when the company is running and there is no officially announced or declared insolvency, financial restructuring or bankruptcy scenario, appointment of a custodian by a court would have to be in very exceptional cases. Complexity of the subject and lack of a detailed statutory guidance on the subject have led to conflicting opinions and rather scattered judicial decisons.

2. Types of Corporate Custodian

There are two types of custodianship available in the context of a legal person; namely; management custodian and a representative custodian. Management custodian is appointed to legal institutions that are deprived of requisite managerial bodies for the purpose of ensuring corporate management and administration. Its appointment continues so long as managment gap continues to exist meaning it's nature is a temporary protectionary legal measure. In this respect the court shall primarily authorise the management custodian to work on eliminating the lack of management and resume active duty2.

Representative custodian is appointed in cases of a legal or practical impediment to the legal representation of a legal institution. In this case the managerial body of the institution and its members exist but due to a conflict of interest relating to a specific concern the managerial body is deemed unable to fulfill its representation power. This being the case, representative custodian's role is limited to those specific and limited functions stated in its appointment decision3.

3. Lack of Requisite Corporate Bodies as the Main Requirement

Appointment of a custodian to a company is requested by the help of a provision, interestingly not in the TCC but in the Turkish Civil Code which otherwise governs, among other civil law subject matters, civil custody and legal guardianship in general. Naturally, these articles are concerned more with appointment of a custodian to a real person but also include a specific case applicable to a legal person. Article 427 (4) of the Turkish Civil Code covers a specific case applicable to a legal entity by allowing appointment of a custodian to a company in case a company is "deprived of the relevant representative corporate bodies and that (act of) management may not be achieved in any alternative means"4. The latter condition points to a general rule which is if company management may easily be restored despite a temporary inexistence or disturbence, appointment of a custodian to the company will be averted. In this respect, if shareholders are about to (or have the capacity to) convene to replace a resigning board or directors are able to make a temporary internal appointment to fill in any vacancy of directors there is no legal basis to ask for a custodian appointment5. This view is also in line with existing judicial approach. When asked to appoint a custodian to a company, courts often seek evidence as to whether shareholders have first done their part in terms of replacing or appointing a successor management and if they see that an attempt in this respect is indeed possible (i.e there is no factual or legal impediment for shareholders to convene and take a decision to form or replace management) but has not yet been made, they deny the request.

This Civil Code provision is indeed the statutory back bone of each decision concerning each instance where a lack of management exists in a company, as a result of which a management custodian (one who shall be entitled to take first hand, direct managerial decisions concerning business of the company) is appointed6. As mentioned, appointment of a custodian to a legal entity may be requested only in case of actual (and not merely constructive) absence of the managerial corporate body which is the board of directors in the case of a joint stock company and board of managers in the case of a limited liability company7. Therefore, inability to convene a shareholders meeting does not per se and singularly justify appointment of a management custodian8.

The Supreme Court has long acknowledged the legal authority of a commercial court to be able to appoint custodian to a company9. Supreme Court decisions that we observe in these instances are piled up in a limited sphere of circumstances where a company loses or unable to work its statutory decision making bodies10. In an important case concerning a limited liability company, plaintiff requested appointment of a custodian to the company as a result of the current manager's term of office having expired and based on the fact that the 65% equity owner of such company failed to attend to the partners meeting to which he was duly invited so as to be able to appoint a new manager. The Supreme Court reversed the first degree courts' decision denying appointment of a custodian, ordering the first degree court to make a further detailed review as to the need for appointment of a management custodian to the company11. It seems that the Supreme Court in this case wanted more clarity as to the reasons for the company failing to convene a formal partners meeting to appoint new management as opposed to outright denying the request.

Another decision of the Supreme Court clearly indicates that in case company is deprived of the statutory corporate bodies (such as the board of directors) due to shareholders being unable to make a new appointment in lieu of those whose office term has expired, parties having legal interest may ask the court to appoint a management custodian until shareholders make a due appointment12.

An interesting case involved request of a plaintiff, equity owner in a limited liability company, to have the current manager of such company removed and an interim custodian to be appointed in lieu thereof. Plaintiff's request was based on allegation that the current manager's brother has established a new company, the field of activity of which mirrored that of the limited liability company and the assets of the limited liability company in question were likely to be transferred to this newly established side company. Notice that the case does not involve an absolute lack of a representative corporate body but is stemmed from a "concern" that the very same managment may or is likely be abusing its management priviliges. First degree court denied the plaintiffs request stating that there was no evidence in file with respect to manager abusing his managerial rights and that limited liability company being managed by a custodian on a permanent basis violated the understanding and philosophy of corporate law in general. Supreme Court on the other hand reversed the decision stating; allegations concerning abuse of managerial rights by the company's current manager and that corporate assets have been unduly transferred to a separate company necessitated a review of such allegations based on corporate records. Therefore, Supreme Court orders the first degree court to first undertake such an investigation and decide on the plaintiffs request for appointment of a custodian accordingly13. Once again, the plaintiff's demand under this case was appointment of a management custodian to the company not merely as a form of an injunctive relief but as his main case. The Supreme Court's decision is rather interesting and unusual where in many other cases, we observe a strict judicial reluctance to overthrow or supersede an existing company management by virtue of a custodian appointment. The outcome in this specific case, as we suspect, might have been shaped by serious fraud or similar acts of malpractice allegations which may have gone uninvestigated by the first degree court. Also very important aspect is the fact that the company in question in this specific case was a limited liability company and not a joint stock company which led the Supreme Court to be more relaxed regarding legal authority to order for plaintiff's demand. As we will mention below, the Supreme Court does not show the same level of flexibility for a custodian appointment due to alleged management fraud in the case of a joint stock company. Nevertheless this case raises an interesting question of whether a custodian may be appointed to a company which in all reality does have a standing and acting management but allegedly a bad or even an evil one.

Can we deem a bad or fradulent management same as not having a management at all thus pave the way for appointment of a custodian in lieu thereof?

3.1 Demand As a Form of Injunctive Relief

We discussed the use of Turkish Civil Code's Article 427 (4) as a stand-alone provision to be utilized to enable appointment of a custodian with broad management powers to a company that otherwise does not have or is unable to select a managerial corporate authority. In addition, we frequently observe custodian appointment requests not as an ultimate demand in a case but in the form of an injunction relief request where the plaintiff's ultimate case concerns a different legal claim.

In a decision concerning a limited liability company, Supreme Court approved appointment of a custodian to a company as an injunctive relief which had two partners and representation authority was granted jointly to both of the two partners. The case involved facts where one of the partners sued the other accusing him of not participating in the company's management by not showing up at the company as a result of which the company being unable to make collection of its receivables, sign contracts or do business in general. The plaintiff's demand was that the defendant is expelled from the limited liability company and until the end of the case, a custodian is appointed to ensure the management of the company continues. Supreme Court reversed the first degree court's decision not to appoint a custodian as a form of injunctive relief and approved the plaintiff`s request for a custodian to be appointed on the basis that non participation by one of the partners to management of a limited liability company which was run by joint representation effectively depriving the company of a managerial body14.

3.2 Under Threat of Forced Liquidation

Another statutory basis for demanding appointment of a court appointed custodian is traced in Article 530 of the TCC. Article 530 is within the chapter of the TCC dealing with winding up and liquidation of a company and provides for either a shareholder, creditor or the Ministry of Commerce to be able to apply to the commercial court in case a statutory corporate body of a company is nonexistent or the company is unable to convene a formal shareholders meeting "for a long period of time". Upon one of the named parties application, the court grants a cure period to the company in order to conform its legal status as ordered by law (in other words, provide for the necessary missing corporate bodies or convene a shareholders' meeting) after hearing also from the company's board. If the company fails to cure the deficiency within the given time frame, the court declares winding up of the company. When the case is initiated, the court is authorized to take necessary precautionary measures upon one of the parties' request (Article 530 (2)). This last part points out to the authority of the court to be able to appoint a management custodian to a company in case the statutory conditions mentioned above are met15. Once again, we see a statutory attempt to try to resolve a long standing deadlock situation the victim of which is often the company itself. However, different from a request under Article 427 (4) of the Turkish Civil Code, this application is to invoke a court to participate in the process, appoint a custodian if need be and if deficiencies are not cured, to order for the company's winding up16. Clearly the ultimate goal is to grant a one last chance to shareholders to get together and involve actively in selection and forming of corporate bodies, the failure of which would be punishable by a winding up of the company.

Given that the ultimate result may as well be an order for winding up, there are statutory conditions attached to a request hereunder. First and foremost, lack of the relevant corporate body must be permanent (as opposed to a temporary failure to constitute the relevant corporate body which has thereafter been cured). In fact this is consistent with the approach used when evaluating a custodian appointment request solely under Turkish Civil Code's Article 427 (4) as discussed formerly herein. The law indicates this factor as such deficiency enduring for a long period. How long is then sufficiently long? In fact, the law intentionally refrains from spelling a definitive period to satisfy the permanency element. This means that each case will need to be independently analyzed and resolved. Of course the type of the relevant lacking corporate body which is missing is also significantly important. The most obvious difference is in between the inability of convening a formal board meeting or a shareholders meeting. Many companies in fact do not convene formal board meetings very frequently and day to day business is generally handled by managers or selected directors instead of the board acting as a whole. In this case of course it may not be said that the inability or better said the intentional choice of not convening formal board meetings points out to a reason for asking winding up the company. On the other hand, shareholders are by law required to convene at least once a year. Therefore, consecutive failure of convening a formal shareholders' meeting may said to form the basis of a request under Article 530. There are scholars who argue that inability to convene a formal shareholders meeting for three consecutive years will justify a request under Article 53017.

Second condition is that in addition to a long enduring state of incapacity or inexistence of corporate bodies, court must grant a time period to allow the company to cure such deficiency. Finally, the deficiency must still exist even after the cure period granted by the court18. Once the cure period is passed without action, in other words, the absence of such statutory corporate body still exists even after the expiry of the cure period the court will have no discretion but order winding up of the company.

As seen from the above an application under Article 530 is not a very practical method and does not offer a relief to the applicant within a short period of time. It may be used as an alternative to winding up of a company that has been put into an actual and long state of incapacity and deadlock19. It is ultimately a cleaning up effort which is evidenced by the fact that even the Ministry of Commerce has the legal standing to ask a court for winding up of a company. Appointment of a custodian by the court serves only a limited use within the limited amount of time between such case is initiated and a decision is granted by the court to wind up the company given the persistent inactivity of its shareholders.

4. In the Case of Management Deadlock or Intra Shareholder Disputes

From a practical point of view, appointment of a custodian request is likely to arise in cases where share capital of a joint stock company is divided into two (or more) group of shares and each holder of the respective share group is granted a right of privilege to appoint one (or more) directors, altogether comprising the board of directors. This type of privileged share group structure is very commonly used by investors willing to retain supervisory (or controlling) managerial rights in a company jointly owned by other shareholders. The goal is to ensure that each interest group is represented in the board to make sure that company is managed by participation or at least in awareness of all directors. In the absence of such a privileged share status, all directors would have normally been appointed by the shareholder having simple voting majority. What happens in this case if one share group for some reason, intentionally or not, does not make use of such privilege share status to appoint a director as a result of which the company's board of directors is unable to be formed as per its articles of association? Another similar example can be given in cases where a number of directors representing a certain shareholder group do not attend to meetings as a result of which the necessary meeting and decision quorums are not achieved. All these instances signify what is otherwise known as a "management deadlock". Difference is that the former example points to a deadlock scenario directly at shareholder level arising as a result of an intentional or unintentional failure of use of a shareholder right which directly relates to or has an adverse impact on the management of the company. The latter however relates to a deadlock at the board level where directors fail to convene a formal board meeting to take the necessary decisions required to manage the company. Failure to convene a board meeting may arise either when a director's meeting request is denied by the chairman or other directors or the board failing to achieve either the meeting or decision quorums to pass a resolution.

Without attempting to list various possible deadlock scenarios it is possible to say that in principle such a deadlock at management level "may" justify an application to the court with a request for appointment of a custodian (and if such deadlock persists for a significant amount of time even a request for dissolution of the company, as explained below). In our opinion as well this management deadlock scenario is also one that is akin to an otherwise duly elected board's term of office having expired or directors having resigned where in both cases the company may not be said to have an operating management in reality20. In one specific case, shareholders representing a certain share group sued the company and the non electing shareholder group to ask the court to appoint a custodian to the company until the non electing shareholder group decides to exercise his right of share privilege to appoint a director21. However it is important to note the factual elements of each such case and recognize the fact that a deadlock needs to be persistent, actual and spread out as opposed to relating to a categorical issue. What we mean is that the right (or freedom) of directors to not to agree on a specific decision must be respected to the fullest extent possible. A shareholder group, through a director in the board, may choose to prevent taking of a specific decision by using his privileged share status. In this respect, a director may intentionally choose not to appear in a board meeting or cast a negative vote. Not all cases and instances where a decision is failed to be reached on a specific issue or decision shall justify appointment of a custodian to the company thus creating a short cut around the existing management. A management deadlock which justifies an appointment of a custodian must be persistent and relate to (or indicate) an overall disagreement in company management as opposed to difference of opinion in one or more specific decision. Deadlock must be the reflection of an overall shareholder or director battle being fought between different interest groups where the company board room becomes its battleground. These type of deadlocks may well be the underlying reason for a court to agree to appoint a custodian to a company which otherwise has a management in office, one way or the other.

5. Conclusion

We observe that in vast majority of the cases, the factual element justifying appointment of a custodian to a company is where the company does not legally or practically have a valid or functioning management. Cases where shareholders are unable to convene or make a decision to replace the management due to a deadlock is a clear example in this respect. We observe that courts are willing to appoint a temporary representative custodian in these cases for either the specific purpose of organizing the invitation procedure for a shareholders meeting (in cases where the relevant corporate body authorized to make the invitation is not available) or to form a temporary management until the non available shareholder is willing to participate to the company governing system and perform his share in the election process.

What about cases beyond these examples where a management exists on paper but alleged to have been engaged in fraud or misuse of corporate assets? A distinction shall be made as for different circumstances. In the case of a joint stock or a limited liability company where the requesting plaintiff shareholder owns majority equity interest, the courts are likely to deny the demand for appointment of a custodian in lieu of the current existing management even when fraud and misuse allegations exist simply because the majority shareholder will be initially expected to work within the corporate governance mechanism to replace and pursue the directors by using his majority (controlling) equity position22. In this case courts tend to prefer the majority shareholder to push for a shareholders (or partners) meeting and remove the director (or manager) first by using "ordinary means" instead of asking the court to intervene with the existing company management. At the end of the day, the plaintiff will be asked to put forward very convincing evidence as to why he is unable to reach to the same end result of replacing management by using the ordinary corporate decision making mechanism and had to resort to judicial intervention.

As for the case of a limited liability company, there is a clear statutory basis under the TCC for purposes of demanding the retrieval or restriction of a limited liability company's managers' managerial rights despite his will. Article 630 (2) of the TCC allows each partner of a limited liability company to request from the court to repudiate or limit a managers' management and representation rights in the existence of a "just cause". Article 630 (3) further explains that a managers' gross violation of his duty of care and loyalty or other responsibilities under the law or the company bylaws or loss of his ability to manage the company in a good manner shall each be deemed as a just cause23. Therefore, the answer is simple as for a limited liability company. Allegation of fraud or misuse of corporate assets, elements of a situation pointing to more than mere bad management may successfully be used to ask the court to annul the powers of an otherwise operating limited liability company management and appoint a custodian in lieu thereof24. Yet again, the above referred question must always be kept in mind that a court will ask the plaintiff the simple question as to why he is unable to replace a manager by simply convening a partners meeting and dismissing him. The answer may of course be that the demanding partner may not be enjoying control of the limited liability company either by way of equity ownership or for any other practical purpose.

The case is not as easy as for a joint stock company's management, being the board of directors. There is no provision similar to that of Article 630 where directors' authority in a joint stock company may be judicially restricted or repealed25. This is no coincidence. Joint stock company structure is significantly different from that of a limited liability company where the latter represents an assumption of small to midsize entrepreneur business enterprise as opposed to a professional business organization. In the case of a joint stock company, shareholders are expected to work together to form or replace a company management where unless privileged share exists, simple majority shall rule. Therefore, the judiciary is much more hesitant in terms of intervening with a running joint stock company management due to fraud allegations and expects the shareholders to take the necessary steps in this respect which is also mirrored by recent judicial practice26. To ease such effort, there are rules to facilitate removal of directors by shareholders in case of a just cause27. That being said, these rights may be exercised by a formal shareholders meeting and judicial intervention is not the method preferred by law. Also a not commonly used method is to set up a structure in the company's articles of association so as to ensure automatic termination of office for directors in the case certain triggering events arise. An example could be that if a director liability law suit is initiated against a director or the board in general, such directors' or the boards' term of office shall automatically expire. This structure promises to be very instrumental in order to ensure removal of a "suspicious" management which may have been appointed and not desired to be replaced by the majority shareholder. However, the flip side is of course that the mechanism is open to abuse where removal of directors may be achieved even by frivolous liability law suits by predesigned shareholders28. More importantly, there is no restriction as to demanding from the court appointment of a custodian as part of an injunctive relief in a case initiated for a different legal claim. A relevant example of this remedy would be to initiate a director liability law suit where at the same time an injunction is sought in the form of appointment of a custodian to the company replacing the directors that are sued. Rendering such injunction is of course in the discretion of the court but if a prima facie case is presented to the court or that there is overwhelming evidence that directors have abused their management powers or breached their statutory duty of care and loyalty against the company, it may be possible that such an injunction may be received from the court29. However, it is likely that a mere request from the court to have the current management's representation authority being suspended and a custodian appointed to a company based on alleged bad or fraudulent management will fail as the courts will be unable to find an explicit statutory basis in order to be able to order such a relief as for a director in a joint stock company under current TCC30. It is advisable, as mentioned immediately before, that such relief is asked as a preliminary injunction in the course of another corporate law suit, mostly likely one being a director liability case in order to enhance chances for success.

In specific cases where the company suffers as a result of an intra shareholder disputes the result of which shareholders are unable to form a formal decision making platform (i.e to replace the management), managers having resigned or even if still in office unable to perform a functioning and unbiased management, a court will be much more likely to sympathize with a management custodian appointment request made by a shareholder. If the heart of the problem is a resigning board and failure to appoint a substitute one, often the courts order (and if the party requesting appointment of a custodian shall specifically demand) appointment of a "management" custodian to organize the formalities necessary to invite and hold a formal shareholders meeting so as to provide a chance to shareholders to elect a new board and more importantly govern the company in the meantime as part of its role of being a management custodian31. This part is important as in practice custodians are often reluctant to act and use managerial powers and tend to remain by merely inviting shareholders to convene and take decisions. That shall not be the expected role of a management custodian. The party requesting the custodian, often the plaintiff, must ask for explanatory order to be given by the court stating that the custodian does have managerial powers and is not merely a representative custodian whose authority is to merely represent the company in organizing and achieving a formal shareholders meeting.


1. If financial restructuring (konkordato) application is accepted by the court, a custodian will inevitably be appointed to the company, this time with more management powers and authorities, usually in the form of empowering the custodian to observe implementation of the approved reorganization plan.

2. Çamoğlu, Ersin; Anonim Ortaklığa Yönetim Kayyımı Atanması, İstanbul Barosu Dergisi Eylül-Ekim 2017, Sayı 2017/5

3. Çamoğlu, pg 18. A typical example as for the appointment of a representative custodian is in the case of a liability law suit by the company against all its directors.

4. In any case initiated by reference to Article 427 (4) of the Turkish Civil Code, the request shall nevertheless be made from the commercial court (and not civil court) as the request (of appointment of a custodian to a company) relates to a commercial matter despite being a right referred in the Civil Code. 11th Chamber, 26.6.2003, E. 2003/5621, K. 2003/6912

5. Soykan, İsmail Cem; Anonim Ortaklıklarda Organ Yokluğu, XII Levha Yayıncılık, Istanbul 2012, pg 268

6. See also Güney, Necla Akdağ; Anonim Şirket Yönetim Kurulu, Vedat Kitapçılık, Istanbul 2012, 1. Bası, pg 218

7. A recent (unpublished) court decision in this respect dated 5.5.2017 by the Istanbul 4th Commercial Court accepts the request for appointment of a management custodian to a company where shareholders are unable to make appointment to the relevant open director positions in the board of directors due to internal shareholder dispute.

8. Soykan, pg 266

9. Üçışık, Güzin/Çelik Aydın; Anonim Ortaklıklar Hukuku, Adalet Yayınevi, Ankara 2013, 1. Baskı, pg 245

10. See Eriş, Gönen; Ticari İşletme ve Şirketler, Seçkin, 2. Baskı, Ankara 2014, pg 3103 for a Supreme Court decision stating that if a corporate body is missing due to resignation of directors, appointment of a custodian may be requested from the court.

11. 11th Chamber, 3.10.2012, E. 2011/7398, K. 2012/14892. The important aspect of the decision is that the Supreme Court recognizes the use of Article 427 (4) of the Turkish Civil Code in relation with a request of appointment of a corporate management custodian. Unlike many other, in this case the plaintiff's main and ultimate demand was appointment of a management custodian to the company. In practice the demand for a corporate custodian is often raised by a plaintiff as a form of injunctive relief to be applicable until the end of a pending case where the main demand is any other claim (such as personal liability or dismissal of managers) rather than exclusively custodian appointment request.

12. 11th Chamber, 20.9.2011, E. 2009/12668, K. 2011/10598. The decision points out that a "management" (and not merely representative) custodian may be appointed in case the company is deprived of managerial bodies. A similar outcome in 11th Chamber, 25.1.2007, E. 2005/12237, K. 2007/826 where Supreme Court recognizes the legal authority to request appointment of a management custodian in case company is deprived of management due to the term of office of the board having expired and the shareholders being unable to elect a replacing board.

13. 11th Chamber, 19.1.2010, E. 2008/4483, K. 2010/537

14. See 11th Chamber, 3.7.2013, E. 2013/9963, K. 2013/14184 (Batider September 2013, C. XXIX, S.3). The first degree courts' denial was based on an argument that the claimant was at liberty to sue the other non participating partner and seek compensation should the acts of the latter inflicted damage on the company thus the conditions for appointment of a custodian not having been met. This was in our opinion an unfit legal basis to deny plaintiff's request to start with. A plaintiff is and shall remain free to choose how to structure his claim and shall not be criticized or punished by a court for having misplaced a claim which is otherwise available to him by law. If the plaintiff did indeed requested compensation he could have initiated a civil case in line with such claim but did not do so. He intentionally chooses to expel the non participating shareholder from the company as opposed to sue him for damages and such selection shall be respected.

15. See also Günaydın, Burcu; Anonim Şirkette Zorunlu Organ Eksikliğine Dayanan Fesih Davası, Beta 2012, pg 67 stating that the custodian to be appointed by the court shall be a "management" custodian as opposed to an escrow or a representative custodian where the latter merely has a limited and specific role in terms of achieving a given duty. The nature of a corporation and the need to continue business requires this custodian to be a management custodian with rather broad managerial authority. Also see Çamoğlu, pg 20.

16. See 11th Chamber, 27.3.2008, E. 2008/1705, K. 2008/3958

17. Soykan, pg 294

18. Soykan, pg 309. Author also indicates that the court at this point does not have a discretion and must order winding up if the deficiency is not cure despite the given cure period. See also Günaydın, pg 39, 43.

19. Bilgili, Fatih/Demirkapı, Ertan; Şirketler Hukuku, Dora, Bursa 2013, pg 570 arguing that an effective decision making deadlock case may also be deemed as a lack of a corporate body.

20. Soykan, pg 71, pg 266. Also in the same opinion stating that an absolute inexistence of corporate bodies shall not be a prerequisite for appointment of a management custodian. Cases where a board exists at least on paper but is unable to convene or even if convened unable to take decisions or function may also justify a custodian appointment. Categorically speaking the Supreme Court also seems to agree with this approach although not taking it as an absolute rule. See also Yılmaz, Gülşah; Pay Sahipleri Sözleşmesinden Doğan Birlikte Satma Hakkı ve Birlikte Satışa Zorlama Hakkı, Oniki Levha Yayıncılık, İstanbul 2018, 1. Baskı, pg 38-39 where a board being unable to function due to managerial deadlock was deemed as lack of a corporate body in a 1994 decision. Same in a 2014 decision on pg 39 therein.

21. As for an example of the occurrence described herein please see the Supreme Court decision 11th Chamber, 5.10.2006, E. 2005/6672, K. 2006/9814. The case was also based on Article 427 (4) of the Turkish Civil Code where the ultimate demand was appointment of a corporate custodian. The first degree court accepted the plaintiff's demand for appointment of a custodian and denied the demand of the non electing shareholder to participate in the case as a joinder. To elaborate, the plaintiff shareholder sued only the company and not the non-electing shareholder and the latter demanded that he is allowed to join the case to be heard. The first degree court accepted the plaintiff's case and denied the joinder request. The Supreme Court reversed the decision not on the merits but on the grounds that the non-electing shareholder should have been accepted into the case as well since the decision was one that directly related and affected his legal status. Note that the Supreme Court approved the non appealed portion of the decision which was the first degree court's approval of the case and agreeing to appoint a custodian to the company in lieu of the non electing shareholder's director but only until the next shareholders meeting. In essence this would be categorized as a representative custodian as opposed to a management custodian as the role (replacing only the director that should have been appointed by the non electing shareholder) and appointment term (until the next shareholders meeting where the non-electing shareholder will have opportunity to exercise his director appointment right) of the custodian is limited.

22. See 11th Chamber, 22.1.2007, E. 2005/13731, K. 2007/8567

23. The first part of the clause refers to and captures those instances where the manager is accused of self dealing, fraud or misappropriation of any kind where the latter part refers to a case where a manager is unable to manage the company despite his will say in connection with a health problem or incarceration.

24. See 11th Chamber, 14.05.2014, E. 2014/3201, K. 2014/9259, www.kazanci.com

25. TCC does not empower courts to discharge or replace directors of a joint stock company no matter what the grounds are, this authority belongs to the general assembly of shareholders. Çamoğlu, pg 17

26. See 11th Chamber, 8.1.2014, E. 2013/11047, K. 2014/288 (Batider March 2014 –XXX). The case involves an injunction request of the plaintiff (being a minority shareholder in a joint stock company) concerning appointment of a managerial custodian to the joint stock company and retrieval of the representation authority of the defendants being current directors appointed by the controlling shareholder. Plaintiff's injunction request is based on various allegations which all in all state or argue, briefly; inefficient information flow to plaintiff concerning company affairs, management being done by the controlling shareholder pursuant to self interest, failing to invite the minority shareholder (also being one of the directors) to board meetings, violation of equal treatment principle against the minority shareholder's interests, significant and unusual increase in defendant's personal assets who are said to have no other income stream other than income generated by the company. The result was a denial of the custodian appointment request by the first degree court which was also confirmed by the Supreme Court on the basis of lack of an explicit authority granted to courts by the law in this respect (as opposed to an explicit existing authority in this respect when a collective company (or in our opinion when a limited liability company) is concerned). Also see Çamoğlu, pg 24 stating that an allegation that the (joint stock) company is not being well run or managed with a lack of duty of care or by abusing managerial rights do not justify a court to appoint a custodian which shall not undergo a "fitness" test.

27. Article 364 of the TCC that concerns with removal of directors during their term of office even if there is no specific agenda item to that effect during a formal shareholders meeting.

28. Of course there is no barrier against devising structures that may also be instrumental to discourage such dishonest attempts to overthrow management by agreeing i.e suing shareholder to deposit his shares as collateral for any losses that the directors or the company may incur as a result of such an attempt.

29. See 11th Chamber, 6.10.2005, E. 2004/10513, K. 2005/9383

30. 11th Chamber, 8.1.2014, E. 2013/11047, K. 2014/288 (Batider March 2014, C. XXX, S.1). Also see, Yasaman, Hamdi; Şirketler Hukuku ve Sermaye Piyasası Hukuku ile İlgili Makaleler, Mütalaalar, Bilirkişi Raporları, Cilt II, Vedat Kitapçılık, Istanbul 2013, pg 234 where the author's opinion as for appointment of a custodian seems to be confined with cases of actual lack or absence of a corporate body. Also for the same opinion see Çamoğlu, pg 18 stating that court is not authorised to relieve directors and appoint a custodian even for grounds such as abuse of managerial powers, opression of minority, grieve argument or incoherence between shareholders and management or company incurring constant loss.

31. See Teoman, Ömer; Yaşayan Ticaret Hukuku, Hukuki Mütalaalar, Kitap 14, XII Levha Yayınevi, Istanbul 2012, 1. Bası, pg 167 for a real life dispute concerning management custodian appointment.

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