Series On Shareholding In Joint Stock Companies – Part I: Shareholders' Agreements

Pursuant to Article 480/1 of the Turkish Commercial Code No. 6102 ["TCC"],  the principle of single obligation states that shareholders cannot be held liable for any obligation other than the performance of the share price or the premiums exceeding the nominal value of the share, except for the exceptions set forth in the articles of association and the law. The purpose of this provision is to prevent the change of the legal nature of the joint stock company determined by law by preventing the shareholders from having any obligation other than fulfilling their capital commitment to the company.

In light of the existing regulations, the fact that the rights and obligations of shareholders are regulated within a limited framework by the articles of association has led shareholders to alternative mechanisms to protect their interests.

At this point, the shareholders'  agreement, which has a critical role in the field of corporate law, enables the establishment of a delicate balance of interests between shareholders and the formation of a healthier functioning corporate order.

Accordingly, the benefits intended to be provided by this agreement signed between the shareholders are;

1. Shaping the corporation according to the will of the shareholders,
2. Strengthening the bond between shareholders and the partnership,

• Prevention of the transfer of partnership interests to third parties

1. Ensuring and maintaining the balance of power among the shareholders
2. Establishment of a new order in case of new shareholders coming to the partnership or merger/acquisition/public offering¹.

This method may also be preferred in cases where it is not desirable to sell the shares to any third party in order to prevent the “alienation” of the partnership in partnerships that are family partnerships or have a limited number of shareholders who know each other.²

The shareholders' agreement is a voluntary agreement that is not stipulated in the written legislation and is concluded based on the principle of freedom of contract in Turkish law of obligations.

Accordingly, as a consequence of the fact that this type of agreement is not regulated by the law, there is freedom of form in the preparation of the agreement. For this reason, the agreements to be prepared for this reason will be valid as long as they do not contradict Article 27 of the Turkish Code of Obligations ["TCO"]. This freedom of form provides the shareholder with convenience and flexibility compared to the articles of association, and the absence of a registration obligation allows the content of the agreement to be kept confidential. These opportunities are among the reasons why the shareholders' agreement is preferred .³

A shareholder agreement may be concluded as an agreement to which all shareholders are a party or some shareholders are a party, but it is accepted that new shareholders cannot be subject to these provisions if they do not give their consent during the transfer of shares. As a matter of fact, the Court of Cassation has also ruled that this agreement will not bind third parties⁴ . At this point, it can be said that the decisions to be taken by the shareholders, even with unanimity, and the obligations arising from the agreements to be signed by the shareholders will not be contrary to the principle of single obligation, and these obligations will be in the nature of a personal debt undertaken by the shareholder, although they are not dependent on the share. For this reason, the provisions agreed upon pursuant to the shareholding agreement shall be non-transferable together with the share.⁵

In this series of articles on shareholding in joint stock companies, Güleryüz+ Partners will first analyze the place and content of shareholders' agreements under Turkish law, and provide information on the implementation of the agreement and the sanctions in case of breach.

Footnotes

1. Gül Okutan, Anonim Ortaklıklarda Paysahipleri Sözleşmeleri, PhD Thesis, Istanbul University Institute of Social Sciences, Istanbul 2001, p. 67

2. Okutan, Shareholders' Agreements in Joint Stock Companies, p. 68

3. Okutan, Shareholders' Agreements in Joint Stock Companies, p. 66

4. YAR.11.HD.7.11.200T. 2000/6279E. 2000/8691K. (YKS, 2001 C.27, S8, p.1203).

5. Okutan, Shareholders' Agreements in Joint Stock Companies, p. 37

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.