Article 407 and subsequent articles of the Turkish Commercial Code (“TCC”), contain regulations regarding the general assemblies of corporations. According to these provisions, the general assembly must meet once in a year, within 3 months following the end of each fiscal year, as ordinary general assembly and if deemed necessary extraordinary general assemblies may be called.
Invitation of the general assembly to convene is primarily the responsibility of the board of directors. The board of directors (“BoD”) is authorized to convene the general assembly even if the duties of the members have ended. However, sometimes Company management neglect their duty to call general assembly or they would be unable to make the call due to reasonable causes. Therefore, Article 410/2 and 412 of the TCC, provide an alternative way to call general assembly through a court decision in certain cases regarding both for corporations and limited liability companies.
Right of a Shareholder to Call General Assembly Meeting Via Court Permission, Article 410/2 of TCC
The Article 410/2, allows a single shareholder of a stock company to call a general assembly meeting with the permission of the court. Holding a single share in a company would be enough to apply this right. The court is authorized to grant permission to the requesting shareholder to call the meeting is subject to the existence of the limited number of circumstances mentioned in the provision.
According to the provision, the necessary circumstances for the court to grant permission to the shareholder to call the meeting are as follows:
- Inability of the board of directors to meet continuously,
- Impossibility of reaching the meeting quorum,
- Absence of meeting quorum.
In practice; due to reasons such as health problems of BoD members, conflicts and disputes between shareholders and BoD members lead to the circumstances stated in the provision. In cases where the meeting quorum has not met since the board members constantly fail to attend meetings, neglect their duties, pass away, or cannot be reached; applying to this solution and granting permission to call general assembly may be an appropriate way to hold necessary general assembly meetings and even restore the functionality of the board by electing a new board member.
According to this provision, in decisions where the court grants permission for a general assembly call, it is generally observed that the court determines the agenda of the general assembly based on the requests of the claimant shareholder, and the permission to call is granted to the shareholder only in accordance with the specified agenda items. As a result, the shareholder filed a lawsuit, can hold a general assembly meeting by making the call by himself/herself.
Right of Minority Shareholders to Call General Assembly Meeting Via Court Decision, Article 411 and 412 of TCC
Article 411 and 412 of TCC, unlike the previous provision, only grant rights to minority shareholders to protect their interests against majority shareholders.
Who is considered a minority shareholder? In the provisions, shareholders in a company who own at least one-tenth of the capital, or in publicly traded companies, one-twentieth of the capital are defined as “minority shareholders”.
Minority shareholders can request the BoD to call for a general assembly meeting by stating their reasons and the agenda they are requesting in writing. If the general assembly meeting is already scheduled, they can also request the addition of agenda items from the board of directors. Requests for calling a general assembly meeting and addition of agenda items must be sent through a notary public.
If the requests of minority shareholders are rejected by the BoD or if a positive response is not provided within 7 business days, minority shareholders can request the calling of the general assembly meeting from the commercial court of first instance at the location of the company’s headquarters. The main rule in these cases is that the court will reach a decision without holding a hearing. However, if the court deems necessary a hearing may be done.
In the first option mentioned above, Article 410/2 directly grants permission to the shareholder to call a general assembly. Unlike the Article 410/2, in the lawsuits filed by minority shareholders, if the court accepts the claimant’s request for calling the general assembly, it will appoint a custodian to determine the agenda and make the summoning.
Furthermore, we would like to remind you that the court’s decision in both of these cases will be a final judgement and it is not possible to appeal these decisions.
Uğur Serkan Köksal