Article Series on Joint-Stock Companies Under Turkish Law: Participation And Representation in General Assembly Meetings

7 February 2025

I. Introduction

General Assembly meetings serve as the most crucial decision-making platform within joint-stock companies, where shareholders exercise their fundamental rights regarding corporate governance. The Turkish Commercial Code (“TCC”) and the relevant secondary legislation comprehensively regulate the participation and representation of shareholders in General Assembly meetings to ensure transparency, legal certainty, and effective corporate governance. The ability of shareholders to attend these meetings either in person or through representatives is a key factor in securing the fair and functional operation of corporate decision-making processes.

This article examines the legal framework governing participation and representation in General Assembly meetings of joint-stock companies under Turkish law. It first addresses the general principles surrounding attendance, including the preparation of the list of attendees, the mandatory presence of certain individuals such as board members and ministry representatives, and the procedural aspects of participation. The article then elaborates on the types of representation available to shareholders, including simple representation and depository representation, while also highlighting their respective legal implications. By analyzing the relevant provisions of the TCC, the Capital Markets Law (“CML”), and the Regulation on the Procedures and Principles of General Assembly Meetings of Joint-Stock Companies and the Presence of the Ministry Representative in Such Meetings (“GAMR”), this study aims to clarify the legal responsibilities and rights of shareholders, representatives, and corporate bodies in the General Assembly process.

II. General Overview of Participation and Representation

Pursuant to Article 417 of the TCC, the list of individuals entitled to attend the General Assembly is prepared by the Board of Directors. This list is signed by the Chairman of the Board of Directors and made available at the meeting venue before the meeting commences. While preparing this list, the Board of Directors arranges it based on the “list of shareholders” obtained from the Central Registry Agency (“CRA”) regarding bearer shareholders and the shareholders of dematerialized shares who are eligible to attend the General Assembly pursuant to Article 13 of the Capital Markets Law (“CML”).

According to Article 407/2 of the TCC, at least one member of the Board of Directors must be present at the General Assembly meeting. However, this provision does not stipulate any sanction for a Board member’s absence. Furthermore, the rationale of the article states that the absence of these individuals does not affect the validity of the decisions taken. Nevertheless, different views exist in the legal doctrine regarding this matter. One view asserts that the absence of a Board member renders the meeting invalid[1], while another argues that such absence constitutes grounds for annulment[2]. A third opinion maintains that this situation merely results in consequences within the scope of the Board of Directors’ liability[3].

Pursuant to the reference in Article 407/3 of the TCC and within the scope of Article 333 of the TCC, it is mandatory for Ministry representatives to attend the General Assembly meetings of companies whose incorporation is subject to the approval of the Ministry of Customs and Trade[4]. For other companies, the circumstances under which the presence of a Ministry representative is required are regulated under Article 32 of the GAMR[5]. If a Ministry representative is required but absent from the meeting, the decisions taken at such a meeting shall be deemed null and void.

Pursuant to Article 432/1 of the TCC, shareholders whose shares are subject to joint ownership or co-ownership may appoint one among themselves or a third party as a representative to exercise their participation rights in the meeting. Additionally, under Article 427/2 of the TCC, a person holding a bearer share due to a pledge, lien, mortgage, custody agreement, or similar contracts may exercise the related rights only if explicitly authorized in writing by the shareholder.

As per a legislative amendment introduced in 2020[6], holders of bearer shares must prove their possession of the shares and notify the CRA in order to exercise their shareholder rights before the company under Article 426 of the TCC[7].

Once the relevant notification is made and the holders of bearer shares are registered in the CRA list, their participation in the meeting shall be subject to proving their possession of the shares to the Board of Directors before the signing of the list of attendees, as stipulated under Article 18/3 of the GAMR.

According to Article 425 of the TCC, shareholders may exercise their rights arising from their shares by personally attending the meeting or by appointing a representative, who may or may not be a shareholder, to participate in the General Assembly on their behalf. This provision exists to accommodate the practical needs of shareholders. The concept of representation mentioned here includes both a simple representative within the meaning of Article 427 of the TCC and a depository representative within the scope of Article 429 of the TCC.

Pursuant to Article 427 of the TCC, a representative exercising participation rights on behalf of a shareholder must comply with the instructions given by the shareholder. However, under the same provision, any non-compliance with such instructions does not invalidate the vote cast, as the instructions pertain to the internal relationship governed by the agency agreement. While the representative is obligated to follow the shareholder’s instructions, this obligation only has consequences within their internal relationship. Furthermore, it is explicitly stipulated that the authority to represent bearer share certificates not in the owner’s possession must be granted through a written document.

III. Types Of Representation

When examining the types of representation in the General Assembly, the law primarily recognizes two concepts: simple representation and depository representation.

1. Simple Representation

A simple representative is regulated under Article 426 of the TCC and is a general type of representative whose authority to represent must be granted in writing. If shares are embodied in bearer shares, the mere transfer of possession of such shares to the representative is deemed sufficient for representation under Article 415/3 of the TCC.

2. Depository Representation

A depository representative is a person to whom shares are physically or otherwise entrusted by a shareholder who wishes to be represented at the General Assembly. The individuals eligible to act as depository representatives are enumerated in a limited manner under Article 44 of the GAMR[8]. Under Article 429 of the TCC, a depository representative is authorized to exercise the participation and voting rights arising from the entrusted shares and share certificates on behalf of the depositor.

Prior to each General Assembly meeting, the depository representative must seek instructions from the depositor regarding how to act within the scope of this authority[9]. If the representative has requested such instructions in a timely manner but has not received them, they shall exercise the participation and voting rights in accordance with the depositor’s general instructions. In the absence of such general instructions, the representative shall cast votes in line with the proposals of the Board of Directors.

IV. Conclusion

Ensuring shareholder participation in General Assembly meetings is essential for maintaining good corporate governance, protecting shareholder rights, and fostering accountability within joint-stock companies. The TCC and related regulations provide a structured framework to facilitate participation, whether directly or through representation, while also imposing obligations on the Board of Directors and other relevant corporate stakeholders to ensure compliance with procedural requirements.

The presence of key individuals, such as board members and, where required, ministry representatives, plays a significant role in legitimizing the decisions taken at these meetings.

Furthermore, the distinction between simple representation and depository representation allows shareholders to exercise their rights effectively, depending on their specific needs and circumstances.

Recent amendments, such as the requirement for holders of bearer shares to notify the Central Registry Agency before exercising shareholder rights, reflect the evolving regulatory landscape aimed at enhancing transparency and accountability. These legal developments emphasize the importance of adhering to statutory requirements in order to avoid disputes over the validity of General Assembly resolutions.

Ultimately, the legal provisions governing participation and representation in General Assembly meetings serve to balance the interests of shareholders and corporate governance structures, reinforcing the principles of fairness, legal certainty, and efficiency in decision-making within joint-stock companies.

If you would like to know more on this matter or require legal assistance, please contact Berker Berker Law Firm via info@berkerberker.com or any other contact information listed on our website.

FOOTNOTES

[1] Çamoğlu asserts that Articles 407/2 and 3 of the TCC are of a mandatory nature and that non-compliance renders the meeting invalid. However, the type of invalidity is not specified. See also. Poroy, Tekinalp and Çamoğlu, Ortaklıklar Hukuku I (Vedat 2019) 680.

[2] Hasan Pulaşlı, Şirketler Hukuku Genel Esasları (Adalet 2016) 402.

[3] Bahtiyar, Ortaklıklar Hukuku (Beta 2018) 168; Ünal Tekinalp ve Ersin Çamoğlu, Açıklamalı, Notlu ve Karşılaştırmalı 6102 Sayılı Yeni Türk Ticaret Kanunu ve İlgili Mevzuat (Vedat 2011).

[4] Examples include banks, financial leasing companies, insurance companies, etc. For a full list, see the Communiqué on Raising the Minimum Capital Amounts of Joint-Stock and Limited Liability Companies and on Determining Joint-Stock Companies Subject to Incorporation and Articles of Association Amendments Requiring Ministry Approval, published in the Official Gazette dated 15.11.2012 and numbered 28468.

[5] Mandatory cases for other companies: General Assembly meetings where agenda items include capital increase or decrease, transition to or exit from the registered capital system, increase in the registered capital ceiling, amendment of the articles of association concerning the company’s business scope, merger, demerger, or conversion. Additionally, General Assembly meetings of companies implementing an electronic participation system, all General Assembly meetings held abroad, and special meetings of privileged shareholders held abroad.

[6] The repealed provision of Article 426 of the TCC stated: “Holders of bearer share certificates shall obtain an entry card by proving their possession of such certificates at least one day before the General Assembly meeting and may participate in the meeting by presenting these cards.”

[7] For detailed information on the procedure, see the Communiqué on Notification and Registration of Bearer Share Certificates with the Central Registry Agency.

[8] See. Fatih Bilgili ve Ertan Demirkapı, Şirketler Hukuku (Dora Yayıncılık 2013) 324; These include intermediary institutions for dematerialized shares under Article 13 of the Capital Markets Law, and for other share certificates, in addition to intermediary institutions, portfolio management companies, persons or entities authorized to hold share certificates under their respective legislation, and pledge creditors.

[9] Pursuant to Article 45/2 of the GAMR, such authority may be granted for a limited or unlimited period; however, this does not eliminate the obligation to seek instructions from the shareholder.