Article Series on Joint-Stock Companies Under Turkish Law: Types of General Assembly Meetings

3 January 2025

1.General Overview

Pursuant to Article 409/3 of the Turkish Commercial Code (“TCC”), the default meeting venue for a General Assembly is the company’s registered office unless otherwise agreed. Additionaly, Article 8 of the Regulation on the Procedures and Principles of General Assembly Meetings of Joint Stock Companies and the Attendance of Ministry Representatives (“Regulation”) provides that the specific address of the meeting may also be stipulated in the Articles of Association. If the location is not specified, the parties authorized to issue the meeting notice are entitled to designate the location. The provision further states that, the meeting may also be held outside the company’s registered office or abroad if stated in the articles of association.

2. Types of General Assemblies

2.1. Ordinary and Extraordinary General Assemblies

Pursuant to TCC Article 409, General Assemblies are categorized into two types based on the frequency of their occurrence: ordinary and extraordinary general assemblies. Ordinary general assemblies must be held within three months following the conclusion of each fiscal year. While this period is not a statute of limitation, it acts as a compelling guideline in practice, ensuring timely corporate governance[1]. Failure to hold the meeting appropriately may lead to liability[2] under Articles 553 et seq. of the TCC[3].

According to TCC Article 418, if quorum requirements are not met, or as mentioned in previous articles of this series, if a meeting is postponed one or more times upon the minority shareholders’ request under TCC Article 420, the subsequent meetings shall still be considered ordinary general assembly meetings[4]. As such, all procedural requirements, such as proper invitations and agenda-setting for an ordinary general assembly, must also be adhered to for these meetings.

During ordinary meetings, discussions and resolutions are made on the following matters as outlined in TCC Article 409/1:

Election of corporate bodies,
Financial statements,
Annual reports of The Board of Directors’,
Utilization of profits,
Determination of profit and dividend distribution rates,
Release of board members from liability, and
Other issues related to the fiscal year, if deemed necessary.

A similar provision is also outlined in Article 5/1(a) of the aforementioned Regulation.

Meetings other than ordinary assemblies are classified as extraordinary general assemblies. According to TCC Article 409/2, these meetings are convened “when necessary”. As they are convened on an as-needed basis, extraordinary general assemblies may never occur in practice. Consequently, there are no legal sanctions for their absence unless their convening is necessary, in which case the Board of Directors may bear liability for failing to organize the meeting.

Due to their nature, the timing and agenda of extraordinary general assembly meetings cannot be predetermined. It is generally accepted in the Turkish legal doctrine that the agenda should consist of matters necessitating the meeting[5]. Decisions taken at these meetings are binding, even for shareholders who were absent or have cast dissenting votes[6].

2.2. Physical and Electronic General Assemblies

Article 415 of the TCC defines a “Physical General Assembly Meeting” as one where shareholders convene at a single physical location. Alternatively, pursuant to TCC Articles 1527 and 1528, assemblies can also be conducted through electronic participation utilizing the Electronic General Assembly System.

The Electronic General Assembly System enables companies to perform all processes electronically, from issuing meeting invitations to registering meeting minutes and documents to the Central Registry System (MERSIS) for registration after the meeting.

The Turkish legal doctrine divides electronic general assemblies into two subcategories[7]:

Electronically-Attended General Assemblies: These are physical meetings with an option for shareholders to participate electronically.
Virtual General Assemblies: These are meetings conducted solely in an electronic environment, without any physical presence.

Documents that need to be reviewed prior to the meeting are made available online. However, there is debate in the Turkish legal doctrine about whether virtual general assemblies have practical application under Turkish law[8].

Some scholars argue that general assemblies regulated under TCC Article 1527 only envisage assemblies with electronic participation[9]. They contend that, in light of Articles 1527/2 and M.1527/5, in the case of an entirely virtual general assembly, the decisions rendered in the meeting shall be null and void, even if decisions were unanimously adopted[10]. This argument is based on their interpretation and rationale of TCC Article 1527/2 and Article 1527/5. It can be observed that the TCC, the Capital Markets Law (“CML”), and related regulations collectively emphasize the continuation of a physical meeting during electronic general assemblies[11].

For publicly traded companies, the inclusion of provisions regarding electronic general assemblies in the articles of association is mandatory under TCC Article 1527/5. For non-public companies, the use of this system is optional. In cases of mandatory implementation, the infrastructure required for the Electronic General Assembly System is provided by the Central Securities Depository. Non-public companies must establish their own systems for this purpose.

Shareholders participating electronically in General Assemblies retain all legal rights to propose, express opinions, and vote as if they were physically present. The relevant rules for electronic participation are outlined in the Regulation[12], which also includes a sample provision for inclusion in the articles of association. This provision must be incorporated verbatim and cannot be altered.

Electronic assemblies have become a preferred method due to their convenience and security, particularly during and after the pandemic.

2.3. Convened and Non-Convened General Assemblies

2.3.1. Convening the General Assembly

Article 410 of the TCC specifies the parties authorized to convene the General Assembly. Primarily, this authority rests with the Board of Directors and is exercised by a board resolution. If the Board of Directors fails to convene the General Assembly when required, or does not call for an extraordinary meeting despite the necessity, liability under Articles 553 et seq. of the TCC may arise. The Board of Directors are both entitled and obligated in this regard.

Pursuant to Article 410 of the TCC, the Board of Directors may convene the General Assembly “even if their term of office has expired”. The rationale behind this provision is to enable the election of new board members. However, since this is not explicitly stated or limited in the provision, it is susceptible to malicious exploitation.

In connection with the Board of Directors, under Article 411 of the TCC, minority shareholders may request, through a notary, that the Board of Directors convene the General Assembly. The Board of Directors can either accept, reject, or remain silent for seven business days concerning this request.

If the request is accepted, the procedures for holding the General Assembly must commence, ensuring it is held within 45 days at the latest. Should the Board of Directors fail to initiate procedures within this period, the right to convene the assembly transfers to the minority. Under paragraph four of Article 411, the minority may then issue the call.

If the Board of Directors rejects the minority’s request for a meeting or remains silent for seven business days, the minority may, pursuant to Article 412 of the TCC, petition the court to order the General Assembly to convene. If the court grants the request, it will then appoint a trustee. The court’s decision on this matter is final.

Aside from the Board of Directors, the General Assembly may also be convened by liquidators “on matters related to their duties”, the bankruptcy administration under Article 226 of the Execution and Bankruptcy Law, and trustees under Article 427 of the Civil Code.

A new provision introduced by the TCC under Article 410/2 allows an individual shareholder to petition the court to convene the General Assembly under certain conditions. These conditions include the Board of Directors’ persistent inability to meet, the lack of a quorum, or the absence of a functioning board. Legal scholars suggest that under these circumstances, the shareholder may also request the appointment of a trustee or that the court may appoint one ex officio[13].

2.3.2. Convened General Assembly

Under Articles 414 of the TCC and Article 10 of the Regulation on Commercial Registry Announcements, invitations must be made via announcements published on the company’s website and in the Trade Registry Gazette as specified in the Articles of Association. A sample format for such announcements is available on the Trade Registry Gazette’s website. This call must be made at least two weeks before the meeting date[14].

For publicly traded joint-stock companies, Articles 29/1 and 2 of the Capital Markets Law (SerPK) apply. Unlike other enterprises, these announcements must also be published on the Public Disclosure Platform and other venues specified by the Capital Markets Board, and the call must be made at least three weeks before the meeting date.

2.3.3. Non-Convened General Assemblies

Pursuant to Article 416 of the TTK, if all shareholders or their representatives are present and none objects, a General Assembly meeting can be held without adherence to the formal invitation procedure, referred to as a “non-convened General Assembly” .

There is no explicit provision on quorum requirements for resolutions in non-convened General Assemblies. However, legal scholars generally infer from Article 418/2 of the TCC that a majority of those present suffices for decision-making[15].

A critical point is that resolutions can only be made if the required quorum is continuously maintained throughout the meeting[16]. If a shareholder present at the beginning leaves the meeting, no resolutions can be adopted. Practically, a shareholder intending to disrupt proceedings may exploit this by leaving the meeting instead of casting a dissenting vote, thereby preventing decision-making[17].

Under Article 416/2 of the TCC, in a non-convened General Assembly, agenda items may be added unanimously, and any contrary provisions in the Articles of Association are deemed invalid.

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 at our website.

REFERENCES

[1] According to doctrine, this provision is a regulatory provision, and General Assembly resolutions adopted after the 3-month period are also valid; Mustafa Yavuz, ‘Anonim ve Limited Şirketlerde Olağanüstü Genel Kurul Toplantısı ve Yapılma Usulü’ (2015) 10(102) Terazi Hukuk Dergisi 100.

[2] In its decision dated 07.05.1968, numbered 2237 E. 2661 K., the Court of Cassation stated that an ordinary General Assembly meeting held outside its due time cannot be annulled solely for this reason ;Sami Karahan, Şirketler Hukuku (Mimoza Yayıncılık 2015) 520.

[3] Turkish Commercial Code (TCC) Article 553: “Founders, members of the board of directors, managers, and liquidators are liable for damages they cause to the company, shareholders, or company creditors if they violate their obligations arising from the law or the articles of association through fault.” This liability is a compensation liability, and within this scope, there must be a wrongful act and consequent damage caused to the company and/or shareholders.

[4] Mehmet Bahtiyar, Ortaklıklar Hukuku (Beta 2017) 153.

[5] Karahan (n 3) 520-31.

[6] Yavuz (n 1) 101.

[7] Ceren Eyüboğlu, Halka Açık Anonim Şirketlerde Elektronik Genel Kurul Toplantıları (On İki Levha 2019) 35-7; Işık Özer, ‘Türk Ticaret Kanunu Tasarısına Göre Anonim Şirket Genel Kuruluna Elektronik Ortamda Katılım’ (2009) 24(4) BATİDER 42.

[8] For scholarly works in favor of virtual meetings see: Zekeriya Arı, ‘Türk Ticaret Kanunu Tasarısının Elektronik Ortama İlişkin Hükmü (Tasarı M.1527) ve Sanal Genel Kurul’ (2009) 13(3-4) EÜHFD 196, Leyla Keser Berber, ‘Dijital Şirkete Geçmek İçin Sekiz Yasal Gerekçe’ (2011) 1 Regesta 63, Salih Karadeniz, ‘Anonim Şirketlerde Elektronik Genel Kurul’ (2022) 7(13) İMHFD 506; For scholarly works against virtual meetings see: Eyüboğlu (n 5) 54, Özer (n 5) 635, Necat Azarkan, ‘Anonim Şirketlerde Sanal (Virtüel) Genel Kurul’ (2018) 2(4) Dicle Üniversitesi Adalet Meslek Yüksekokulu Dicle Adalet Dergisi 39, KAYIHAN, Şaban, ‘Anonim Şirketlerde Elektronik Kurullar’ Şerafettin Ekici, Ekrem Solak, Muhammed Emre Avşar (eds), in Uluslararası Bilişim ve Teknoloji Hukuku Sempozyumu Tebliğler Kitabı (Adalet 2021) 64.

[9] Eyüboğlu (n 7) 54; Özer (n 7) 635.

[10] Bahtiyar (n 4) 155

[11] Pursuant to Article 1527/1 of the Turkish Commercial Code, meetings of the Board of Directors and Board of Managers can be conducted entirely in electronic form.

[12] See also. 28 Ağustos 2012 tarihli, 28395 s. Resmî Gazetede yayımlanan “Anonim Şirketlerde Elektronik Ortamda Yapılacak Genel Kurullara İlişkin Yönetmelik” ile 29 Ağustos 2012 tarihli 28396 s. Resmi Gazetede yayımlanan “Anonim Şirketlerin Genel Kurullarında Uygulanacak Elektronik Genel Kurul Sistemi Hakkında Tebliğ”.

[13] Reha Poroy, Ünal Tekinalp and Ersin Çamoğlu, Ortaklıklar Hukuku, vol 1 (Vedat 2013) 678.

[14] Excluding the days of announcement and meeting.

[15] Hasan Pulaşlı, Şirketler Hukuku Genel Esasları (Adalet 2016) 370.

[16] Ünal Tekinalp, Sermaye Ortaklıklarının Yeni Hukuku (Vedat 2013) 13-6.

[17] Poroy, Tekinalp and Çamoğlu (n 13) 671.