Voting Agreements in Turkey – Q&A

     1. How can we define Voting Agreements?

Voting Agreements can be defined as a sui generis agreement where a group of shareholders has an undertaking to vote a certain way, to give an abstaining vote or not vote completely or partially in the General Assembly Meetings of a Joint Stock Company or a Limited Liability Company.

     2. Why do shareholders enter into Voting Agreements?

Voting Agreements are made within the scope of freedom of contract with the objective of enabling shareholders who don’t hold a sufficient number of shares, and thus no effective voting rights, in a Joint Stock Company or a Limited Liability Company to play a decisive role in regards to Decisions arising out of a General Assembly. In other words, the aim of the shareholders wishing to enter into a voting agreement is to reach a more effective position in terms of the decision-making process by means of uniting with other shareholders, as they have very little impact on the decisions by themselves.

     3. Can Voting Agreements be regulated under the articles of incorporation or the articles of partnership?

It is not possible to regulate Voting Agreements neither under the articles of incorporation nor under the articles of partnership as it is not expressly allowed as per Article 340 of the Turkish Commercial Code.

     4. Can Voting Agreements be prohibited by the articles of incorporation?

Voting Agreements cannot be prohibited by the articles of incorporation as such a restriction will be a limitation to the principle of freedom of contract.

     5. Who are the parties to a Voting Agreement?

The Agreement can be made between the shareholders themselves, between the partnership and the shareholders or between the shareholders and the board of directors, as well as third parties.

    6. Which forms of Voting Agreements can be made in terms of obligations?

In terms of the obligor party, an Agreement can be concluded in the form of a unilateral voting agreement, a bilateral voting agreement or a consortium meaning a multilateral voting agreement.

     7. Are Voting Agreements limited to the General Assembly?

Voting Agreements can be made regarding the votes of a Board of Directors Meeting as well as of the General Assembly.

     8. In which cases are Voting Agreements deemed as invalid?

• Agreements that are in violation of the mandatory provisions of the law are deemed as null and void. Such may be the case if a voting agreement is made for the purpose of evading the articles regarding Joint Stock Companies and Limited Liability Companies or the articles of incorporation and partnership.
• Agreements that are in violation of ethics and the principle of good faith are deemed as null and void. An example may be the issue of “bought votes” meaning votes used or promised was assured in return of a special benefit and/or monetary gain.
• Agreements that are in violation of the public order, personal rights or those that contain a subject matter which is impossible to achieve shall be deemed as null and void.

     9. Can Voting Agreements be made regarding only certain votes?

It is possible to enter into a voting agreement regarding all the votes attached to a shareholder or a certain part of them. It is also possible to enter into multiple Voting Agreements at the same time regarding different votes.

     10. What are the consequences of non-compliance with the voting agreements by the shareholders?

In the event of a failure to comply with the provisions of the Voting Agreement, the counterparty will be entitled to seek compensation for their damages. As liability of the oblige and the existence of a damage must be proven in order to seek such a relief, it has become common practice to include a penalty clause to the agreement.

     11. Can General Assembly resolutions be cancelled in the event of non-compliance with the Voting Agreement?

A failure to comply with the Voting Agreement does not result in the General Assembly resolution being null and void. Despite violating the agreement, the casted votes are valid but the party violating said agreement shall be held liable for such a failure to comply.

 If you would like to know more on this matter or require legal assistance, you may get in touch with BerkerBerker Law Office via info@berkerberker.com or any other contact information listed at our website www.berkerberker.com