Voting Agreements Under Turkish Law

Author: Atty. Ahmet Berker

1. Definition of Voting Agreements

Voting agreements are sui generis contracts wherein a group of shareholders commits to voting in a specific manner, abstaining, or refraining from voting entirely or partially during the General Assembly Meetings of a Joint Stock Company or a Limited Liability Company.

2. Purpose of Voting Agreements

These agreements are established within the scope of freedom of contract to enable shareholders, who may not hold a sufficient number of shares and thus lack effective voting rights, to play a decisive role in decisions arising from a General Assembly. By uniting with other shareholders, they aim to achieve a more influential position in the decision-making process.

3. Inclusion of Voting Agreements in Founding Documents

It is not permissible to include voting agreements within the Articles of Incorporation or Articles of Partnership, as explicitly prohibited by Article 340 of the Turkish Commercial Code.

4. Prohibition of Voting Agreements by Articles of Incorporation

The Articles of Incorporation cannot prohibit voting agreements, as such a restriction would limit the principle of freedom of contract.

5. Parties Involved in Voting Agreements

Voting agreements can be established between shareholders themselves, between the company and shareholders, between shareholders and the board of directors, or even with third parties.

6. Forms of Voting Agreements

In terms of obligations, voting agreements can be unilateral, bilateral, or multilateral (consortium). In a unilateral agreement, one party commits to a voting action without reciprocal obligations. In a bilateral agreement, both parties mutually commit to specific voting behaviors. A consortium involves multiple parties agreeing on voting actions to achieve a common purpose.

7. Scope of Voting Agreements

Voting agreements are not limited to the General Assembly; they can also pertain to votes in Board of Directors meetings.

8. Invalidity of Voting Agreements

Voting agreements are deemed null and void if they:

– Violate mandatory legal provisions.

– Contravene ethics or the principle of good faith.

– Infringe upon public order or personal rights.

– Contain subject matter that is impossible to achieve.

For example, agreements aiming to circumvent compulsory legal provisions or those involving “bought votes” in exchange for special benefits or monetary gain are invalid.

9. Specificity of Voting Agreements

Shareholders can enter into voting agreements concerning all their votes or a specific portion. Multiple voting agreements can coexist, each addressing different voting scenarios.

10. Consequences of Non-Compliance

If a shareholder fails to comply with a voting agreement, the counterparty is entitled to seek compensation for damages. To facilitate enforcement, it is common practice to include a penalty clause within the agreement.

11. Impact on General Assembly Resolutions

Non-compliance with a voting agreement does not render a General Assembly resolution null and void. Despite the breach, the votes cast remain valid; however, the party violating the agreement may be held liable for damages resulting from the non-compliance.