This memorandum provides an overview on the basic rights of a shareholder in a joint stock company incorporated under the laws of Turkey. The memorandum does not cover public companies.
Shares entitle their holders to certain rights, some of which are of a financial nature, others administrative.
Each shareholder is entitled to attend general meetings. This includes the right to participate in discussions and vote at a meeting. Each share gives at least one vote to its holder. The articles of incorporation may recognize shares with more than one vote.
Shareholders also have a right to be informed. Shareholders holding ten percent of the stock capital of the corporation have additional rights to be informed.
The primary financial right of a shareholder is the right to receive dividends. This is part of the right of a shareholder to participate in the profits of the corporation. The Board, on the advice of auditors, proposes the amount to be distributed. The Board must consider requirements to establish a reserve fund found in statutory provisions and provisions of the articles of incorporation and laws on establishing reserve funds for the benefit of the employees. The Board may, in addition, create “silent reserves”. The Board may decide not to distribute any dividends for a particular financial year or may keep the amount very low, unless this is incompatible with good faith.
Each shareholder has a preemptive right which gives to a shareholder the right to participate in the increased capital of the corporation. This right can be taken away by a shareholders’ resolution.
The rights to vote and to participate in dividends, as well as the right to bring an annulment suit against resolutions of the shareholders’ meeting or to participate in assets remaining after dissolution are enumerated in the Commercial Code as vested rights (rights which may not be taken away under the articles of incorporation or shareholders’ resolutions).
Shareholders representing one tenth of the capital stock are given rights additional to those that might be exercised by the holder of a single share. Such shareholder or shareholders may demand the convening of a general meeting of shareholders. They may request the appointment of a special auditor when they claim a misuse of administrative powers or that the administrators have seriously violated statutory provisions or provisions of the articles of incorporation. They may also require that the corporation initiate a lawsuit against the board of administration for negligently causing damage to the corporation.
This Memo provides a general overview on significant issues of Turkish corporate law. The information provided is not intended to serve as a legal advice. Before taking any action or relying on the information given, addressees of this Memo should seek specific advice on the matters which concern them.