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Annulment of General Assembly Resolutions in Joint Stock Companies

02 November, 2020

The annulment of the decisions to be taken by the general assemblies of joint stock companies is regulated in articles 445 and following of the Turkish Commercial Code numbered 6102 (“TTK”). Pursuant to Article 445 of the TTK, shareholders, the board of directors and each board member may file a lawsuit for the annulment of the decision if the conditions specified in the TTK are met. The lawsuit should be filed within 3 months of the decision, to the Commercial Court of First Instance of competent jurisdiction, where the headquarter of the company is located. 

Article 446 of the TTK regulates the persons who can file an action for annulment. Sub clause 1, subparagraph “a” list these persons as; 

  • The persons attended to the general assembly,
  • whom also gave negative votes to the decision to be taken which is written in the meeting minutes. 

 It should be noted that the shareholders' right to file an action for annulment is indispensable, and as per Article 447 of the TTK, any decision that limits or disposes of this right of the shareholder is null and void. 

In subparagraph b of the same article, regardless of whether they participated in the meeting or voted negatively, if; 

  • the call was not made duly, 
  1. the agenda has not been duly announced, 

  1. unauthorised persons or representatives attended the general assembly and cast their votes, 

  1. not being allowed to attend the meeting unfairly and 

  1. shareholders who claim that such unlawful actions effected the end result of the votes can also file an action for annulment. 

Examples given under article 447/1-b of the TTK is not numerus clausus, therefore right to demand information and related rights thereof are in the scope of this regulation.[1] 

The action for annulment can be opened by the board of directors if one of the reasons for cancellation, described below, is found. Accordingly, the board of directors as the body will file the action for annulment as the plaintiff, where a duly taken decision of the board on the issue is present. 

Additionally, if a personal responsibility arises in the execution of the decisions, a lawsuit for annulment may be filed by each member of the board of directors. 

Grounds that are sufficient for the annulment of a decision of the general assembly are regulated in Article 445 of the TTK. These include the breach of; 

  • the law, 

  • founding charter of the company, 

  • good faith can be annulled by the court. 

“The law” represents not only the TTK, but all laws enacted by the legislature. [2]The related article of the founding charter should also be valid in order to file an annulment case. Breach of the law and the founding charter can be derived from the procedural provisions that regulates the decision-making process, or the provisions regulating the content of the decision. A causal link between the violation and the decision taken is required in order to fulfil the requirements for filing an annulment case. Hence, the breach must affect the decision taken by the general assembly. Application for annulment of the decision is not possible if the result of the decision would not change, even if the procedural procedure was lawful. [3] 

It should be noted that the jurisdiction of the judge hearing the annulment action is limited to examining whether the decision is in compliance with the law (the law, the articles of association and the rule of integrity), and the judge will not be able to carry out the appropriateness of the decision. [4] Article 369 of TTK refers to the “businessjudgement rule” in its justification; since this rule relates to the decision-making process of the board of management, it will have no account for the purposes of the possible annulment cases. [5]  

In principle, as regulated under articles 418 and 421 of the TTK, decisions to be taken by the general assemblies of joint stock companies have to have been made by majority of the votes. In order to prevent the suppression of the minority by the principle ofmajority, a requirement of goods faith good faith has been added as a cause to apply for annulment. The goal is to prevent the unfair decisions resulting from the oppression of the shareholders having the most capital and votes. [6] In scope of the principle of equal treatment that have been regulated by Article 357 of TTK, shareholders with equal legal conditions should be treated equally. Violation of this principle will also be accepted as a breach of thegood faith requirement, thus resulting in the annulment of the decision. 

 

[1] İ. Kırca, F.H. Şehirali Çelik, Ç. Manavgat, Anonim Şirketler Hukuku Cilt 2/2, Ankara 2016, p. 195 

[2] E. Moroğlu, Anonim Ortaklıkta Genel Kurul Kararlarının Hükümsüzlüğü, İstanbul 2014, p. 215 

[3] İ. Kırca, F.H. Şehirali Çelik, Ç. Manavgat, Anonim Şirketler Hukuku Cilt 2/2, Ankara 2016, p. 108 

[4] İ. Kırca, F.H. Şehirali Çelik, Ç. Manavgat, Anonim Şirketler Hukuku Cilt 2/2, Ankara 2016, p. 63 

[5] S.S. Özdemir, İş Adamı Kararı İlkesi (Business JudgmentRule) ve Türk Hukukunda Uygulanabilirliği, 2017, p. 8 

[6] E. Moroğlu, Anonim Ortaklıkta Genel Kurul Kararlarının Hükümsüzlüğü, İstanbul 2014, p. 225 

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