General Assembly of a Joint Stock Company — Convocation, Agenda and Resolutions

A comprehensive guide to the ordinary and extraordinary general assembly process in joint stock companies, the convocation procedure, meeting and voting quorums, the requirement of a ministry representative and the provisions of TTK Arts. 407-451.

In a joint stock company the general assembly is the supreme decision-making body in which the shareholders come together to take the company's fundamental decisions. Articles 407-451 of the Turkish Commercial Code No. 6102 (TTK) govern in detail the procedure for convening the general assembly, its powers, the voting quorums and the legal consequences of the resolutions taken. General assembly resolutions are of vital importance: they directly affect the company's future, protect shareholders' rights and hold the company's management to account. This article deals comprehensively with all aspects of the general assembly of a joint stock company, the problems encountered in practice and the legal solutions.

What Is the General Assembly and What Powers Does It Have?

In a joint stock company the general assembly is the body in which the shareholders take decisions on the matters entrusted to it by statute and by the articles of association. The non-transferable duties listed in TTK Art. 408 include amending the articles of association, electing the organs, deciding on the financial statements and annual report, determining the use of profit, and the other duties prescribed by statute. The provision in TTK Art. 408/2-f on “the wholesale sale of a substantial amount of the company's assets” was annulled by the Constitutional Court.

What Are the Differences Between Ordinary and Extraordinary General Assemblies?

Under TTK Art. 409 general assembly meetings are divided into ordinary and extraordinary. An ordinary general assembly is held within three months of the end of each accounting period. In companies whose accounting period is the calendar year, the ordinary general assembly must be held by the end of March at the latest. At an ordinary general assembly, matters such as the board's annual activity report, the auditors' reports, approval of the financial statements, distribution of profit, and the discharge and election of board members are discussed.

An extraordinary general assembly may be convened at any time when the company's business requires. There is no time limit for an extraordinary general assembly; it may be convened whenever needed. Its agenda may include matters such as an increase or reduction of capital, an amendment to the articles of association, a merger, division, change of legal form or dissolution of the company.

The fundamental difference between an ordinary and an extraordinary general assembly is the time of meeting and the agenda. An ordinary general assembly is held within three months of the end of the accounting period; an extraordinary one is convened as needed. At both meetings the statutory provisions on convocation and quorums apply according to the agenda and the nature of the resolution.

How Is a General Assembly Convened?

A general assembly is as a rule convened by the board of directors. Convocation is effected in the manner specified in the articles of association and by publication in the Turkish Trade Registry Gazette at least two weeks before the meeting, excluding the days of publication and of the meeting; in companies obliged to maintain a website, the notice is also published there. A registered letter with return receipt is sent to shareholders recorded in the share register and to those who have previously supplied a share certificate or proof of shareholding and notified their address. A meeting without notice at which all shareholders are represented is possible on the conditions in TTK Art. 416.

A minority representing at least one tenth of the capital, or one twentieth in publicly held companies, may under TTK Art. 411 request the board through a notary to convene a meeting or to add an item to the agenda. If the request is refused or no favourable reply is given within seven business days, authority to convene may be sought from the court under TTK Art. 412.

How Is the Agenda Determined and May It Be Changed?

The agenda is as a rule determined by the board convening the meeting and set out in the notice. No resolution may be taken on a matter not on the agenda; the statutory exceptions in TTK Art. 413/2 are reserved. The removal of board members and the election of new ones are treated as related to the discussion of the year-end financial statements and may be considered where the relevant item is on the agenda (Art. 413/3); this does not mean the agenda may be altered without limit at every meeting.

A minority representing at least one tenth of the capital, or one twentieth in a publicly held company, may under TTK Art. 411 request through a notary that an item be added to the agenda. For the request to reach the notice of meeting it must reach the board before the publication fee is paid for publication in the Turkish Trade Registry Gazette. If the request is in proper form the board must add it to the agenda; if it is refused or no favourable reply is given within seven business days, the court may be applied to on the conditions in Art. 412.

What Are the Meeting and Voting Quorums?

Unless the statute or the articles of association require a higher quorum, the general assembly meets with the presence of the holders or representatives of shares representing at least one quarter of the capital; that quorum is maintained throughout the meeting. If it is not achieved at the first meeting, no meeting quorum is required at the second. Resolutions are taken by a majority of the votes present at the meeting (TTK Art. 418). Amendments to the articles of association as a rule require at least half the capital to be represented at the first meeting and a majority of the votes cast; if the first meeting cannot be held, at least one third of the capital must be represented at the second. TTK Art. 421 lays down heavier special quorums for the company's objects, restrictions on the transfer of shares, privileges and certain structural resolutions. A single quorum therefore cannot be stated for all resolutions.

When Is a Ministry Representative Required?

The attendance of a ministry representative is not mandatory at every general assembly of a joint stock company. The requirement arises for companies whose incorporation and amendments to the articles of association are subject to permission; for meetings whose agenda includes a capital increase or reduction, entry into or exit from the registered capital system, a change in the registered capital ceiling, a change in the field of activity, a merger, division or change of legal form; for meetings held abroad; and in the other cases listed in the relevant regulation. In case of doubt, the Ministry of Trade's current regulation and practice should be checked.

How Is the Meeting Conducted?

The meeting is chaired by a chairman elected by the general assembly, who appoints a minutes secretary and, if necessary, a vote collector. An attendance list and minutes of the meeting are drawn up. The minutes are signed by the chairman and, at meetings attended by a ministry representative, also by that representative. There is no general requirement of notarial certification for the validity of general assembly minutes; resolutions requiring registration and publication are submitted to the trade registry.

Can a General Assembly Be Held Electronically?

Under TTK Art. 1527, electronic participation is possible where the articles of association so provide and the technical conditions in the secondary legislation are met. The use of an electronic general assembly system is mandatory in companies whose shares are listed on the stock exchange. Electronic participation produces all the legal effects of physical attendance; identity verification, voting and recording are carried out under the Central Registry Agency's system and the relevant regulation.

When Does Annulment of a General Assembly Resolution Arise?

Against general assembly resolutions contrary to the statute, the articles of association or the rule of good faith, the persons listed in TTK Arts. 445 and 446 may bring an action for annulment before the commercial court of first instance at the company's registered office within three months of the date of the resolution. A shareholder who attends and votes against records their dissent in the minutes; the special cases in Art. 446 concerning shareholders affected by defects in convocation or participation are reserved.

TTK Art. 447 provides that resolutions that remove or restrict a shareholder's inalienable rights, that restrict the rights of information and inspection beyond the extent permitted by statute, or that disrupt the fundamental structure of the joint stock company and contravene the provisions on the preservation of capital, are void. “Contrariety to the integrity of the company” is not the criterion used in the statutory text.

How Do Voting by Proxy and Representation Work?

A shareholder may be represented at the general assembly by a person who is or is not a shareholder; for publicly held companies the Capital Markets Law and the Board's rules apply in addition. The form and production of the instrument of representation are determined by the nature of the company and the current secondary legislation. The former TTK Arts. 428–430 on the corporate representative, the independent representative and the depositary's representative have been repealed.

Minority Rights and the Protection of Shareholders

The minority comprises shareholders representing at least one tenth of the capital, or one twentieth in a publicly held joint stock company. The articles of association may provide for a lower proportion. The principal minority rights in the TTK are special powers such as convening the general assembly and adding items to the agenda (Arts. 411–412), seeking the appointment of a special auditor from the court on certain conditions (Art. 439), postponing discussion of the financial statements (Art. 420) and bringing an action for dissolution for just cause (Art. 531).

Rights such as information and inspection, dividends and liability actions are not, however, specific to the minority; they are conditional rights afforded to every shareholder or to the persons listed in the statute. Under TTK Art. 437 a request for information may be refused only on the ground of trade secrets or a company interest requiring protection. Where refusal is unjustified, the shareholder may apply to the commercial court of first instance at the company's registered office within ten days of the refusal and, in other cases, after a reasonable period.

Frequently Asked Questions

When is the ordinary general assembly held?

It is to be held within three months of the end of the financial period.

Is a ministry representative required at every meeting?

No. The requirement arises in the cases listed in the relevant regulation according to the nature of the company and the agenda.

Are general assembly minutes certified by a notary?

There is no general notarial certification requirement. The minutes are signed by the chairman and, where applicable, the ministry representative; resolutions requiring registration are submitted to the trade registry.

What is the time limit for an annulment action?

Three months from the date of the resolution.