Right to wind up joint stock companies on justifiable reasons has been introduced to the Turkish law by the article 531 of the Turkish Commercial Code (“TCC”). Before this article, right to wind up joint stock companies on justifiable reasons had not been regulated in the Turkish law, and the Court of Cassation had regarded such demands as unlawful. By right to wind up vested in minority shareholders who do not have an effect in company management, it is aimed to protect minority shareholders and power balance between minority shareholders and majority shareholders.

This right has the function to provide legal protection for minority shareholders’ rights and interests in case of minority shareholders’ rights being violated, and that there is no other way to remedy the violation as per the law and the articles of association in consequence of majority shareholders abusing constantly their power in a joint stock company. However, such abasement shall be realized and on an ongoing base[1].

It is also claimed that the source of the right to wind up a joint stock company is the concept of rightful termination as a result of the disruption of the relationship between the partners and/or between the company and a partner or of the disruption of the balance of interests against a partner[2].

1. Who is entitled to file a lawsuit to wind up a joint stock company?

Pursuant to the article 531 of the TCC, the shareholders holding at least one-tenth of the share capital in non-public companies, and the shareholders holding at least one-twenty of the share capital in public companies are entitled to file a lawsuit to wind up a joint stock company. Thus, right to wind up a joint stock company should be regarded as a right of minority shareholders.

It is controversial in the doctrine that these rates can be reduced with the articles of association. One standpoint argues that these rates can be reduced, while the other argues that this rate cannot be reduced because it is not clearly regulated in the law[3].

It is not necessary for a single partner to hold the required share capital, and it will be possible for more than one partner to meet the required share capital as a block[4]. In other words, more than one partner can come together and use their right to file the lawsuit by meeting the requires share capital.

Doctrine and the Swiss Federal Court, rightly emphasized that the plaintiff(s) not only hold at least 10% or 20% of the capital at the time the lawsuit is filed, but that these capital ratios should be maintained when the just cause occurs and during the trial[5].

2. In which cases is lawsuit to wind up a joint stock company to be filed?

It is regulated in the article 531 of the TCC that winding up of a joint stock company can only be requested based on justifiable reasons. However, the article does not define the justifiable reasons and no example is given for. For this reason, it is left to the Court of Cassation and the case law and doctrine to determine the situations that will constitute justifiable reasons. Undoubtedly, the judge will determine whether the justified basis to wind up the company will be realized by evaluating the conditions in the concrete case[6].

Examples for the justifiable reasons in the doctrine are shown as, the company which is in financial difficulties due to bad management by the majority shareholder, the company which has been emptied systematically, the profit share not distributed for at least 3-4 years despite the fact that there is no financial reason, the rights of the minority shareholders which are systematically and continuously shown restraint[7].

Since joint stock companies are companies managed by majority shareholders, differences of opinion between the partners and negative voting at the general assembly meetings should not be regarded as justifiable reasons. In the determination of the justifiable reasons, the partnership relations should become unbearable for the partner[8].

In a decision of the Court of Cassation[9], it has accepted the disposal of some immovables that are useful for carrying out the company’s business activities, inactivity for a long time and the ongoing lawsuits between the partners as justifiable reasons.

However, it is also argued that if a justifiable reason is determined in the articles of association or the shareholders agreement, in case of realizing this justifiable reason, the company should be winded up without examining whether the reason determined is justified or not[10].

When the justifiable reason is occurred is as important as the existence of the justifiable reason. In accordance with the provision 2/1 of the Law on the Enforcement and Application of the Turkish Commercial Code numbered 6103, before the effective date of the TCC which is July 1st, 2012, the legal consequences of the events that occurred, the provisions of that law will be applied. For this reason, the events that occurred before the effective date of the TCC will not constitute a justifiable reason within the meaning of article 531 of the TCC. However, it is accepted that the situations that emerged before the TCC entered into force but continued during the effective period of the TCC and constitute a whole will be taken into account in determining the justifiable reason within the meaning of article 531 of the TCC[11].

Although the time for filing a lawsuit is not regulated in the article 531 of the TCC, the lawsuit must be filed within a reasonable period of time from the emergence of the justifiable reason, pursuant to article 2 of the Civil Code. For this reason, it is necessary to determine whether the lawsuit was filed within a reasonable time after the emergence of the justifiable reason by the judge in the lawsuits; otherwise, the request should be rejected.

3. What are the alternative resolutions in the lawsuit to wind up a joint stock company?

Pursuant to the second sentence of the article 531 of the TCC, in case of justifiable reason, the judge may decide to pay the actual values ​​of the shares of the plaintiff shareholders as of the date of the decision and the dismissal of the plaintiff shareholders from the company or another appropriate and acceptable solution, instead of winding up the company.

Thus, in case of justifiable reason, the judge may decide on another suitable and acceptable solution instead of winding up the company in his discretion, the judge is not obliged to decide on winding up the company. Although it is understood from the wording that the judge has discretionary power in deciding an alternative solution, the judge must decide another suitable and acceptable solution to the situation if available. Winding up the company should be regarded as an ultima ratio if there is not any alternative solution[12].

The judge’s discretionary power must be understood in two ways. First one; the judge decides on an alternative solution, even if an alternative solution is not requested in the petition. The second is that it is the discretionary power of the judge in determining what the alternative solution will be. The dismissal of the plaintiff shareholder from the partnership by paying the share value stated in the article should be regarded as an example, and the judge may decide on another solution that is appropriate and acceptable to the concrete situation.

In addition to the sample solution regulated in the article, the decision to distribute dividends, the invalidity of the decision of the board of directors or the general assembly, and the demerger of the company are presented as alternatives in the doctrine[13].

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[1] Şahin, Ayşe: Anonim Ortaklıkta Haklı Sebeple Fesih Hakkı, İstanbul 2013, s. 51. Erdem Nuri: 6102 Sayılı Yeni TTK Hükümlerine Göre Anonim Ortaklığın Haklı Sebepler Feshi, İstanbul 2012, s. 113 vd.

[2] Sumer Ayşe: “Türk Ticaret Kanunu Tasarısında Anonim Ortaklıkların Haklı Nedenle Feshi”, Marmara Üniversitesi İ.İ.B.F. Dergisi, XXVIII, İstanbul 2010, s. 172 vd.

[3] Nomer Ertan, Füsun: “Anonim Ortaklığın Haklı Sebeple Feshi Davası TTK m.531 Üzerine Düşünceler”, İstanbul Üniversitesi Hukuk Fakültesi Mecmuası, LXXIII, İstanbul 2015, s. 423-424, Ayoğlu, Tolga: “Anonim Ortaklıkların Haklı Nedenle Feshi”, GSÜHFD, Prof. Dr. Oğuz İmregün’e Saygı Sempozyumu, 2013/2, İstanbul 2015, s. 222.

[4] Ayoğlu, s. 222.

[5] Nomer Ertan, s. 424.

[6] Çağlar, Hayrettin/Kaşak Esra: “Anonim Şirketin Haklı Nedenle Feshine İlişkin TTK m. 531 Hükmünün Zaman Bakımından Uygulanması”, Ankara Üniversitesi Hukuk Fakültesi Dergisi, 65 (3), Ankara 2016, s. 663, Nomer Ertan, s. 425, Ayoğlu, s. 226.

[7] Nomer Ertan, s. 427.

[8] Nomer Ertan, s.427. Çağlar/Kaşak, s. 663-664.

[9] Yargıtay 11. Hukuk Dairesi, E. 2014/3669, K. 2014/10238, T. 2.6.2014 (Kazancı Mevzuat ve İçtihat Bilgi Bankası, Erişim Tarihi: 15.5.2017).

[10] Ayoğlu, s. 226 ve 231 vd.

[11] Şahin, s. 50.

[12] Nomer Ertan, s. 428-429, Ayoğlu, s. 237 vd., Çağlar/Kaşak, s. 664 vd. 

[13] Nomer Ertan, s. 432 vd., Ayoğlu, s. 245 vd., Çağlar/Kaşak, s. 666.