The Right to Request and Review Information of The Members of The Board of Directors and Shareholders in Joint Stock Companies as A Necessity of Accountability and Transparency
In joint stock companies, the right to request information enables the establishment of a transparent structure. The right to request and review information in joint stock companies is one of the fundamental rights of both shareholders and members of the board of directors, and is among the indispensable and inalienable rights. Each board member has the right to request and review information about all the operations and transactions of the company. In this context, if a board member requests any commercial book record or any contract from the company for their review, this right cannot be denied. Likewise, each shareholder has the right to receive and review information on the company’s financial position, management mechanism and prospective transactions. The right to request and review information in joint stock companies is regulated separately for board members in article 392 and shareholders in article 437 of the Turkish Commercial Code (“TCC”) numbered 6102.
A. THE RIGHT TO REQUEST AND REVIEW INFORMATION OF THE MEMBERS OF THE BOARD OF DIRECTORS IN JOINT STOCK COMPANIES
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Pursuant to Article 392 of the Turkish Commercial Code, every member of the board of directors may request information, ask questions, and examine all the operations and transactions of the company in joint stock companies.
In this context, every board member has the right to request any commercial book, contract, correspondence or document to be brought to the board of directors meetings; in addition, apart from the meetings members have the right to request information from the representatives appointed to the company management with the permission of the director of board of directors and also; if it is necessary for the member the conduct its works in the company the member may request the director for permission to review the company’s commercial book records and other documents of the company. If the chairman of the board of directors rejects this request, the request is brought up to the agenda for the decision of the board of directors within 2 (two) days pursuant to paragraph 4 of article 392 of the TCC. Even in this case, in case the board of directors does not convene or this request is denied, the member of the board of directors who wishes to use their right to request information should apply to the first commercial court where the company’s headquarters is located.
The right of the Board Member to request and review information is mandatory by law, and these rights of the Members of the Board of Directors cannot be prevented, restricted or removed. In other words, as per the articles of association or the decision of the board of directors, the members’ right to request and review information can be expanded but not limited or restricted.
B. THE RIGHT TO REQUEST AND REVIEW INFORMATION OF THE SHAREHOLDERS
In joint stock companies, shareholders have the right to be informed about the economic conditions and activities of the company so that they can make the right decision regarding their investment in the company, regardless of their capital and share ratios. Therefore, in accordance with Article 437 of the TCC, the shareholders have the right to review the company’s financial statements, annual reports, audit reports and profit distribution proposals at least 15 (fifteen) days before the general assembly meeting. In addition, each shareholder has the right to request a copy of the balance sheet and income statement with the expenses being covered by the company.
As per stated in the justification of the stated article, “The shareholder has been granted the right to receive and examine a comprehensive information that coincides with contemporary standards and is organized in accordance with the principles of public disclosure, corporate audit and honest accountability.”
With this arrangement, shareholders will be able to express their opinions about the company’s progress by analyzing the financial statements of the previous years and the current year comparatively. If the shareholders believe that the progress of the company is negative, they can prevent the bad progress of the company by discharging the board of directors.
The right of shareholders to request and review information in joint stock companies under the TCC, in order for the shareholders to be able to use other rights arising from shareholding actively and effectively, has been arranged in 3 (three) different ways; before, during and after the general assembly.
1- Right to Inspect before the General Assembly
Pursuant to Article 437 of the TCC, shareholders have the right to physically review the audit reports, in particular, the financial statements and the activity reports of the company, at least 15 (fifteen) days before the date of the general meeting. In addition, the financial statements and consolidated statements are actively kept open for 1 (one) year for the shareholders to request information. Each shareholder has the right to request a copy of the balance sheets, provided that the expense is covered by the company.
2-The Right To Receive Information During The General Assembly
The right of the shareholder to get information actively appears in TCC 437/II. Each shareholder has the right to request information from the board of directors regarding the operation of the company, and from the auditors in terms of the way of auditing.
If the right is used in this way, it is possible for the shareholder to achieve more satisfactory results, since the information would not only be about financial statements and reports, but also about the company’s strategy.
3- Right to Examine After the General Assembly
Outside of the general assembly, shareholders are also given the right to examine the company’s internal correspondence with their commercial books. The precondition for exercising this right is that the shareholder did not receive a satisfactory answer during the general assembly. The legislation also stipulates a restriction on the right to review after the general assembly. According to TCC’s Article 437/IV; the review of the company’s commercial books and correspondences by the shareholders must be explicitly approved by the general assembly or a decision must be issued by the company’s board of directors. In the event that the necessary permission is requested or the decision is made, the examination can also be done through the expert.
C. THE LIMIT OF THE RIGHT TO RECEIVE INFORMATION
The right to receive information has been determined by the Article 437/III of the TCC. In this context, the shareholder’s request may be rejected with the idea that company secrets will be disclosed or other company interests that need to be protected can be compromised.
As clearly understood from the provision of the law, the shareholder does not have a right to learn the secrets of the company. However, if the shareholder thinks that his request was denied unfairly, the shareholder may file a lawsuit at the commercial court of first instance where the company’s headquarters is located.
D. IN CONCLUSION
Pursuant to the TCC, the right to request and review information is considered among the indispensable rights of shareholders and board members. There are important differences in the right to request and review information in joint stock companies for board members and shareholders. One of the most important differences is that the right to request information of the members of the board of directors has not been restricted, while the right of the shareholders to request information may be limited in situations where the company’s trade secrets and interests are likely to be compromised. Since the members of the board of directors have the ability to represent and bind the company against third persons, the members of the board of directors have been given less restrictions on their right to request and review information of the companies on this matter.
This Memorandum has been prepared for the purposes of information and benefit in line with the current regulations and you can contact us at any time from the contact information in the heading for further information.
 Article 392- (4) If the chairman refuses the request of a member to obtain information, ask questions and make an examination as stipulated in the third paragraph, the matter is brought to the board of directors within two days. If the Board does not convene or rejects this request, the member may apply to the commercial court of first instance where the company’s headquarters is located. The court can examine and decide on the request file, the court’s decision shall be final