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January 21, 2020

Shareholders Agreements Under Turkish Law

Corporate Law
Reading Time: 4 minutes

         The trading companies especially the joint stock companies are affected by the global economic growth and as a result of that, institutionalization of the internal managements of the companies has become essential impact. Particularly, since Turkey takes attention of the foreign investors, the merger and acquisition transaction (“M&A” or “M&A Deals”) become popular and the fact that the shareholders seek different approaches to the management of the companies, has led them to find an alternative way between them in order to regulate their relationship.

         An alternative agreement named as Shareholders Agreements (“SHA”) except the Articles of Associations regulates the relationship between the shareholders and management of the company and the Turkish Code of Obligations numbered 6098 and dated 01.07.2012 (“TCO”) allows the shareholders to regulate matters which are not covered in the Turkish Commercial Code numbered 6102 and dated 01.07.2012 (“TCC”).

         In consideration of the foregoing, our study refers purpose, context and breach of the SHA and impacts on the M&A Deals.


         The term of the SHA is not defined in the legislation. As a matter of fact, there is no provision specific to the SHA. For any joint stock company, the articles of association are main factor[1]. Pursuant to article 335 of the TCC, in order to establish a joint stock company, the articles of association shall be executed and signed by the shareholder and regulated in compliance with the TCC. Hence, executing the SHA between the shareholders is not mandatory for the companies besides it is subject to the shareholders discretion. Generally, SHAs regulate the relationship and obligations of the shareholders, management and financial affairs of the company. 

         In addition to that, there are other reasons to execute the SHA and the most important these are confidentiality and flexibility. Especially on the M&A Deals including the multiple shareholders, the parties are not willing to disclose certain matters such as trade secrets and the articles of associations of the joint stock companies have to be registered and announced in accordance with the TCC and relevant legislation. Besides that, TCC and relevant legislation do not bring the flexibility to the shareholders regarding the issues which are regulated in such legislation due to the mandatory rules. Moreover, in the M&A Deals the parties are not willing to include third parties to the company and thus principally the limitation on the share transfers provisions other than the provision which TCC and relevant legislation make allowance for, are detailly regulated in the SHAs.

         As a note, it should be stated that since the “ultra vires” rule does not apply for the companies, even if the purpose and subject of the company does not include any business area, the company is able to carry on such business. Therefore, the shareholders can limit the business of the company via executing the SHA.


         Under the Turkish relevant legislation, the is no specific provision regulating and prohibiting the SHA. Thus, SHAs are agreements based on the freedom of contract. So, as a general, complying the mandatory rules, ethics, public order and personal rights is sufficient to execute the SHA.

         As mentioned below, the SHAs are not regulated under the Turkish legislation. Although within this framework, it could be stated that the shareholders are able to execute SHA without complying any condition on formation, if the SHA includes any provision which is specially stipulated under the laws and required to be in the written form or another form, the SHA has to be in this form order to provide the validity of the such provision. For example, within the scope M&A Deal, in case of that the parties’ intention regarding the dispute resolution mechanism is court of arbitration, the agreement should ensure the required conditions for the validity of arbitration clause.  


         The Parties of the SHA is all or some part of shareholders. In the M&A Deals, due to fact that the validity of the share purchase agreement is subject to the permission of governmental bodies such as Competition Board, the parties sign the SHA at the same time with the share purchase agreement  to ensure that the concept of such M&A Deal will be reflected upon the required permission is obtained[2].

         In some particular M&A Deals, the company can be party to the agreement. The purpose is to ensure to assert the rights and obligations of the shareholders to the other shareholders as well as the company. This should impact the asserting the rights and claims to the company, but within the scope of TCO. If any provision conflict with the mandatory rules of the TCC, the TCC provisions will prevail.


         The SHA is an agreement under the TCC and therefore does not have the sanction power of the articles of association of the companies. For this reason, the parties are willing to reflect the provisions of SHA to the articles of association for the sanction power of the agreed conditions and to bind the new shareholders. Hence, the article 340 of the TCC regulates the mandatory rules to be inserted to the articles of associations of the companies. Therefore, within the scope of this mandatory rules, the shareholders can modify the articles of association with the provisions of the SHA such as management of the company, organization structure of the company, limitation of the share transfer, etc.


         Since the SHA is an agreement under the TCC, SHA does not have the sanctions arising out of corporations law and legislation. In this regard, the rights and obligations of the SHA cannot be protected as much as the protection of the articles of associations. Therefore, especially in the M&A Deals, the parties insert the provisions especially regarding the breach of the SHA.     

         The most common instruments of the such sanctions are stated below:

  • The Penalty Clause
  • Call Option and Put Option
  • Escrow Agreement
  • Bank Guarantee Letters

            These instruments provide parties to comply the provisions of the SHA and protect their rights under the TCO rules.  Also agreeing on the arbitration proceeding as a dispute resolution mechanism will also provide confidentiality and protection of the rights and obligations of the parties.


Under the global economic growth and popularization of the M&A Deals, the SHA has been gained the popularity and the provisions of the SHA are more detailed and comprehensive.  Therefore, this study has been prepared with the purpose of being knowledgeable and useful to you and you can contact with us at any time for more information. 

[1] Mehmet Bahtiyar, Ortaklıklar Hukuku, 7. Edition, İstanbul 2012, page 106 ff.; Gül Okutan Nilsson, Anonim Ortaklıklarda Paysahipleri Sözleşmeleri, 1. Edition İstanbul 2003, page 73.

[2] M. Kemal Oğuzman/M. Turgut Öz, Borçlar Hukuku Genel Hükümler Cilt -1, 9. Edition, page 87, Necip Kocayusufpaşaoğlu/Hüseyin Hatemi/Rona Serozan/Abdulkadir Arpacı, Borçlar Hukuku Genel Hükümler, Birinci Cilt, 5. Edition, page 501.