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Although the rights and obligations of cooperative members are generally regulated in the KoopK (Cooperatives Law), the provisions of the TTK on joint stock companies (AO) will apply to rights and obligations not covered by the KoopK. In our study we will explain in detail, in light of Court of Cassation decisions, the rights and obligations conferred on cooperative members by the KoopK and the provisions of the TTK.
Currency note
This article was prepared in accordance with the legislation and practice in force on its date of publication. Matters such as the value of a membership share and the authority empowered to increase it, the administrative authorities that may convene the general assembly, and references to the provisions of the former Turkish Commercial Code may have changed since then. You are advised to consult a lawyer for the current position.
Cooperatives are established for the purpose of providing benefits to their members. In order to achieve this purpose, the law has conferred certain rights and imposed certain obligations on the members. In this way, the legislator aimed to protect the interests of the cooperative and of its members in a balanced manner. This approach should be assessed within the scope of the principle of protection of cooperatives. While exercising the rights granted to them by law within the framework of the statutory provisions, cooperative members must at the same time fulfil certain obligations deemed necessary for the purpose of the cooperative.
The abbreviations frequently used in the article are as follows:
The rights and obligations of cooperative members are generally personal in nature. Rights and obligations of a pecuniary nature are very few in Cooperative Law. This is because Cooperative Law aims to develop the personal economies of its members and to provide benefits to them.
As expressly provided in Art. 23 of the KoopK.1, cooperative members are equal in rights and obligations within the principles accepted by this law. The Court of Cassation explained the concept of equality as a principle in Cooperative Law in its decision dated 03.03.1981, also drawing a distinction between absolute and relative equality. In the decision, the principle of equality was expressed as follows:
“Under Article 23 of the Cooperatives Law No. 1163, cooperative members are equal in rights and obligations in light of the principles accepted by this law. According to this article, the principle of equality in rights and obligations as regards members is provided for in the Turkish legal system as a mandatory, imperative statutory provision. Whereas the provisions of the Cooperatives Law No. 1163 that provide for absolute equality are mandatory without exception, mandatory or interpretative provisions have been laid down on equality. However, although it may be argued that the said law refers only to the principle of equality without distinguishing between absolute and relative equality, and therefore provides for absolute equality, its real aim is to leave no room whatsoever, in any form or to any extent, for arbitrary action in cooperatives. Where the law provides for absolute or relative equality as a mandatory provision, the articles of association cannot provide otherwise. Apart from this, the articles of association may include any desired matters in line with the principle of equality, provided that no inequality is created; in particular, where the measure ensuring relative equality helps achieve the cooperative’s purpose, it may be adopted either by the articles of association or, even if not regulated in the articles of association, by duly adopted general assembly resolutions.2”
It must be said that in its decisions after this date the Court of Cassation has always taken the principle of equality into account in disputes arising between cooperative management and members3.
In Cooperative Law, the principle of equality is not applied in absolute terms, as also explained in the Court of Cassation decision referred to above. Absolute or relative equality will be applied, as determined according to the specific case. “In partnerships of persons and in cooperative partnerships, which are a type thereof, the principle of equality is divided into two: absolute and relative. Absolute equality is equality recognised without taking into account and assessing the differences between the members. Examples are the right of each member, regardless of his or her contribution to the cooperative, to one vote at the general assembly or to request the annulment of general assembly resolutions (Cooperatives Law, Arts. 48, 53). Relative equality, on the other hand, involves assessing the members' different situations arising from various causes and applying a measure so as to achieve an equal outcome. An example is the distribution of the surplus of income over expenditure as a rebate (risturn) in proportion to the members' transactions (Cooperatives Law, Art. 38)4”. In the Court of Cassation decision cited above, a general assembly resolution allowing the members of the board of directors and of the trustee committee who had completed the cooperative's unfinished construction through extraordinary effort to take the flats of their choice without participating in the draw was not considered contrary to the principle of equality5.
Absolute equality
Equality granted without regard to differences between members; for example, giving each member one vote at the general assembly or the right to request the annulment of general assembly resolutions (Art. 48, 53 of the KoopK.).
Relative equality
Equality whereby an equal outcome is achieved by taking into account the different circumstances of members; for example, distributing the surplus of income over expenditure in proportion to the members’ transactions (Art. 38 of the KoopK.).
As can be seen, where the rights granted to members and the obligations imposed on them are applied equally, this is absolute equality; whereas the form of equality in which an equal result is achieved for unequal parties by assessing their circumstances is relative equality.
As to how the application of absolute and relative equality is to be determined, Tekinalp proposes the following criterion: “If the right granted to the member is a protective right rather than a right to benefit, obtain or derive an advantage, equality must be absolute. For a member to bring an action for annulment of a GA resolution, there is no need to take as a basis the volume of transactions made with the cooperative; for obtaining information, there is no need to look at the amount of the premium paid; and for bringing a liability action against the managers, there is no need to look at the amount of the member’s performance. In these examples, the cooperative member obtains no material benefit; a right is being protected. Relative equality applies where a material benefit, benefiting from a contribution, an acquisition, support or benefiting from solidarity is at issue6.”
In cooperative law, the rights held by members are classified in various ways. In Tekinalp’s classification, the rights of cooperative members are divided by subject matter into three: participation rights, protective rights and property rights7. By the manner of their exercise, they are divided into two: individual rights and rights that may be exercised collectively. We will examine this subject on the basis of the classification by subject matter.
Article 26 of the Cooperatives Law8 regulates the right of cooperative members to attend the general assembly. Accordingly, except in housing cooperatives, every member other than those who have not been members of the cooperative for at least three months is entitled to attend the GA. In housing cooperatives, however, the length of membership is irrelevant and every member may attend the GA.
“Every member, except those who became members less than three months previously, has the right to attend the general assembly. This requirement does not apply to attending general assembly meetings in building cooperatives.”
Kooperatifler Kanunu, m. 26
Linked to the right to attend the GA, members also have the rights to take part in deliberations, make proposals and have their dissent recorded in the minutes (Article 53 of the Cooperatives Law).
In cooperatives, while the right to vote is generally exercised at the GA, votes may exceptionally also be cast by letter. For this reason, attending the GA is of importance for members.
At the GA, each member has only one vote (Article 48 of the Cooperatives Law). If the articles of association so provide, a member may, by written authorisation, have his or her vote at the GA exercised on his or her behalf by another member (Article 49/1 of the Cooperatives Law). As a rule, a member may not represent more than one member at the GA. However, in cooperatives with more than one thousand members, the articles of association may provide that each member may represent more than one member, up to a maximum of nine. Where the cooperative has a board of representatives, members vote only in the election of the representatives.
Since the right to vote is an absolute right, it cannot be made subject to conditions. However, in order to vote, it is necessary to attend the GA. Article 26 of the Cooperatives Law provides that those who have not been members of the cooperative for at least three months may not attend the GA. This rule does not apply to housing cooperatives. Accordingly, except in housing cooperatives, persons who have not been members of the cooperative for at least three months may not attend the GA or vote.
Cases where voting is prohibited · Cooperatives Law Art. 50
The Cooperatives Law also regulates cases in which voting is prohibited. Accordingly, persons who have taken part in any way in the conduct of the cooperative’s affairs may not take part in voting on resolutions concerning the release (discharge) of the BoD. This provision does not apply to auditors. No member may exercise his or her right to vote in deliberations concerning a personal matter or lawsuit between the cooperative and himself or herself, his or her spouse, or his or her ascendants or descendants (Article 50 of the Cooperatives Law).
The annual activity report of the BoD, covering its work relating to the cooperative’s income-expenditure balance, together with the balance sheet and the report to be prepared by the auditors in accordance with Article 66 of the Cooperatives Law, shall be kept available for inspection by members at the cooperative’s head office and, if any, its branches for a period of one year starting at least fifteen days before the annual meeting of the GA (Article 24/1 of the Cooperatives Law).
The documents made available for members’ inspection are as follows:
If any cooperative member requests the balance sheet and the income and expenditure accounts, a copy must be provided (Cooperatives Law, Art. 24/2).
As the right to obtain information is an absolute right, it cannot be excluded or restricted by the articles of association or by a decision of any of the cooperative's organs (Cooperatives Law, Art. 24/3). However, Article 24 of the Cooperatives Law expressly lists the documents that members may inspect. Beyond these documents, a member may examine the commercial books and matters relating to correspondence only with the express permission of the general assembly or by a decision of the board of directors (Cooperatives Law, Art. 25).
Duty of confidentiality
The cooperative imposes a duty of confidentiality on its members. Accordingly, save for secrets that may be learnt from the books and documents which members are permitted to inspect, no member is entitled to learn the cooperative's business secrets. The duty of confidentiality does not cease upon the termination of membership but continues. Therefore, members must always keep the cooperative's secrets confidential, even if they subsequently lose their membership. Otherwise, the sanction and penalty to be applied to the member are regulated in Article 25 of the Cooperatives Law9.
A member has a limited right to inspect the cooperative's books and documents. The right of supervision is limited because the books and documents which a member is permitted to examine are restricted by law (Cooperatives Law, Arts. 24, 25) and because supervision is carried out through the cooperative's auditors10.
In the Cooperatives Law, actions for the setting aside of GA resolutions are regulated in a manner similar to the provision of Article 44511 of the TTK concerning joint stock companies. This similarity has led to the decisions of the Court of Cassation on the setting aside of GA resolutions given for joint stock companies being taken into account for cooperatives and those given for cooperatives being taken into account for joint stock companies, resulting in a common body of case law. The reason for this is that it is expressly stated that, in matters on which the Cooperatives Law contains no provision to the contrary, the provisions of the TTK concerning joint stock companies shall apply (Article 98 of the Cooperatives Law).
A member cannot raise the annulment of a GK (general assembly) resolution by way of defence; they must bring an action for annulment12.
Important · One-month peremptory period
The action for annulment must be brought within one month from the date of the meeting before the court of the place where the cooperative’s head office is located. This period is a peremptory period.
The action is brought against the cooperative as a legal entity. The cooperative is represented in the action by the BoD. The Court of Cassation holds that, where the action is brought by the BoD, the cooperative should be represented by the auditor.
Article 53 of the Cooperatives Law, under the heading “Setting Aside of Resolutions and Conditions”, regulates how GA resolutions are to be set aside. The term “setting aside” here is used in the legal sense of “annulment”. There is no doubt that this term also covers nullity13. Indeed, as Tekinalp also emphasises in his work14, the Court of Cassation has developed the law on this matter in joint stock company and cooperative law. According to Court of Cassation decisions, it has been accepted that a declaration of the non-existence and absolute nullity of GA resolutions may be sought by any member without the conditions in Article 53 of the Cooperatives Law having to be met15.
Where the constitutive elements of a legal transaction are incomplete, that legal transaction is “non-existent”. If the constitutive elements of a legal transaction are complete but those validity conditions that are of such importance as to concern public order have not been fulfilled, the transaction is “absolutely null and void (butlan)”16. In order for annulment of a GA resolution of a cooperative to be sought, a GA resolution, whether positive or negative, must necessarily have been adopted. Article 53 of the Cooperatives Law lists breaches of the law, of the articles of association and of the rules of good faith as grounds for setting aside GA resolutions. In addition to these grounds, breaches of the unwritten principles of cooperative law and of the rule of honesty17 should also be regarded as grounds for annulment18.
Yokluk
The constituent elements of the legal transaction are incomplete.
Absolute nullity (nullity)
The constituent elements are complete; however, validity requirements of such importance as to concern public order have not been met.
The Court of Cassation held that irregularities in the notice of meeting do not render the resolutions adopted at that meeting void for non-existence but are subject to the sanction of nullity, and that, taking this into account, it must be determined under Article 53 of the Cooperatives Law whether the general assembly resolution is contrary to the law, the provisions of the articles of association and the rules of good faith19.
In fact, whether failure to convene the meeting in accordance with the procedure and failure to duly announce and notify the agenda lead to nullity or to annulment is a matter of debate, as the Court of Cassation has issued decisions in both directions. According to Tekinalp, this distinction can be made only according to the particular features of the specific case. Failure to announce the agenda results in nullity, whereas failure to notify it results in annulment. This is because the announcement of the agenda is one of the indispensable conditions for holding a general assembly meeting. Failure to announce it renders the meeting void. If the meeting was announced but not notified to the member, this constitutes a ground for annulment20.
Those who may bring an action for annulment against GA resolutions (standing to sue) are listed in Article 53 of the Cooperatives Law. Accordingly:
Furthermore, if the GA resolution is of a nature that would give rise to their personal liability, there is nothing to prevent members of the BoD who were in the minority from bringing an action in their capacity as members21.
A cooperative member who did not vote against a GK resolution when it was adopted cannot bring an action for annulment of that resolution. The fact that they opposed the resolution and voted against it must be recorded in the minutes. If it is not apparent from the minutes that the member voted against, no action for annulment can be brought22. Court of Cassation decisions also expressly state that the casting of a dissenting vote must be recorded in writing23. In its earlier decisions, the Court of Cassation required, for an action for annulment to be brought, that a dissenting opinion stating its reasons be written at the bottom of the minutes and signed24. Subsequently, however, it rightly changed its case law and considered it sufficient that the dissent be recorded in the minutes in some form.
“…Article 381 of the TTK governs the conditions and procedure for the annulment of resolutions of the general assembly of a joint stock company, and that article states that a shareholder who attended the meeting, dissented from the resolution and had this recorded in the minutes may bring an action for annulment; thus, the fulfilment of this condition in some form was considered sufficient, and the requirement that the dissent be written at the bottom of the minutes and signed was not laid down as a precondition to the action. In the present case, since it is understood that the claimants attended the general assembly meeting of 14.5.1987, whose annulment they seek, in person and by proxy, had the matters on which they dissented recorded in the minutes with reasons and clearly, and also cast dissenting votes during the voting, the court should have accepted that the statutory condition for bringing an action for annulment had been met and examined the merits; instead, the court dismissed the action on the ground that the claimants had not had their dissent recorded at the bottom of the minutes and signed it, and consequently the precondition to the action had not been met, which was not considered correct and required reversal.25”.
Y.11.HD. E:1989/5251K:1991/85T: 22.01.1991
However, the Court of Cassation states that, where the notice of the GA meeting given to members was irregular, a member who was not called may bring an action for annulment without the conditions of dissenting from the resolutions adopted at the GA and having this recorded in the minutes having to be met26. Of course, in this case the resolution may be annulled only if it is proven that the resolutions adopted at the GA meeting convened by irregular notice are contrary to the law, the articles of association or the rules of honesty. Otherwise, the irregularity of the notice alone is not a ground for annulment27.
A member who is unable to attend the general assembly meeting through his or her own fault cannot request the annulment of the resolution, but may only request a declaration of its nullity28. In addition, the Court of Cassation has accepted that an action for annulment may be brought against a resolution that infringes vested rights even if no dissenting vote was cast29.
The requirement of having cast a dissenting vote does not apply to shareholders who were unjustly not allowed to exercise their vote, or to members who allege that persons not entitled to attend the general assembly meeting voted. In these cases, however, the member bringing the action must prove that the general assembly resolution he or she seeks to have annulled is contrary to the law, the articles of association or the rules of good faith (Cooperatives Law, Art. 53).
In Switzerland, where provisions similar to the Cooperatives Law exist, the Federal Supreme Court also requires the existence of an interest in the setting aside as a precondition for bringing the action. It is sufficient for the existence of an interest in the setting aside to be established with respect to the cooperative; no interest is required with respect to the member30.
Purpose of the action
The action for annulment aims to protect the member or the minority through the annulment of a general assembly resolution or a declaration of its nullity or non-existence. This action cannot be used to obtain the results of a substantive law action31.
Since the Cooperatives Law contains no specific provision on the right of cooperative members to bring a liability action against members of the BoD, the provision of Article 553 of the TTK will apply pursuant to Article 98 of the Cooperatives Law. Under that provision, members of the BoD who fail to duly perform the duties imposed on them by the law or the articles of association are liable for the damage they cause to the company, to the shareholders and to the company’s creditors (Article 553/1 of the TTK).
The Board of Directors shall exercise the diligence required for managing the affairs of the cooperative and shall make every effort towards the success and development of the cooperative. The Board of Directors is responsible for the proper preparation, keeping and safekeeping of its own minutes and those of the General Assembly, the necessary books and the lists of members, and for preparing the operating accounts and the annual balance sheet in accordance with the statutory provisions and submitting them to the supervisory board for examination (Cooperatives Law, Art. 62).
Kooperatifler Kanunu, m. 62
We see that Article 553/1 of the TTK and Article 62 of the Cooperatives Law regulate in parallel the circumstances giving rise to the liability of the BoD. However, Article 553/1 of the TTK is broader in scope than Article 62 of the Cooperatives Law. In this case, there is no doubt that the liability of the BoD in cooperatives will be determined as set out in both provisions.
Under the regulation in Article 336 of the former Turkish Commercial Code (ETK), members of the board of directors were accepted as being jointly and severally liable. In the TTK, however, the joint and several liability of BoD members has been limited and made subject to new principles32. Accordingly, where more than one person is liable to compensate the same damage, each of them is jointly and severally liable with the others for that damage to the extent that the damage can be personally attributed to him or her, depending on the fault and the circumstances (Article 557/1 of the TTK).
Since Article 408/1 of the TTK states that “The general assembly shall adopt resolutions in cases expressly provided for in the law and in the articles of association.”, where the articles of association do not specify that the general assembly is authorised to bring actions against members of the BoD, this authority will belong to the board of directors33.
Withdrawal is a formative right exercised by a unilateral declaration of intent34.
Unless the articles of association provide otherwise, the declaration of withdrawal is addressed to the YK. Withdrawal takes effect when the member declares their intention to withdraw, and there is no need for the cooperative to accept or approve it35. However, although the declaration of withdrawal is unilateral, the legislator has provided that the YK may refuse to accept it, in which case the member must, after waiting a reasonable period, give notice of withdrawal through a notary. Under the provision, withdrawal takes effect from the date of notice (Art. 13 of the KoopK.).
Under Art. 13 of the KoopK., the withdrawal process consists of the following stages, as described in the article:
With this provision, we see that the legislator has interpreted notification through a notary public, which is a condition of proof of the declaration of withdrawal, as if it were a condition of form. After providing that the intention to withdraw produces effect by unilateral declaration, it is contradictory to make the effect of the declaration dependent on acceptance by the board of directors. Written notice is indeed useful for purposes of proof. However, there is settled case law that, where the board of directors refrains from accepting the declaration of withdrawal, the member must give notice through a notary public36. The requirement of notification through a notary public and the settled case law of the Court of Cassation following the statutory provision are criticised in legal doctrine as being contrary to the formative nature of the notice of withdrawal37. However, contrary views also exist38. Indeed, Tekinalp argues that the board of directors has not only the right to refrain from accepting withdrawal but even the right to reject it39.
Implied intention to withdraw
The Court of Cassation accepts that the intention to withdraw may also be expressed implicitly. In Court of Cassation decisions, a member's request for the return of the money paid and for a declaration that he or she is not a member has also been interpreted as an intention to withdraw40.
In Continental European legal systems, minority rights fall within the group referred to as “protective rights” and appear as rights aimed at protecting those in the minority against the majority41.
When we look at the relevant provisions of the TTK, we see that the concept of “minority shares” is used to refer to shares constituting (at least) one tenth of the share capital. Furthermore, in addition to the individual protection provided for shares in the TTK, qualified protection has also been granted to the holders of shares forming a minority. Where a shareholder of a joint stock company alone holds shares constituting one tenth of the share capital, he or she may also exercise alone the rights provided for minority shares. In addition, where one tenth of the share capital can only be reached by combining the shares of more than one shareholder, the rights granted to minority shares may be exercised (jointly) by all of those shareholders42.
Minority rights can be divided into two groups: positive and negative minority rights.
Negative minority rights
Positive minority rights
In cooperatives, the liabilities of the founders arising from the incorporation of the company and from capital increases cannot be removed by way of settlement and release until four years have elapsed from the date of registration of the company. Even after this period has elapsed, settlement and release become valid only with the approval of the general assembly. However, if shareholders representing one tenth of the share capital, or one twentieth in publicly held companies, oppose the approval of the settlement and release, the settlement and release shall not be approved by the general assembly (Commercial Code, Art. 559). Therefore, even if the periods specified in the law for settlement and release by the general assembly have elapsed, the settlement and release cannot be ratified by the general assembly if the minority does not approve43.
If the general assembly approves the settlement and release despite the opposition of the minority, it acts in manifest breach of the law, and in that case the annulment of the resolution may be sought under Article 445 of the Commercial Code44.
The Turkish Commercial Code lays down certain meeting and decision quorums for the adoption of certain resolutions at general assembly meetings45. In these cases, the minority has the ability to prevent the quorums from being reached and thus to prevent a resolution from being adopted.
Provided that it is stipulated in the articles of association, the minority may be granted the right to be represented on the board of directors. To this end, the articles of association may provide that the members of the board of directors are to be elected from among shareholders forming a particular group, particular classes of shares and the minority, and the articles of association may also grant a right to nominate candidates for membership of the board of directors (Commercial Code, Art. 360).
Every shareholder may, where necessary for the exercise of shareholder rights and provided that the right to obtain information or the right of inspection has previously been exercised, request the general assembly, even if the matter is not on the agenda, to have “specific events” clarified by means of a special audit.
If the general assembly approves the request, the company or any shareholder may, within thirty days, request the commercial court of first instance at the place of the company's registered office to appoint a special auditor (Commercial Code, Art. 438).
If the general assembly rejects the request for a special audit, shareholders holding at least one tenth of the capital, or one twentieth in publicly held joint stock companies, or shareholders whose shares have a total nominal value of at least one million Turkish lira, may, within three months, request the commercial court of first instance at the place of the company's registered office to appoint a special auditor (Commercial Code, Art. 439).
Genel kurul istemi onaylarsa · TTK m. 438
The company or any shareholder may, within thirty days, request the commercial court of first instance to appoint a special auditor.
Genel kurul istemi reddederse · TTK m. 439
Shareholders holding the proportion specified in the law may, within three months, request the commercial court of first instance to appoint a special auditor.
As can be seen, in order for the minority to bring an action under Article 349 of the TTK, the GA must have rejected the request for the appointment of a special auditor46.
In the Cooperatives Law, the minority’s right to call a meeting of the GA and to request that items be added to the agenda is separately regulated in Article 44 and Article 46/2-3.
The General Assembly shall be convened at the request of at least one tenth of the members, provided that they number no fewer than four. If the Board of Directors does not comply with this request within at least ten days, the General Assembly may be convened upon application by the requesting members or directly by the Ministry of Commerce, and, in the case of building cooperatives, by the Ministry of Development and Housing. If it is not convened, the requesting members may apply to the local court to obtain permission to convene the General Assembly themselves (Cooperatives Law, Art. 44).
Matters notified in writing at least 20 days before the general assembly meeting by at least 1/10 of the members, being not fewer than four, must be placed on the agenda.
Matters not on the agenda may not be discussed. However, where at least 1/10 of the members registered with the cooperative submit a written proposal before discussion of the agenda items begins, matters relating to the election of an accounts review committee, the postponement of the examination of the balance sheet and of the release (discharge), the adoption of resolutions concerning members who have withdrawn or been expelled, the calling of a new meeting of the general assembly, the annulment of resolutions of the board of directors alleged to be contrary to the law, the articles of association, the principles of good faith and resolutions of the general assembly, and the removal of members of the board of directors and auditors and the election of replacements shall be placed on the agenda with the approval of more than half of those attending the general assembly (Article 46/2-3 of the Cooperatives Law).
The TTK does not include the minority’s right, introduced for joint stock companies in Articles 341 and 356 of the former Turkish Commercial Code (ETK) and also applicable to cooperative members, to request that an action be brought against members of the board of directors and auditors, nor the right to apply to the auditors against members of the board of directors or managers.
The discussion of the financial statements and related matters shall be postponed for one month by decision of the chair of the meeting, without the need for a resolution of the general assembly, upon the request of shareholders holding one tenth of the capital, or one twentieth in publicly held companies. For a further postponement of the discussion of the financial statements to be requested after it has been postponed once at the request of the minority, it is a condition that the persons concerned have not answered, in accordance with the principles of fair accounting, the points of the financial statements that were objected to and recorded in the minutes (Commercial Code, Art. 420).
Unlike companies, cooperatives cannot pursue a profit motive. However, as a result of their activities, a positive or negative difference between income and expenditure may arise in the cooperative's accounts. It is not possible to call this difference profit or loss, as in commercial companies, since it arises not from an effort directed at profit but from the aim of ensuring the continued existence of the cooperative. For example, a consumer cooperative sells various goods to its members more cheaply than outside, yet still feels obliged to add a certain amount to its own purchase price. This amount is based on the idea, on the one hand, of covering the cooperative's various overheads (such as operating costs, personnel costs and transport costs) and, on the other, of making investments, developing the cooperative and being of greater benefit to its members. A risk margin and the need for prudence must also be taken into account47.
For this reason, in referring to the positive income-expenditure surplus obtained by cooperatives in their successful periods, the Cooperatives Law uses not the word profit but the word “ristourne” (risturn). Unless the articles of association provide otherwise, the entire proceeds obtained at the end of a year’s activity from transactions with members are added to the cooperative’s reserves as the income-expenditure surplus (Article 38/1 of the Cooperatives Law). As is clear from the text of the article, the main rule in a cooperative is that the ristourne is not distributed to members. However, if the contrary is expressly provided in the articles of association, the income-expenditure surplus may exceptionally be distributed to members. This distribution is made subject to certain rules in the Cooperatives Law. Accordingly:
Rules on the distribution of the surplus of income over expenses
1- Where the distribution of the surplus of income over expenditure among the members is provided for, it shall be made in proportion to the members' transactions (Cooperatives Law, Art. 38/1).
2- No distribution shall be made to members unless at least 10% of the income-expenditure surplus is set aside as a reserve and, in cooperative umbrella organisations, in addition at least 5% as an extraordinary reserve (Article 39/1 of the Cooperatives Law).
3- Provisions to be included in the articles of association stipulating that reserve funds are to be distributed to the members are not valid.
4- No surplus of income over expenditure or interest may be distributed until negative results have been eliminated (Cooperatives Law, Art. 38/last paragraph).
Provided that it is stipulated in the articles of association, the assets remaining after all the debts of the cooperative in liquidation have been paid and the members' share contributions have been returned are distributed among the members (Cooperatives Law, Art. 83/1). If the articles of association contain no provision on distribution to the members, the amount remaining after liquidation is left to the National Cooperatives Union of Turkey to be spent in accordance with the purpose of cooperativism (Cooperatives Law, Art. 83/3).
Unless another method has been adopted in the articles of association, the distribution is made equally among the members registered at the time of dissolution or their legal successors (Cooperatives Law, Art. 83/2).
If the articles of association provide for distribution
After the debts are paid and the share amounts are returned, the remaining assets are distributed among the members (Art. 83/1 of the KoopK.).
If the articles of association are silent
The remaining amount is left to the National Cooperatives Union of Türkiye (Art. 83/3 of the KoopK.).
The obligations of cooperative members arising from law may be listed as follows.
Undertaking to subscribe the statutory number of shares
Every person joining the cooperative must acquire at least one membership share. A member is permitted to acquire more than one share, provided that a maximum limit is set in the articles of association. The value of one membership share is 100.000 lira. Members joining the cooperative may subscribe to a maximum of 5.000 shares. Those participating in a cooperative umbrella organisation subscribe to at least 50 shares. The value of the membership share may be increased by decision of the Council of Ministers. (Art. 19/1 of the KoopK.).
Duty not to harm the cooperative
This obligation is a requirement of the principle of protecting the cooperative. Every member has the right to withdraw from the cooperative. However, if withdrawal would endanger the existence of the cooperative, a provision may be included in the articles of association requiring the withdrawing member to pay fair compensation (Art. 10 of the KoopK.). Nevertheless, the principle of protecting the cooperative can never prevent a member’s withdrawal (Art. 11/last paragraph of the KoopK.).
Member’s duty of confidentiality
Except for secrets that may be learned from the books and documents whose inspection is permitted, no member is entitled to learn the cooperative’s business secrets. Every member is obliged to keep the cooperative’s business secrets, however learned, confidential at all times, even after subsequently losing membership (Cooperatives Law Art. 25).
Duty of loyalty
Although not expressly provided for in the Cooperatives Law, the member has a duty of loyalty to the cooperative, which is expressly stated in the Swiss Code of Obligations48.
The articles of association impose many obligations on the member. These may include an entrance fee, annual payments and additional payments, and performance in various matters, obligations to act and to refrain from acting, and personal liability may also be stipulated in the articles of association49.
Additional payments
Additional payments are not a type of liability for the members but an obligation. This obligation is owed not to creditors but to the cooperative50.
In terms of subject matter, the rights of cooperative members can be divided into three groups: participation rights, protective rights and property rights. In terms of the manner of exercise, they are divided into two: rights exercised individually and rights exercised collectively.
The participation rights of cooperative members are the right to attend the GA and, linked to it, the rights to take part in deliberations, make proposals and have their dissent recorded in the minutes. Furthermore, every member attending the GA has the right to vote. In cooperatives, while the right to vote is generally exercised at the GA, votes may exceptionally also be cast by letter. The Cooperatives Law also regulates cases in which voting is prohibited. Accordingly, persons who have taken part in any way in the conduct of the cooperative’s affairs may not take part in voting on resolutions concerning the release (discharge) of the BoD. No member may exercise his or her right to vote in deliberations concerning a personal matter or lawsuit between the cooperative and himself or herself, his or her spouse, or his or her ascendants or descendants
Within the scope of protective rights, cooperative members have the rights to obtain information, to supervise the cooperative's activities, to bring an action for annulment (avoidance), to bring a liability action against members of the board of directors and to withdraw from membership of the cooperative. In addition to these rights, the minority rights regulated in the Turkish Commercial Code for joint stock companies also apply to cooperative members. Minority rights can be divided into two: positive and negative minority rights. Negative minority rights are the minority's right to prevent approval of settlement and release and the existence of qualified majority cases. Positive minority rights are the right to be represented on the board of directors, the right to request the appointment of a special auditor, the right to convene the general assembly or to request the addition of items to the agenda, the right to have the discussion of the financial statements postponed, and the right to request the dissolution of the cooperative for just cause.
The property rights of cooperative members are the right to a share in the surplus of income over expenditure and the right to the liquidation surplus.
The obligations of cooperative members can be divided into two: obligations arising from law and obligations arising from the articles of association. The obligations arising from law are subscribing for the statutory number of shares, not harming the cooperative, confidentiality and the duty of loyalty. As for obligations arising from the articles of association, these may include an entrance fee, annual payments and additional payments, and performance in various matters, obligations to act and to refrain from acting, and personal liability may also be stipulated in the articles of association. Additional payments are not a type of liability for the members but an obligation. This obligation is owed not to creditors but to the cooperative.
1 Cooperatives Law, Official Gazette 10.05.1969, No. 1163.
2 Court of Cassation, 11th Civil Chamber, E:1981/207, K: 1981/910, D: 03.03.1981.
3 Court of Cassation, 23rd Civil Chamber, E:2012/5378, K: 2012/6337, D: 01.11.2012; Court of Cassation, 23rd Civil Chamber, E:2012/3468, K: 2012/5773, D: 05.10.2012.
4See above, § B. Principle of Equality, fn. 1, Court of Cassation, 11th Civil Chamber, E:1981/207 K: 1981/910 D: 03.03.1981.
5Reha Poroy/Ünal Tekinalp/Ersin Çamoğlu, Ortaklıklar ve Kooperatif Hukuku, Vedat Publishing, Updated 11th ed., Istanbul 2009, p.1013.
6 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1014.
7 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1015.
8Cooperatives Law Art. 26: “Every member, except those who became members less than three months previously, is entitled to attend the general assembly. In housing cooperatives, this condition does not apply for attending general assembly meetings.”
9Cooperatives Law Art. 25: “…A member who fails to comply with this obligation shall be liable to the cooperative for any resulting damage and, upon the complaint of the cooperative, shall be punished with imprisonment of up to one year or a judicial fine even if no damage is expected.”
10Cooperatives Law Art. 65/1: “The auditors shall examine all transactions and accounts of the cooperative on behalf of the general assembly.”
11 TTK Art. 445 “The persons specified in Article 446 may, within three months from the date of the resolution, bring an action for annulment before the commercial court of first instance at the place of the company’s head office against general assembly resolutions that are contrary to the provisions of the law or the articles of association and, in particular, to the rule of honesty.”
12 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1020.
13TCO Art. 27: “Contracts that are contrary to the mandatory provisions of the law, morality, public order or personality rights, or whose subject matter is impossible, are absolutely null and void.”
14Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1018.
15Court of Cassation 11th Civil Chamber, Docket No.: 1982/370 Decision No.: 1982/4077 Date: 22.10.1982 “All resolutions adopted at a general assembly convened upon a notice given contrary to the law and the articles of association are null and invalid. A declaration that resolutions adopted at such a meeting are tainted with non-existence may be sought from the court by any member who claims that the notice was not given in accordance with the procedure, without the conditions in Article 53 of the Cooperatives Law having to be met. These points have also been adopted verbatim by part of the doctrine.”
16 M. Kemal Oğuzman/Nami Barlas, Medeni Hukuk, 9th ed., Beta Publishing, 2002 Istanbul, pp. 140-141.
17TCC Art. 2 I. Acting in good faith Art. 2 – “Everyone must comply with the rules of honesty when exercising his or her rights and performing his or her obligations. The legal order does not protect the manifest abuse of a right.”
18Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1018.
19Court of Cassation, 11th Civil Chamber, E: 2001/7233 K: 2001/9738 D: 10.12.2001, Salih Çelik/Muktedir Lale, Kooperatifler Hukuku, 1st ed., Seçkin Publishing, Ankara 2006, p. 548.
20 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, pp.1019-1020.
21Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1019.
22Court of Cassation 11th Civil Chamber, Docket No.: 1998/9971 Decision No.: 1999/2057 Date: 11.03.1999 “Since the claimant participated in all the general assembly resolutions whose annulment he sought, save one, and did not have it recorded in the minutes after the resolution that he dissented from the resolution on which he cast a dissenting vote, it cannot be said that the preconditions for the action have been met.”
23Court of Cassation 11th Civil Chamber, Docket No.: 1984/4466 Decision No.: 1984/6101 Date: 07.12.1984 “…since the claimant made no statement or explanation to the effect that he had his dissent recorded in the minutes within the meaning of Article 53/1 of the Cooperatives Law No. 1163, and since it is not possible to accept the expressions (rejection) and (those not approving) relating to the identification of those casting negative votes in the count and tally in the minutes, which were debated during the rectification deliberations and drawn up in handwriting by two secretaries of the chair, as a dissenting opinion (dissent from the resolution) in the sense intended by the law…” Court of Cassation 11th Civil Chamber, Docket No.: 1989/5251 Decision No.: 1984/6101 Date: 07.12.1984 “Since it is understood that the claimants attended the general assembly meeting whose resolutions they seek to annul in person and by proxy, had the matters on which they dissented recorded in the minutes, stating them clearly and with reasons, and also cast dissenting votes during the voting, it being accepted that the condition required by law for bringing an action for annulment has been fulfilled…”
24 Court of Cassation, 11th Civil Chamber, E:1977/4669 K:1977/5531 D: 20.11.2001 “In order to bring an action for annulment of General Assembly resolutions, it is not sufficient to have dissented from the resolution; the dissent must also be recorded in the minutes. The action for annulment of a claimant who has not fulfilled this procedural precondition must be dismissed”; Court of Cassation, 11th Civil Chamber, E:2001/6860 K:2001/9182 D: 20.11.2001, Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1020.
25 Court of Cassation, 11th Civil Chamber, E:1989/5251K:1991/85D: 22.01.1991; Court of Cassation, 11th Civil Chamber, E:2003/5809 K:2003/68 D: 02.06.2003 “In a joint stock company, it is sufficient for the general assembly minutes to be signed by the meeting chair's board and the Ministry of Commerce Commissioner, and a shareholder cannot actually be compelled to sign the minutes. In the specific case, ordering the annulment of the general assembly and of all the resolutions adopted, instead of dismissing the action, without taking into account that the claimants had no notes of dissent on the resolution concerning the release of the members of the board of directors and the supervisory board, is contrary to procedure and law”.
26Court of Cassation 11th Civil Chamber, Docket No.: 1984/4466 Decision No.: 1984/6101 Date: 07.12.1984 “Where the General Assembly meeting has been held without any notice having been given at all, the resolutions adopted at the general assembly are invalid, and an action to be brought for a declaration of the invalidity of these resolutions is not subject to any time limit. However, if the claimant was not called, or if the members were called but the notice was irregular, this entitles the member who was not called to bring an action for annulment without the conditions of dissenting from the resolutions adopted at the general assembly and having this recorded in the minutes having to be met. However, the action for annulment must be brought, under the said provision, within the 1-month limitation period following the meeting, and in this action it must also be alleged and proven that the resolution whose annulment is sought is contrary to the law, the articles of association or the rules of good faith.”, Çelik/Lale, pp. 549-550.
27 Court of Cassation, 11th Civil Chamber, E: 2001/10204 K: 2002/2499 D: 19.03.2002, Çelik/Lale, pp. 550-551.
28 Court of Cassation, 11th Civil Chamber, E: 2004/10672 K: 2005/7168 D: 05.07.2005, Çelik/Lale, pp. 561-562.
29 Court of Cassation, 11th Civil Chamber, E: 1504 K: 2134 D: 19.04.1979
30 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1019.
31 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1021.
32Seza Reisoğlu, “6102 Sayılı Türk Ticaret Kanununun Anonim Şirketlerle İlgili Başlıca Yeni ve Farklı Düzenlemeleri”,http://www.tbb.org.tr/Dosyalar/Konferans_Sunumlari/TBB_Hukuk_Basdanismani_Prof._Dr._Seza_Reisoglu_Aba nt_22.10.2011.pdf, pp. 23-24.
33 Reisoğlu, p. 24.
34Mustafa Erdem Can, “Kooperatif Ortaklığından Çıkma ve Çıkan Kişinin Hakları”, Gazi Üniversitesi Hukuk Fakültesi Dergisi, Vol. 11, No. 1-2, Ankara 2007, pp. 76-77.
35 Can, p. 77.
36 Court of Cassation, 11th Civil Chamber, E: 1978/78 K: 1978/111 D: 06.02.1978; Court of Cassation, 11th Civil Chamber, E: 1980/3891K: 1980/4842 D: 14.10.1980.
37 Can, p. 77.
38 Efil Öz, “Kooperatif Ortaklığından Çıkma ve Sonuçları”, Konya Barosu Dergisi, No. 20, p. 59.
39 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1001.
40 Court of Cassation, 11th Civil Chamber, E: 1974/2697 K: 1974/3620 D: 13.12.1974.
41 Selin Sert Canpolat, “Ananim Ortaklıklarda Azınlık Haklarının İncelenmesi”, TBB Dergisi, TBB Publications, No. 74, Ankara 2008, p. 158.
42Yılmaz Yördem, “Anonim Ortaklıklarda Ticaret Kanunundan Kaynaklanan Azınlık Hakları”, http://www.dicle.edu.tr/Contents/a1077d98-611e-4b73-a509-8f5ae43efba6.pdf, p. 191.
43Tamer Bozkurt, Ticaret Hukuku (Ticari İşletme-Şirketler Hukuku), Arıkan Publishing, 1st ed., Ankara 2008, p. 499; Hasan Pulaşlı, Şirketler Hukuku Şerhi Vol. II, Adalet Publishing, 2nd ed. Updated with Amendments and Secondary Legislation, Ankara 2014, pp. 1558-1559; Yördem, p. 181.
44 Yördem, p. 181.
45TTK Art. 418 “Except where a higher quorum is provided for in this Law or in the articles of association, general assemblies shall convene with the presence of the holders of shares representing at least one quarter of the capital or their representatives. This quorum must be maintained throughout the meeting…” TTK Art. 421 “Unless otherwise provided in the Law or the articles of association, resolutions amending the articles of association shall be adopted by a majority of the votes present at a general assembly at which at least half of the company’s capital is represented. If the meeting quorum provided for is not reached at the first meeting, a second meeting may be held within one month at the latest. The meeting quorum for the second meeting is that at least one third of the company’s capital be represented at the meeting. Provisions of the articles of association that reduce the quorums provided for in this paragraph or provide for a relative majority are invalid…”
46 Pulaşlı, 1563-1564; Yördem, p. 185.
47O. Murat Koçtürk, “Türkiye’ de Kooperatiflerin Vergilendirilmesi”, Celal Bayar Üniversitesi İİBF Dergisi, Vol. 13, No. 2, 2006, p. 126; Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p. 1031.
48Karahan/Deryal, Şirketler Hukuku, Mimoza Publishing, 1st ed., Konya 2012, p. 850; Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1023.
49 Tekinalp (Poroy/Çamoğlu) Ortaklıklar, p.1023.
50 Diğdem Göç Gürbüz, “Kooperatiflerde Ortakların Sorumluluğu”, Marmara Üniversitesi İİBF Dergisi, Vol. 18, No. 1, İstanbul 2010, p. 468.
Related legislation: Cooperatives Law No. 1163 (mevzuat.gov.tr)
According to the article, under Cooperatives Law Art. 26, those who have not been members for at least three months may not attend the general assembly or vote. This rule does not apply to building cooperatives; in building cooperatives every member may attend the general assembly.
Each member has one vote at the general assembly. If the articles of association so provide, a member may, with written authorisation, have another member cast their vote. As a rule, a member cannot represent more than one member; however, in cooperatives with more than one thousand members, the articles of association may provide that up to nine members may be represented.
The board of directors' annual activity report, the balance sheet and the auditor's report are made available for inspection by members at least fifteen days before the general assembly, for a period of one year; a copy of the balance sheet and income and expense accounts is given to any member who requests it. Inspection of other books and correspondence is possible with the express permission of the general assembly or by a board resolution.
According to the article, the annulment action must be filed within one month of the meeting date, in the court of the place where the cooperative's head office is located, against the cooperative as a legal entity; this is a preclusive period. Annulment of a resolution cannot be raised by way of defence.
According to the Court of Cassation decision cited in the article, it is sufficient that the dissent is recorded in the minutes in some way; writing it at the bottom of the minutes and signing it is not an additional precondition for the action. If the notice of meeting was irregular, the dissent requirement does not apply to a member who was not invited; however, it must be proven that the resolution is contrary to the law, the articles of association or the principle of good faith.
Withdrawal is a right that terminates a legal relationship (a formative right) and is exercised by a unilateral declaration of intent; as a rule, the declaration is addressed to the board of directors. Under Cooperatives Law Art. 13, if the board refrains from accepting it, the member gives notice through a notary after a reasonable period, and the withdrawal takes effect from the date of notice. According to the article, the Court of Cassation accepts that the intention to withdraw may also be expressed implicitly.
Unless the articles of association provide otherwise, the income-expense surplus is added to the cooperative's reserves. If distribution is provided for, it is made in proportion to members' transactions; no distribution may be made unless at least 10% of the surplus is allocated to reserves and any losses have been covered.
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