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In limited companies withdrawal from the company and expulsion from the company are two separate routes leading to the termination of a shareholder’s bond with the company. They are regulated in Articles 638 to 640 of Turkish Commercial Code No. 6102. In this article we address the cases of withdrawal and expulsion, the court with subject-matter and territorial jurisdiction, the parties to the action and the consequences of the termination of membership.
Under the provisions of the TCC on limited companies, withdrawal from the company may take place in the following ways:
This is governed by Article 638 of Turkish Commercial Code no. 6102.
1 - The articles of association may confer on the members a right to withdraw from the company, and may make the exercise of that right subject to specified conditions.
2 - Every member may bring an action for a decision that they withdraw from the company where just cause exists.
Article 638
A member of a limited liability company may withdraw in two situations: where the right of withdrawal is provided for in the articles of association, and where just cause exists. In other words, apart from the cases provided for by law, no right of withdrawal exists unless it is laid down in the articles of association. That right may be provided for in the articles of association, or removed subsequently with the consent of all members (since it constitutes a vested right). As a rule, withdrawal takes effect at the moment the declaration of withdrawal reaches the company, unless the articles provide otherwise — for example, that it is to take effect at the end of that accounting year.
Withdrawal is also possible with the consent of all members at the general assembly. There are, however, views in the literature to the effect that a decision taken at the general assembly will not be valid in the absence of a provision in the articles of association.
This is governed by Article 638/II of Turkish Commercial Code no. 6102. In this case the member’s own intention is not sufficient for withdrawal; a court decision is required. Just cause is assessed on the facts of each case. Just cause consists of reasons that make the continuation of the membership relationship a serious burden for the member; it must also have rendered remaining in the company intolerable for them. What is to constitute just cause may be laid down in the articles of association (in which case the court must allow the action for withdrawal), but withdrawal for just cause cannot be restricted by the articles.
is regulated in TCC Art. 639. Where one of the shareholders brings an action for withdrawal from the company for just cause, the company managers must notify the other shareholders of this without delay. Upon this notification, each of the other shareholders has the right to join the withdrawal if this reason also constitutes just cause for them.
Withdrawal by joining operates in the following order, as described in the article:
Important · The one-month period
Shareholders must exercise the right to join the withdrawal within one month of the date on which the notification reaches them; the one-month period is a peremptory period.
Where one of the members exercises the right conferred on them by the articles of association, the other members may, if they wish, also withdraw by joining that withdrawal. This is governed by Article 639 of the TCC.
Having set out the just causes in an action for withdrawal, a member may ask the court to order, for the duration of the proceedings, that some or all of their rights and obligations arising from membership be suspended, or that certain measures be taken to secure their position. Such measures may be ordered on application or by the court of its own motion.
Article 641 of Turkish Commercial Code no. 6102 provides:
“Where a member leaves the company, they are entitled to claim a departure payment corresponding to the true value of their capital share.”
“By reason of the right of departure provided for in the articles of association, the articles may regulate the departure payment differently.”
Turkish Commercial Code No. 6102, Art. 641
Where a member of a limited liability company leaves the company, they are entitled to claim a departure payment corresponding to the true value of their capital share. Where the member’s withdrawal requires a court decision, withdrawal takes effect on the date the decision becomes final, and the departure payment is determined by reference to that date. Where the right of departure is specifically provided for in the articles of association, the manner and time of payment of the departure payment may also be agreed differently.
Turkish Commercial Code no. 6102 contains detailed provisions on groups of companies, and Article 195 governs controlling and dependent companies. Under that article:
“a) Where a commercial company, directly or indirectly, in respect of another commercial company;
- holds the majority of the voting rights, or
- is entitled, under the articles of association, to secure the appointment of a number of members sufficient to form a decision-making majority in the management body, or
- constitutes, together with its own voting rights and on the basis of an agreement, alone or together with other shareholders or members, the majority of the voting rights
b) where a commercial company is able to keep another commercial company under its control by virtue of an agreement or in some other way,
the first company is the controlling company and the other the dependent company
TCC Art. 195
Under Article 202/II of the TCC, shareholders in a dependent company have the right to bring an action against general assembly and board resolutions concerning significant amendments to the articles of association effected through the exercise of control and for which there is no clearly justified reason from the dependent company’s point of view. The Law lists merger, division, change of type, dissolution and the issue of securities as examples of such resolutions.
Where the conditions of Article 202 of the TCC are met and the dependent company is a limited liability company, the member of that company may, in an action brought against the controlling company, request that their shares be purchased at their true value; if the court allows the action, or if the judge so decides of their own motion under Article 202/I-b, the member’s shares will be purchased by the controlling company and the member will leave the company by the court’s decision.
Company mergers are governed by Article 136 et seq. of the TCC and are divided into mergers by acquisition and mergers by the formation of a new company. Under Article 137 of the TCC, capital companies may merge with capital companies, with cooperatives and — provided that they are the acquiring company — with general and limited partnerships.
The members’ right of withdrawal on a merger of companies is governed by Article 141 of Turkish Commercial Code no. 6102:
“(1) The companies participating in the merger may confer on the members, in the merger agreement, a right to choose between acquiring shares and membership rights in the acquiring company and a departure payment corresponding to the true value of the shares to be acquired.
(2) The companies participating in the merger may provide in the merger agreement for the payment of a departure payment only.”
Turkish Commercial Code No. 6102, Art. 141
Under Article 141 of the TCC, the merger agreement may confer on the members of the merging companies a right to choose between acquiring shares and membership rights in the acquiring company and receiving a departure payment corresponding to the true value of the shares to be acquired. The member concerned will then either consent to the merger and become a member of the acquiring company or of the company newly formed by the merger, or leave the company by electing to receive the departure payment agreed in the merger agreement as corresponding to the true value of the shares to be acquired.
Whether members have a right of withdrawal on a division of the company is not expressly regulated. An examination of Article 161 of Turkish Commercial Code no. 6102 shows that members are not given a right to take a departure payment and leave on a division. That article reads as follows:
“(1) On a full or partial division, company shares and rights are preserved in accordance with Article 140.
(2) The members of the transferring company may be allocated;
- a) shares in all the companies participating in the division, in proportion to their existing shares, or
- b) shares in some or all of the companies participating in the division, in proportions differing from those of their existing shares.
may be allocated.
Turkish Commercial Code No. 6102, Art. 161
The division under subparagraph (a) is a division “in which the proportions are preserved”, and that under subparagraph (b) a division “in which the proportions are not preserved”.
As appears from the explanatory memorandum to the article, where it is provided by agreement or by consensus that a member may leave the company on a division, the member may do so.
A change of type in commercial companies is governed by Articles 180 to 190 of Turkish Commercial Code no. 6102. As appears from those articles and their explanatory memoranda, no right of withdrawal is provided for. However, given the freedom of contract and the absence of any prohibition on withdrawal in those articles, members may leave the company by agreement or by consensus where a change of type takes place.
Equalisation payment · TCC Art. 191
Under Article 191 of Turkish Commercial Code no. 6102, where membership rights have not been adequately protected in a merger, division or change of type, each member may, within two months of the publication of the merger, division or change of type resolution in the Turkish Trade Registry Gazette, request the commercial court of first instance at the place of the head office of one of the companies participating in the transaction to determine an appropriate equalisation payment.
In limited liability companies, on the transfer of a membership share the transferor leaves the company and the transferee joins it. Although it is said that there is no withdrawal here in the technical sense, a transfer of shares may nevertheless be regarded as one of the forms of withdrawal.
Court with subject-matter jurisdiction · TCC Art. 5
Commercial Court of First Instance; in places where there is none, the Civil Court of First Instance
Court with territorial jurisdiction · CCP Art. 6
The court of the domicile of the company from which the shareholder is withdrawing
Under Article 5 of Turkish Commercial Code no. 6102, the courts having subject-matter jurisdiction in an action for withdrawal are the commercial courts of first instance. Where there is no commercial court of first instance, the competent court is the civil court of first instance at that place.
Under Article 6 of Code of Civil Procedure no. 6100, the court having territorial jurisdiction in an action for withdrawal is the court of the place of establishment, at the date the action is brought, of the company from which the member seeks to withdraw.
Although Turkish Commercial Code no. 6102 contains no provision on the point, the case-law of the Court of Cassation indicates against whom the action is to be directed where a member of a limited liability company brings an action for withdrawal. In its judgment of 15 September 2014 (11th Civil Chamber, E. 5041/K. 13783) the Court of Cassation held that “in an action seeking leave to withdraw from a limited liability company, the action must be directed against the company”. In accordance with that precedent, a member wishing to withdraw will direct the action against the company of which they are a member.
“In an action seeking permission to withdraw from a limited company, the claim must be brought against the company.”
Court of Cassation 11th Civil Chamber, judgment dated 15.09.2014, E/5041/K.13783
Under Article 640/I of the TCC, a resolution of the general assembly of members is required in order to expel a member in the cases specified in the articles of association. Under Article 621/I-d of the TCC, a resolution to expel a member on a ground provided for in the articles of association requires at least two-thirds of the votes represented together with an absolute majority of the whole of the capital carrying voting rights. Under Article 640/II of the TCC, that resolution must be notified to the member concerned through a notary. A member against whom an expulsion resolution has been taken may bring an action to have it set aside. Under Article 622 of the TCC, the provisions on joint stock companies concerning the setting aside and nullity of general assembly resolutions apply by analogy to limited liability companies.
Article 640/III of the TCC provides: “The expulsion of a member from the company by court decision on the ground of just cause, at the company’s request, is reserved.” Accordingly, where just cause exists, the company may request the court to expel the member. Under Article 621/I-h of the TCC, the decision to apply to the court for the expulsion of a member for just cause is taken by the general assembly of members with an aggravated quorum. Once that resolution has been taken, the action is brought by the company as a legal entity. There is no provision as to the time limit for bringing the action. The resolution must be notified to the member through a notary. A member in respect of whom a decision has been taken to bring an expulsion action may at any time bring an action to have that resolution set aside.
Comparison of expulsion on grounds set out in the articles of association and for just cause
| On grounds set out in the articles of association | For just cause | |
|---|---|---|
| Foundations | TCC Art. 640/I | TCC Art. 640/III |
| Karar | Resolution of the general meeting of shareholders | A court decision in an action brought by the company following a resolution adopted by the general meeting with a qualified quorum |
| Notification | Service through a notary public | Notification through a notary public |
| The shareholder’s right | Action for annulment of the resolution | Action for annulment of the resolution |
Under Article 636/III of the TCC, where one of the members requests the court to dissolve the company for just cause, the court may, instead of dissolving the company, order that the member’s share be purchased by the company at its true value, that the claimant member be expelled from the company, or any other appropriate and acceptable solution.
Article 141/2 of the TCC “The companies participating in the merger may provide in the merger agreement for the payment of a departure payment only.” is worded in these terms.
In the light of the provision that the merging companies may expressly decide that shareholders are to be given a departure payment, such a decision results in the members being expelled on payment of their departure payments; having regard to the consequences of the decision, Article 151/V of the TCC sets the majority required for taking it at ninety per cent. The explanatory memorandum to Article 141/II states that the provision enables a minority opposed to the merger, or a shareholder who disturbs the peace or whose continued presence is not desired by the majority, to be expelled from the company by a ninety per cent majority decision.
In demergers and changes of type
Unlike mergers, divisions and changes of type do not offer this possibility; indeed Article 183 of the TCC expressly and mandatorily provides that members may not be expelled in cases of change of type.
Under Article 202/I-b of the TCC, where the controlling company abuses its control and fails to make equalisation, each member of the dependent company may bring an action against the controlling company and the members of its board of directors seeking compensation for the company’s losses. In such an action the judge may, on the claimant’s request or of their own motion, order — instead of compensation — that the shareholder’s share be purchased at its true value as provided in paragraph 2, or any other appropriate solution.
Article 208 of the TCC provides:
“Where the controlling company holds, directly or indirectly, at least ninety per cent of the shares and voting rights of a capital company, and the minority obstructs the operation of the company, acts contrary to the rule of good faith, causes appreciable difficulty or acts recklessly, the controlling company may purchase the minority’s shares at their stock exchange value or, failing that, at the value determined in the manner provided in the second paragraph of Article 202.”
TCC Art. 208
Article 208 of the TCC is intended in particular to protect the company against situations in which the minority abuses its rights so as to paralyse the company — for example by bringing an action to set aside every resolution, without any justification and solely in order to obstruct its operation, or by having general assembly deliberations adjourned.
A reduction of capital may be undertaken in order to make good a loss in the company’s balance sheet, or where the company’s capital is excessive having regard to its purpose. In limited liability companies, capital reduction may be carried out in accordance with the provisions on joint stock companies. A reduction of capital is an amendment of the articles of association and may, under Article 589 of the TCC, be effected by a resolution of members representing two-thirds of the capital, unless the articles provide otherwise.
In a capital reduction, the principle of equality means that, as a rule, the shares of all shareholders are redeemed in the same proportion. Where the articles of association so provide, however, or with the shareholder’s own consent, the shares of certain shareholders may be redeemed in full. As a member whose shares have been redeemed in full no longer holds the status of shareholder, this too constitutes a form of expulsion.
The status of shareholder of a member who withdraws or is expelled comes to an end. That status terminates: where the member exercises a right of withdrawal arising from the articles of association, at the moment the declaration of intention reaches the company; where the member requests withdrawal for just cause from the court, when the judgment becomes final; in cases of merger, change of type and division, on registration of the merger, division or change of type with the trade registry; where redemption of the shares is resolved upon, by the general assembly resolution taken; where the shareholder transfers their shares to another, by the approval resolution of the general assembly of members; where a member of a limited liability company is expelled under a provision of the articles of association, by the expulsion resolution of the general assembly, or — where an action is brought to set that resolution aside and is allowed — or, where expulsion for just cause is requested from the court, when the court allows the action and that judgment becomes final; in the case of a merger, on the approval by the general assembly of a merger agreement providing only for a departure payment; and on the purchase of minority shares by the controlling company under Article 208 of the TCC.
Moment at which shareholder status terminates (main cases)
| Hâl | Time of termination |
|---|---|
| Exercise of the right of withdrawal arising from the articles of association | The moment the declaration of intent is received |
| Application to the court for withdrawal for just cause | The court judgment must have become final |
| Merger, demerger or change of type | Registration of the transaction in the trade registry |
| Redemption of shares | The general meeting resolution adopted |
| Transfer of shares to another person | Approval resolution of the general meeting of shareholders |
| Merger providing only for an exit payment | Approval of the merger agreement by the general meeting |
| Purchase of minority shares by the parent company under TCC Art. 208 | The purchase transaction |
With the termination of the status of shareholder in the internal relationship, all rights and obligations arising from that status cease. In the external relationship, however, the termination of shareholder status takes effect only upon registration and announcement in the trade registry.
Under Article 641/I of the TCC, where a member leaves the company they are entitled to claim payment of a departure payment calculated by reference to the true value of their capital share. The departure payment is determined on the basis of the true value of the departing member’s capital share.
Where, on the member’s departure, the company has sufficient distributable equity to pay the departure payment, or where the member’s departure is based on a reduction of the company’s capital — that is, where the capital has been reduced in proportion to the value of the share — the departure payment falls due on the date the member leaves the company.
Related legislation: Turkish Commercial Code No. 6102 (mevzuat.gov.tr)
Under Art. 638 of the TTK (Turkish Commercial Code), the articles of association may grant the partners a right of withdrawal and make it subject to certain conditions; moreover, each partner may bring an action for a decision on their withdrawal where just causes exist. The article states that withdrawal with the consent of all partners may also be possible, although there are opposing views in legal doctrine.
In this case the member's will is not sufficient; a court decision is required. Just cause is assessed according to the circumstances of the specific case and must have made remaining in the company unbearable for the member. Just causes may be set out in the articles of association, but withdrawal for just cause cannot be restricted by the articles.
TTK m. 639’a göre bir ortak haklı sebeple çıkma davası açtığında müdürler bunu diğer ortaklara gecikmeden bildirir. Aynı sebep kendisi için de haklı sebep oluşturan her ortak, bildirimin kendisine ulaşmasından itibaren bir ay içinde çıkmaya katılabilir; bu süre hak düşürücüdür.
TTK m. 641’e göre şirketten ayrılan ortak, esas sermaye payının gerçek değerine uyan ayrılma akçesini isteme hakkına sahiptir. Çıkma mahkeme kararına bağlıysa ayrılma akçesi kararın kesinleşme tarihine göre belirlenir; çıkma hakkı şirket sözleşmesinde düzenlenmişse ödeme şekli ve zamanı farklı kararlaştırılabilir.
In the cases specified in the articles of association, expulsion requires a resolution of the members' general assembly, and the resolution is served on the member through a notary; the member may file an annulment action against the resolution. In expulsion for just cause, the company applies to the court after a resolution adopted by the general assembly with a qualified quorum.
According to the article, the competent court under TTK Art. 5 is the commercial court of first instance or, where there is none, the civil court of first instance. According to a 2014 decision of the 11th Civil Chamber of the Court of Cassation, in an action seeking permission to withdraw from a limited liability company, the action must be directed against the company.
TTK m. 141’e göre birleşme sözleşmesinde ortaklara, devralan şirkette pay edinme ile payların gerçek değerine denk ayrılma akçesi arasında seçim hakkı tanınabilir. Sözleşmede yalnız ayrılma akçesi de öngörülebilir; makaleye göre bu karar TTK m. 151 uyarınca yüzde doksan çoğunluk gerektirir.
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