Prohibition on Voting in Joint Stock Companies
CIRCUMSTANCES IN WHICH SHAREHOLDERS AND BOARD MEMBERS OF JOINT STOCK COMPANIES ARE DEPRIVED OF VOTING RIGHTS
With a view to protecting the interests of the company and preventing conflicts of interest, Article 436 of Turkish Commercial Code No. 6102 prohibits shareholders and members of the board of directors from exercising their voting rights in certain situations.
THE SHAREHOLDER
Under Article 436, paragraph 1, a shareholder may not vote in deliberations concerning a transaction or matter of a personal nature, or litigation before any judicial body or arbitrator, between the company and the shareholder, their spouse, descendants or ascendants, or partnerships in which those persons are partners or capital companies under their control.
Constituent elements:
The counterparty must be the shareholder personally, their spouse, a descendant (child, grandchild) or ascendant (mother, father, grandmother, grandfather), a partnership owned by or in which those persons are partners (ordinary partnership, ordinary limited partnership, general partnership), or a capital company under their control (limited liability company, joint stock company, partnership limited by shares).
The matter must concern deliberations relating to a transaction or matter of a personal nature between those entities and the company, or litigation before any judicial body or arbitrator.
Since the interests of the company would be endangered where a conflict of interest exists between the persons mentioned and the company, such persons, while remaining informed of the general assembly agenda, must be excluded from voting on matters that are personal to the shareholder and thereby diverge from the general interest of the company.
THE BOARD OF DIRECTORS
Paragraph 2 concerns the board of directors, one of the company's mandatory organs, which carries out the transactions necessary to implement the resolutions adopted by the general assembly and represents the company in doing so.
"Members of the company's board of directors and persons holding signature authority in management may not exercise the voting rights arising from their own shares in resolutions concerning the discharge of members of the board of directors."
Constituent elements:
The person must be a member of the company's board of directors or a person holding signature authority in management (general manager, managing director, authorised representative).
There must be an agenda item at the general assembly concerning the discharge of such persons.
By a resolution of discharge, members of the board of directors (for a maximum of three years in joint stock companies) are released from the legal consequences of their acts or omissions during their term of office; their obligations come to an end and no liability action may be brought against them. Where a board member votes and that vote affects the discharge resolution, an action may be brought against the company before the Commercial Court of First Instance at the company's registered office within three months of the resolution, seeking annulment of the general assembly resolution. Where the discharge resolution has been adopted in bad faith (misstatement in the balance sheet, concealment of transactions giving rise to liability, obstruction of minority shareholders' right of inspection and the like), an annulment action and/or a liability action may be brought against the board members within two years of learning of the loss and the person responsible, and in any event within five years of the adoption of the resolution (Art. 553 et seq. of the Turkish Commercial Code).
CONCLUSION
Article 436 of Turkish Commercial Code No. 6102 is an important balancing mechanism ensuring that decision-making processes in joint stock companies are conducted soundly, impartially and in the company's interest. The prohibition on voting where a legal relationship of a personal nature exists between the shareholder or their close circle and the company, and in votes on the discharge of board members and persons holding signature authority in management, is in essence not a sanction but a protective provision aimed at preventing conflicts of interest, and a natural corollary of the principles of accountability and corporate governance.
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