TERMINATION OF JOINT STOCK COMPANIES BY JUST CAUSE AND LAWSUIT FOR TERMINATION IN TURKISH LAW

TERMINATION OF JOINT STOCK COMPANIES BY JUST CAUSE AND LAWSUIT FOR TERMINATION IN TURKISH LAW

Introduction

Termination of joint stock companies by just cause did not regulated in the old Commercial Code No. 6762 but it has entered into Turkish Company Law through Turkish Commercial Code (“TCC”) No. 6102.  The provisions of termination of joint stock companies by just cause are regulated as follows in Article (“Art.”) 531:

TCC Art. 531:

In the presence of just causes, owners of shares representing at least one-tenth of the capital and one-twentieth of public companies use may request that the company be terminated from the commercial court of first instance where the company’s headquarters is located.

Instead of termination the court may decide, for plaintiff shareholders, the real value of the shares closest to the decision date to be paid and plaintiff shareholders to be removed from the company or any another suitable and acceptable solution.

Uncertainty of the Just Cause

The TCC neither explained what the just cause was in the article of law nor gave an example to the situations that constitute the just cause.

Therefore, the Courts will appreciate what is unfair in the dispute according to the concrete event that comes before them.¹.

The Principle of Termination of Joint Stock Companies By Just Cause as a Last Solution

As can be understood from the clear word of the law, the primary aim is to continue the existence of the company and to keep it alive. However, if all ways have been exhausted in order for the company to survive, it may be used to terminate the company for just reason. The continuity of the company is always essential according to the spirit of the TCC. Therefore, it is obligatory to evaluate other remedies by the Courts during the evaluation. If the plaintiff also has a fault in the occurrence of the just cause, the case may be rejected.

Authorized Court in Dissolution Case for Just Reason, Term of Litigation and Parties to the Lawsuit

It’s an action lawsuit with a nature of adjective law and shall be brought in the commercial court of first instance where the company’s headquarters is located.

The defendant is the company itself and the plaintiff is the shareholders representing at least one tenth of the capital in closed joint stock companies, and shareholders representing one-twentieth in public companies.

The case can be filed within a reasonable time.

Justified Reasons in the Light of Doctrine

Tekinalp stated that, not well management of the company’s assets unless there is a general crisis or similar reason, systematic transfer of the company’s opportunities and resources, danger in the investments of minority shareholders in the company when the company falls into the bottleneck of payment in case of insolvency, justified reasons occur.

Also, if financially, the company does not yield consistently, and although additional capital is provided, the inefficiency continues or the disputes that paralyze the company caused by all partners are shown as examples of justified reasons within the partnership.

Dissolution of the Joint Stock Company by Just Cause Reasons and The Courts’ Broad Discretionary Power in the Light of the Turkish Court of Cassation (Court of Appeals/ Yargıtay)

Turkish Court of Cassation has made the main emphasis on Article 531 Clause 2, in addition to its emphasis on the decision of the court about what the just causes will be. Therefore, we will see the emphasis of the continuity of the company in our investigations of the Turkish Court of Cassation.

  • 11th Circuit of the Turkish Court of Cassation (Yargıtay) pointed out that the justified reason would be determined by the courts in each case.

11th Circuit of the Turkish Court of Cassation 2016/14541 E.  2018/6990 K. , 13.11.2018

‘’ …Since the justified reasons are not defined by law, they will be appreciated by the courts according to the characteristics of each concrete event.…’’

  • The emphasis of the 11th Circuit regarding the continuity of the company is in the following decision.

11th Circuit 2015/9088 E.,  2016/2352 K. , 3.3.2016

‘’…It is essential to ensure the continuity of the company in terms of company law; Pursuant to the regulation, instead of the dissolution of the company with an economic value, it is compulsory to evaluate the other remedies that will keep the company alive…’’

Conclusions

To sum up, the reason why the law gives the minority the right to file a  termination case with alternative solutions for justified reasons is to turn reckless majority threatening the existence of joint stock companies to act in accordance with the law, to be fair in their decisions and prompt to a modern management approach. In this way, it will be easier to protect the minority and partnership assets. Because the doors will be closed to the ”to hose” of the joint stock company resources with daily language, and the interests of the joint stock company and the shareholders outside the governing majority can be secured with solutions to be decided by the court. ⁶

In the light of the information conveyed, courts will appreciate what constitutes a just cause for the termination of the company and as the established practice of the Apellate Court, it is compulsory for the courts to evaluate whether the company will continue or not if not, it is possible to say that it should justify this sufficiently. However, it should be kept in mind that decisions will be made on the basis of different scenarios that may arise in each concrete conflict.

For 1-5*citations; Anonim Şirketlerde Haklı Sebeplerle Fesih Hakkının Yargıtay İçtihatları Çerçevesinde Değerlendirilmesi, Cengiz Erten.

6* Poroy/ Tekinalp / Çamoğlu / Ortaklıklar Hukuku II, Güncellenmiş, Yeniden Yazılmış 14. Bası, s. 348 vd.

The content of this information note is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
If you have any questions, please contact us

Leave a Reply

Your email address will not be published.