1. What are the procedures and sanctions regarding ordinary general assembly meeting in terms of Turkish Law?
As per the Article 409 of Turkish Commercial Code numbered 6102 (“TCC”) and Regulation on the Procedures and Principles of General Assembly Meetings of Joint Stock Companies and the Representatives of the Ministry of Customs and Trade Attending Such Meetings (“Regulation”), ordinary general assembly meetings of joint stock companies must be held within three months of the end of the company’s fiscal year. In addition, as per the Article 617 of TCC, ordinary general assembly meetings of limited liability companies must be also held within three months of the end of the company’s fiscal year. Since there is no special provision under the Capital Market Law numbered 6362, publicly held companies shall hold their ordinary general assembly meetings in compliance with the TCC.
The above mentioned provisions set forth under the TCC and the Regulation have been deemed as regulatory provisions and there is no specific sanction regulated under the TCC and the Regulation. On the other hand, in case ordinary general assembly meetings are not held within the specified time period, liability of board members might be arisen. However, for the liability of board members, (i) there must a negligent act of board members and (ii) company and/or shareholder of the company must incur a damage due to the negligent act of the board members.
2. What is the impact of Covid 19 pandemic on ordinary general assembly meetings?
In the current situation, due to the fact that Covid 19 pandemic has spread all over Turkey, ordinary general assembly meetings may not be held. Republic of Turkey Ministry of Interior (“Ministry of Interior”) published a circular on 16.03.2020 stating that all meetings and activities of non-governmental organizations (associations, foundations) and non-governmental organizations that bring people together, including trainings (excluding management activities requiring enforcement), will be temporarily postponed starting from 24:00 on Monday, 16.03.2020. Although commercial companies have not been explicitly stated under the circular, since there will be a physical gathering, it can be stated that, the circular can also be applicable for ordinary general assembly meetings of the commercial companies set forth under the TCC.
In addition, all the national and international academic, cultural, artistic and similar meetings or activities to be conducted at indoor and outdoor areas has been postponed until end of April by the circular of the Presidency of Republic of Turkey (“Presidency”) dated 20.03.2020 (“Circular 2020/3”) in order to prevent spread of Covid 19 pandemic.
In order to clarify the situation with respect to the ordinary general assembly meetings, the General Directorate of Domestic Trade of the Turkish Ministry of Commerce (“General Directorate”) published a statement on 20.03.2020 (“Statement”) and declared several measures to be taken for ordinary general assembly meetings of joint stock companies and limited liability companies. Please find below the measures announced by the General Directorate.
i. The ordinary general assembly meetings of joint stock companies and limited liability companies that have been already convened by a resolution taken by the management body of the companies in compliance with the TCC and the companies’ articles of association, can be cancelled by a resolution to be taken by the management body of the companies, without waiting for the general assembly to convene in order to resolve on the postponement. Accordingly, as soon as such resolution is submitted to the Directorate of Turkish Trade Registry Gazette, the resolution can be published on Turkish Trade Registry Gazette.
ii. As stated above, there is no sanction set forth under the TCC and the Regulation for ordinary general assembly meetings which are not held within specified time period. Additionally in the current situation, the meetings have been postponed by the Circular 2020/3 as well as the circular published by the Ministry of Interior, and followingly it can be interpreted that the date of the planned ordinary general assembly meetings must be determined with taking the terms and conditions of such circulars into consideration for the ordinary general assembly meeting that have not been convened yet.
iii. As an alternative: Electronic general assembly meeting system:
The Statement enables shareholders to participate to general assembly meetings electronically without participating in physically for the companies which use an electronic general assembly system as per the Article 1527 of the TCC and wishing to hold a general meeting in order to prevent the spread of Covid 19 pandemic and procure a minimum level of shareholders’ participation in case of presence of a general assembly held in a physically.
Within this scope, the companies whose articles of associations do not have the provisions allowing them to conduct an electronic general assembly meeting, are also permitted to hold the general assembly meetings electronically by the way of “Electronic General Assembly Meeting System” and “Electronic Board of Directors System” on the condition that the support services shall be obtained from the Central Registry Agency (Merkezi Kayıt Kuruluşu Anonim Şirketi) and such companies’ respective shareholder must be provided with the opportunity to attend meetings electronically. Additionally, the Statement reads that, such companies shall amend their articles of association by adding a provision which allows the companies conduct an electronic general assembly meeting at the first coming general assembly meeting. However, eliminating the condition (“Provided that it has been regulated under the articles of associations”) set forth under the Article 1527 by the Statement has been criticized due to the breach of hierarchy of norms.
On the other hand, we would like to remind that, as per the Article 32/1 (b) of the Regulation, participation of ministry representative is mandatory for the companies whose general assembly meeting is held electronically.
Lastly, Article 617/4 of the TCC contains the following provision “Unless a partner makes a request for an oral deliberation, general assembly resolutions may be adopted by the written consent of other partners to the proposal of one of the partners regarding an agenda item. It is mandatory for the validity of the resolution that the same proposal is presented for approval of all partners”. Therefore, the general assembly resolutions can be taken by the way of circulation for limited liability companies by taking into consideration current conditions.
3. Is it possible for all shareholder of a company to participate electronically to general assembly meeting?
As per the Article 1527/1, board of directors or board of managers meeting may be held electronically with the attendance of all the members or certain members may attend electronically to an ongoing physically held meeting. However, in the Article 1527/2 and 1527/5, “participation through electronic environment” is mentioned but a complete participation through electronic environment is not stated under those articles. As no distinction is made between such articles and also no distinction in the preamble of the draft TCC is made in terms of general assembly, it has been evaluated by doctrine through a grammatical interpretation that participation to general assembly meeting through electronic environment completely is not allowed under the TCC. To sum up briefly, some of shareholders shall attend the general assembly meeting physically while other shareholders shall attend the meeting electronically. In such a case, it is evaluated that, holding a general assembly meeting electronically for all shareholders without gathering in physical environment (completely virtual), and taking decisions in such meeting (even if such decision is taken unanimously) is not possible.
Additionally, we also would like to remind that, Article 9/2 of the Regarding The Electronic General Assembly Meetings Of Joint Stock Companies contains the following provision “The general assembly meeting shall simultaneously start in both physical and electronic environment.”
In the light of the foregoing explanations, the opportunity (“shareholders can participate in general assembly meetings electronically without participating in physical environment”) provided in the Statement can be an argumentative matter.
4. Is there any need for a postponement in respect of companies having one shareholder?
As per the Article 408/3 and 616/3 of the TCC, the single shareholder may solely use all powers of the general assembly. For an effective resolution, all resolutions adopted in the name of the general assembly must be written.
Since there is no need for a physical meeting in terms of a single shareholder as per the abovementioned article, the prohibition stated under the Circular 2020/3, may not be applicable for the companies which have a single shareholder.