The Decision of the Court of Cassation on the Determination of the Minority Status for an Application to the Court on the Invitation of the General Assembly for a Meeting

Hande Betül Yalçın co-authored this article.

The 11th Civil Chamber of the Court of Cassation, with the file no. 2023/3167. – decision no. 2023/5998, has ruled on a significant decision regarding the procedure of the exercise of the minority shareholders’ right on the invitation of the general assembly to a meeting as per the Turkish Commercial Code numbered 6102 ("TCC"). Based on the decision, it is statutory to ensure the minority shareholding title during the legal proceedings for the exercise of the mentioned right. The relevant decision has been published in the Official Gazette on 17 February 2024.

Decision of the Court of First Instance

In the lawsuit filed before the Istanbul Anadolu 6th Commercial Court of First Instance, the plaintiff, who owns 5.03% of the shares of a publicly held joint stock company, stated that the general assembly meeting of the company was not held and the request in this regard was not responded by the board of directors of the company positively. Accordingly, the plaintiff, requested the court's authorisation to invite the general assembly for a meeting in accordance with the relevant articles of the TCC. The relevant article of the TCC on which the claim is based is as follows:

ARTICLE 411

(1) Shareholders constituting at least one tenth of the share capital, or one twentieth of the share capital in publicly held companies, may request the board of directors to invite the general assembly for a meeting by stating the reasons and agenda in writing, or if the general assembly is already convened, to include the matters they request to be resolved in the agenda. By the articles of association, the right of invitation may be granted to the shareholders holding a reduced number of shares.

(2) The request to add an item to the agenda must be received by the board of directors before the date of payment of the announcement fee for the publication of the invitation announcement in the Turkish Trade Registry Gazette.

(3) The invitation and the request to add an article to the agenda shall be made through a notary public.

(4) If the board of directors accepts the invitation, the general assembly shall be invited for a meeting to be held within forty-five days at the latest; otherwise, the invitation shall be made by the requestors.

Furthermore, pursuant to Article 412 of the TCC, if the board of directors rejects the request of the shareholders on the invitation or an addition to the agenda within the scope of the above-mentioned article, or if the request is not responded positively within seven business days, upon the application of the same shareholders, the commercial court of first instance in the place where the company's head office is located may decide to invite the general assembly for a meeting.

The court of first instance decided that the plaintiff has the capacity of a party to the lawsuit since it has met the 5% limit stipulated by the TCC, and as a result of the examination, the case was accepted. Pursuant to Article 412 of the TCC, this decision of the court of first instance is definitive.

Reason for Appeal

The Ministry of Justice appealed the said decision for the sake of the law. In the appeal petition, in summary, the reversal of the decision was requested due to violation of the law and the procedures since the condition of 5% shareholding of the plaintiff is a condition of the litigation and should be protected throughout the entire judgement where the court of first instance has evaluated this condition based only on the date of the legal notice.

Assessment of the Court of Cassation

The 11th Civil Chamber of the Court of Cassation considered the following procedural issues in its assessment based on the appeal request:

• In order for the minority shareholders to exercise their right to request the invitation for the general assembly of the company to a meeting within the scope of the TCC, firstly, the request must be made by the minority shareholders and must be made jointly by the shareholders with sufficient capital shares. In other words, this condition will not be deemed as fulfilled if the request is made separately and without the knowledge of each other, but with sufficient capital to constitute a minority.
• The second important issue is that the invitation must be properly. Minority shareholders should definitely make the meeting invitation request addressed to the board of directors through a notary public.

Finally, the 11th Civil Chamber ruled that the decision rendered by the court of first instance that (i) the conclusion of the plaintiff is a minority shareholder is unlawful by determining the share status of the plaintiff based only on the lawsuit petition and other documents in the file and, (ii) it is a condition of the lawsuit that the minority shareholding status is ensured at the date of the legal notice and during the judgement and (iii) a decision rendered without an examination in this regard should be reversed for the sake of the law.

You can find the Decision in Turkish here.