Joint Venture Agreements in Turkey: Governance, Deadlock, Share Transfers and Exit Rights

Introduction

A joint venture allows two or more businesses to combine capital, technology, market access, licences, personnel or commercial experience for a defined investment or continuing business operation.

International joint ventures in Turkey are commonly established for:

• Manufacturing,
• Energy,
• Construction,
• Infrastructure,
• Technology,
• Healthcare,
• Defence,
• Distribution,
• Real estate development,
• Research and development,
• Financial services.

One party may contribute:

• Capital,
• International brand,
• Patented technology,
• Equipment,
• Global customers,
• Management expertise.

The Turkish partner may contribute:

• Local market knowledge,
• Licences,
• Land,
• Distribution channels,
• Workforce,
• Government and supplier relationships.

The commercial idea may appear balanced at the beginning. However, a joint venture can become difficult when the parties disagree about:

• Business strategy,
• Additional investment,
• Appointment of executives,
• Dividend distributions,
• Related-party transactions,
• Expansion,
• Borrowing,
• Sale of the business,
• Transfer of shares,
• Exit price.

A successful joint venture agreement should therefore regulate not only how the parties will cooperate, but also how they will separate.

The main legal documents ordinarily include:

1. Joint venture or shareholders agreement,
2. Articles of association of the Turkish company,
3. Share subscription or share purchase agreement,
4. Technology, trademark or know-how licence,
5. Supply or distribution agreement,
6. Management and service agreements,
7. Employment arrangements for key personnel.

These documents must operate consistently.

A provision written only in the shareholders agreement may not always produce the intended corporate effect if it is not reflected in the articles of association or valid resolutions of the company’s authorised organs.

Can Foreign Investors Establish a Joint Venture in Turkey?

Yes.

Foreign investors may establish companies in Turkey or acquire shares in existing Turkish companies. Turkey’s foreign direct investment framework applies the equal-treatment principle and generally gives international investors the same rights and liabilities as local investors. The conditions for company establishment and share transfers are generally the same for Turkish and foreign investors.

Foreign investors may also generally transfer abroad through banks:

• Net profits,
• Dividends,
• Sale proceeds,
• Liquidation proceeds,
• Licence and management fees,
• Loan repayments and interest,

subject to applicable tax, banking, sanctions and foreign-exchange rules.

Special restrictions may nevertheless apply in regulated sectors or transactions involving:

• Banking,
• Insurance,
• Energy,
• Broadcasting,
• Aviation,
• Defence,
• Mining,
• Agricultural land,
• Strategic licences,
• Real estate held by companies with foreign capital.

Sector-specific approval requirements should be examined before signing or closing the investment.

Contractual and Corporate Joint Ventures

A joint venture may be structured as either:

• A contractual joint venture without a separate company, or
• An incorporated joint venture operating through a Turkish legal entity.

Contractual Joint Venture

A contractual joint venture is created through an agreement between the participants without incorporating a separate company.

Depending on its structure, the relationship may qualify as an ordinary partnership under the Turkish Code of Obligations. An ordinary partnership is defined as an agreement under which two or more persons undertake to combine their labour or assets to achieve a common purpose.

Contractual joint ventures are frequently used for:

• Construction tenders,
• Project-specific engineering,
• Research projects,
• Temporary consortiums,
• One-off procurement contracts.

The agreement should regulate:

• Representation,
• Contributions,
• Cost sharing,
• Profit and loss allocation,
• Liability,
• Project management,
• Tax,
• Exit and liquidation.

Because there is no separate legal personality, participants may face direct exposure for obligations undertaken in connection with the project.

Incorporated Joint Venture

An incorporated joint venture operates through a separate Turkish company.

The most common forms are:

• Joint stock company, or anonim şirket,
• Limited liability company, or limited şirket.

Foreign investors may establish either form under the Turkish Commercial Code.

A corporate joint venture may provide:

• Separate legal personality,
• Defined share ownership,
• Centralised governance,
• Easier financing,
• Transferable ownership interests,
• Separation between company assets and shareholder assets.

The company structure does not eliminate every shareholder risk. Shareholders may still be liable under:

• Guarantees,
• Capital commitments,
• Shareholder loans,
• Tax or public debt rules in applicable company forms,
• Unlawful corporate conduct,
• Specific contractual undertakings.

Joint Stock Company or Limited Company?

The correct structure depends on the investment, planned financing and exit strategy.

Joint Stock Company

A joint stock company is often preferred where the joint venture may involve:

• Institutional investors,
• Multiple financing rounds,
• Share classes,
• Employee equity,
• Convertible investment,
• Future public offering,
• Easier share transfers.

Its organs are principally:

• General assembly,
• Board of directors.

The Turkish Commercial Code gives the board of directors and general assembly separate areas of authority and provides certain non-transferable duties for each organ.

Limited Company

A limited company may be suitable for:

• Closely held operations,
• Smaller number of investors,
• Stronger contractual control over transfers,
• Owner-managed businesses.

Its principal organs are:

• General assembly of shareholders,
• Manager or board of managers.

Limited company share transfers are more formal than ordinary transfers of registered joint stock company shares.

A limited company share transfer agreement must generally be made in writing and the parties’ signatures must be notarised. Unless the articles of association provide otherwise, general assembly approval is also required.

Shareholders Agreement and Articles of Association

The shareholders agreement governs the contractual relationship between the joint venture parties.

It commonly regulates:

• Governance,
• Board nomination,
• Reserved matters,
• Capital calls,
• Dividends,
• Share transfers,
• Deadlock,
• Confidentiality,
• Non-compete obligations,
• Exit rights.

The articles of association regulate the company’s formal corporate structure and are registered with the trade registry.

A shareholders agreement ordinarily binds its parties. It does not automatically bind:

• The company, unless it is a party where legally appropriate,
• Future shareholders who have not acceded,
• Corporate organs acting within mandatory statutory authority,
• Third parties relying on registered corporate records.

Accordingly, provisions intended to create corporate consequences should be reflected in the articles of association or implemented through valid company resolutions where Turkish law permits.

The articles cannot override mandatory provisions of the Turkish Commercial Code or transfer non-delegable powers from one corporate organ to another. This follows from the statutory division of authority between the board and general assembly.

Priority Between the Documents

The transaction documents should contain an order-of-precedence clause.

For example:

1. Mandatory Turkish law,
2. Articles of association for corporate matters,
3. Shareholders agreement between shareholders,
4. Operational agreements.

The agreement may require shareholders to exercise their voting rights to amend the articles where necessary.

However, the parties should not promise to implement a shareholders agreement provision that would itself violate mandatory corporate law.

Share Capital and Contributions

The agreement should identify each party’s initial contribution.

Contributions may include:

• Cash,
• Equipment,
• Real estate,
• Intellectual property,
• Shares in another company,
• Receivables,
• Business assets.

Non-cash contributions require proper valuation, documentation and transfer.

The agreement should state:

• Contribution value,
• Contribution date,
• Conditions for acceptance,
• Ownership and encumbrances,
• Consequences of late contribution,
• Whether contribution creates shares or shareholder debt.

A party contributing technology should clarify whether it is:

• Assigning ownership,
• Granting a licence,
• Providing temporary access.

A party contributing real estate should determine whether ownership is transferred to the joint venture or the property is leased.

Shareholding Percentages

The parties may use an equal structure such as:

• 50%–50%,

or an unequal structure such as:

• 60%–40%,
• 70%–30%.

Economic ownership and governance control do not always need to be identical.

A minority shareholder may receive veto rights over important decisions. However, extensive veto rights may result in joint control for competition-law purposes.

A 50%–50% structure creates an obvious risk of deadlock. A 51%–49% structure may still be jointly controlled if the minority investor must approve strategic commercial decisions.

Board Composition

The joint venture agreement should regulate:

• Number of board members,
• Nomination rights,
• Appointment procedure,
• Term,
• Removal,
• Replacement,
• Chairperson,
• Meeting frequency,
• Quorum,
• Voting.

The parties may agree that:

• Each shareholder nominates an equal number,
• Majority shareholder nominates more members,
• An independent member breaks ties,
• Chairperson rotates between shareholders.

A nomination right should be distinguished from formal appointment.

In a joint stock company, board members are appointed through the legally competent corporate mechanism. Shareholders may contractually agree to support nominated candidates, but appointments and removals should still be completed through valid corporate resolutions.

Legal Entity Board Members

A legal entity may be appointed as a board member of a Turkish joint stock company, provided that an individual representative is registered to act on its behalf.

This can be useful where the foreign investor wants the board seat to belong to the investing company rather than a specific employee. Turkish company establishment guidance expressly recognises the appointment of a legal entity as a board member through a designated natural-person representative.

The agreement should regulate what happens when the designated representative changes.

Board Quorum

Quorum rules should prevent unilateral control while allowing the business to function.

Possible structures include:

• Majority of all directors,
• Presence of at least one nominee of each shareholder,
• Higher quorum for reserved matters,
• Reduced quorum at a reconvened meeting.

A clause requiring one nominee from each shareholder at every meeting can allow a party to block all business simply by not attending.

A balanced approach may provide:

• First meeting requires representation from both parties,
• Reconvened meeting may proceed for ordinary matters,
• Reserved matters still require both parties’ approval.

Casting Vote

A casting vote allows the chairperson to break an equal vote.

This mechanism may be useful for routine operational issues, but it may effectively give one shareholder control if that shareholder always appoints the chairperson.

The agreement should state whether the casting vote applies to:

• Ordinary business only,
• Budget implementation,
• Emergency matters.

A casting vote should generally not override a reserved matter requiring approval from both shareholders.

Management

The agreement should distinguish between:

• Board-level supervision,
• Daily management.

Key executive roles may include:

• Chief executive officer,
• General manager,
• Chief financial officer,
• Technical director,
• Sales director.

The agreement should state:

• Which shareholder nominates each executive,
• Who formally appoints and removes the executive,
• Reporting lines,
• Authority limits,
• Employment terms,
• Replacement procedure.

Management appointments should comply with the non-transferable powers of the company’s legally authorised organ.

Reserved Matters

Reserved matters are decisions that cannot be made without approval from a specified shareholder or its nominated directors.

Common reserved matters include:

• Amendment of articles,
• Capital increase or reduction,
• New share issue,
• Borrowing above a threshold,
• Approval of annual budget,
• Material deviation from budget,
• Acquisition or sale of assets,
• Related-party transactions,
• Entry into a new business,
• Appointment of senior executives,
• Litigation settlement,
• Dividend distribution,
• Merger or liquidation,
• Sale of intellectual property,
• Creation of security,
• Change of accounting policy.

Reserved matters protect minority shareholders but should not include every routine operational decision.

An excessive list may make the company unmanageable and may create joint control for merger-control purposes.

Budget and Business Plan

The agreement should regulate:

• Preparation timetable,
• Required information,
• Approval process,
• Consequences of non-approval,
• Permitted spending before approval.

A common solution is to provide that if a new budget is not approved:

• Previous year’s budget continues,
• Adjusted for agreed inflation or contractual obligations,
• No new discretionary investment begins.

Without a fallback mechanism, a shareholder can create an operational crisis by refusing to approve the annual budget.

Bank Accounts and Payment Authority

The joint venture should have its own bank accounts.

The agreement should regulate:

• Account-opening authority,
• Payment signatories,
• Monetary thresholds,
• Online banking access,
• Foreign-currency accounts,
• Emergency payments.

A dual-signature rule may provide control but can delay payroll, tax and supplier payments.

The parties may use different approval levels for:

• Ordinary budgeted payments,
• Unbudgeted payments,
• Related-party payments,
• Capital expenditure.

Related-Party Transactions

A shareholder may supply the joint venture with:

• Products,
• Technology,
• Management services,
• Loans,
• Office space,
• Personnel.

Related-party arrangements should be:

• Disclosed,
• Documented,
• Approved through the agreed governance process,
• Conducted on arm’s-length terms,
• Supported for tax purposes.

A shareholder should not use control over the joint venture to shift profit to an affiliated supplier through inflated prices or management fees.

Shareholder Funding

Joint ventures are often funded through a combination of:

• Equity,
• Shareholder loans,
• Bank financing,
• Third-party investment.

The agreement should determine:

• Initial funding,
• Future funding obligations,
• Funding ratio,
• Interest on shareholder loans,
• Security,
• Repayment priority,
• Subordination.

The parties should avoid vague wording such as “shareholders shall provide all financing required by the company.”

The agreement should identify whether future funding is:

• Mandatory,
• Subject to approval,
• Limited to a maximum amount,
• Provided pro rata.

Capital Calls

A capital-call clause should state:

• Who may request funding,
• Required approval,
• Amount,
• Purpose,
• Payment deadline,
• Evidence of need,
• Consequences of failure.

Possible consequences of non-funding include:

• Default interest,
• Shareholder loan from the funding party,
• Dilution,
• Suspension of certain contractual rights,
• Call option over the defaulting shareholder’s shares.

Any dilution or forced transfer mechanism must be coordinated with mandatory company law, capital procedures and valuation rules.

Dilution

Dilution provisions should define:

• Price of new shares,
• Valuation method,
• Pre-emption rights,
• Treatment of shareholder loans,
• Maximum dilution,
• Whether the defaulting party may cure.

Automatic confiscation of shares for a minor or temporary funding failure may face enforceability concerns.

The consequence should be proportionate and commercially justifiable.

Profit Distribution

The agreement should regulate the dividend policy.

Possible approaches include:

• Distribution of a fixed percentage of available profit,
• Retention until debt targets are satisfied,
• Distribution subject to approved investment budget,
• Board recommendation followed by general assembly decision.

Under Turkish company law, formal decisions concerning annual profit and dividends belong to the competent general assembly within the statutory corporate framework.

The shareholders agreement may contain a voting commitment, but it cannot lawfully require a distribution that would violate:

• Capital maintenance,
• Mandatory reserves,
• Solvency,
• Creditor-protection rules.

Intellectual Property

The agreement should identify whether intellectual property used by the joint venture:

• Belongs to one shareholder,
• Is licensed,
• Is assigned to the joint venture,
• Is jointly owned.

The documents should regulate:

• Licence duration,
• Territory,
• Fees,
• Improvements,
• Use after exit,
• Enforcement,
• Confidentiality.

The joint venture should not depend on a revocable technology licence that one shareholder can terminate immediately during a shareholder dispute unless that commercial risk is deliberately accepted.

Non-Compete Obligations

The parties may agree not to compete with the joint venture.

The restriction should identify:

• Restricted business,
• Territory,
• Duration,
• Affiliates covered,
• Existing businesses excluded.

A non-compete clause should be limited to what is reasonably necessary to protect the joint venture.

Competition-law analysis is particularly important where the parent companies remain active in the same or neighbouring markets.

Joint Control Under Competition Law

A joint venture may be jointly controlled even where one shareholder holds more than 50% of the shares.

Joint control may exist where two or more shareholders must agree on strategic decisions such as:

• Budget,
• Business plan,
• Senior management,
• Major investments.

The Competition Authority’s control guidance explains that jointly controlling shareholders must cooperate and reach a common understanding regarding the joint venture’s commercial policy.

Veto rights concerning only fundamental minority protection, such as changes to the articles or liquidation, do not always create joint control.

The actual decision rights must be examined.

Full-Function Joint Venture

A jointly controlled company may constitute a merger-control transaction where it performs, on a lasting basis, the functions of an autonomous economic entity.

A full-function joint venture ordinarily needs:

• Its own management,
• Adequate personnel,
• Financial resources,
• Operational assets,
• Independent market activity,
• Lasting business purpose.

The Competition Board consistently treats the creation of a jointly controlled, full-function joint venture as a concentration under the merger-control rules.

A project company that performs only one limited service for its parents and has no independent market presence may require a different competition analysis.

2026 Merger-Control Thresholds

Turkey updated its merger-control thresholds in February 2026.

Under the updated framework, the principal turnover figures include:

• TRY 3 billion aggregate Turkish turnover,
• TRY 1 billion individual Turkish turnover,
• TRY 9 billion worldwide turnover.

The single Turkish turnover threshold was increased from TRY 250 million to TRY 1 billion, the aggregate Turkish threshold from TRY 750 million to TRY 3 billion, and the worldwide threshold from TRY 3 billion to TRY 9 billion.

A full-function joint venture meeting the turnover and jurisdictional conditions must be notified to the Turkish Competition Authority and cleared before implementation.

The threshold analysis should include the relevant parent groups, not only the newly incorporated joint venture.

The 2026 guidance also clarifies that multiple related transactions occurring within a three-year period may be treated as one transaction for turnover calculations, including in the context of joint ventures.

Coordination Between Parent Companies

A joint venture may also create coordination between its parent companies.

The 2026 amendments expressly introduced a framework for examining coordination risks between joint venture parents. Updated guidance addresses possible cooperative effects arising through the joint venture.

Competition concerns may arise where the parents:

• Remain competitors,
• Exchange sensitive information,
• Coordinate prices,
• Divide customers,
• Reduce independent market activity.

The agreement should limit information exchange to what is necessary for the joint venture.

Commercially sensitive parent-company information may need to be protected through:

• Clean teams,
• Information barriers,
• Aggregated reporting,
• Limited board materials.

Conditions Precedent

The joint venture should not close until required conditions are satisfied.

Conditions may include:

• Competition clearance,
• Sector approval,
• Foreign investment notification,
• Corporate approvals,
• Financing,
• Licence transfer,
• Real estate transfer,
• Regulatory authorisation.

The agreement should state:

• Long-stop date,
• Cooperation obligations,
• Responsibility for filings,
• Risk-allocation commitments,
• Termination rights if approval is refused.

The parties should not exercise control before obtaining mandatory competition clearance.

Share Transfer Restrictions

Joint venture parties commonly want to control who may become a shareholder.

Transfer restrictions may include:

• Lock-up period,
• Consent right,
• Right of first refusal,
• Right of first offer,
• Pre-emption right,
• Permitted affiliate transfer,
• Competitor restriction,
• Tag-along,
• Drag-along.

These provisions should be coordinated with the company type and articles of association.

Share Transfers in Joint Stock Companies

As a general principle, registered shares of a joint stock company may be transferred unless the law or articles provide otherwise.

The articles may restrict transfers of non-listed registered shares within the statutory limits. In certain circumstances, the company may refuse approval based on an important reason stated in the articles or by offering to acquire the shares at their real value.

A contractual transfer restriction may create damages liability between shareholders but may not always prevent the legal transfer against the company or third parties unless it is supported by a valid corporate restriction.

Share Transfers in Limited Companies

A limited company share transfer generally requires:

• Written transfer agreement,
• Notarised signatures,
• General assembly approval unless the articles provide otherwise,
• Trade registry procedures where applicable.

The transfer agreement should also state special obligations attached to the share, including certain pre-emption, purchase, repurchase or penalty arrangements where relevant.

The formal transfer procedure must be followed even where the shareholders agreement contains a simple contractual sale obligation.

Lock-Up Period

A lock-up prevents shareholders from transferring shares for a specified period.

It may protect:

• Initial business plan,
• Financing,
• Technology contribution,
• Management continuity.

The agreement should define exceptions for:

• Affiliate restructuring,
• Initial public offering,
• Approved strategic investor,
• Default,
• Deadlock exit.

An affiliate transfer should require the shares to be transferred back if the affiliate leaves the transferring shareholder’s group.

Right of First Offer

Under a right of first offer, the selling shareholder must first invite the other shareholder to make an offer before negotiating with third parties.

The clause should state:

• Offer period,
• Required information,
• Payment terms,
• Whether partial sale is allowed,
• Time allowed for third-party sale.

The third-party sale should not occur on materially more favourable terms without giving the existing shareholder another opportunity.

Right of First Refusal

Under a right of first refusal, the selling shareholder first obtains a genuine third-party offer and then gives the other shareholder the right to match it.

The clause should regulate:

• Evidence of the third-party offer,
• Identity of buyer,
• Price,
• Non-cash consideration,
• Deferred payment,
• Conditions,
• Matching period.

The seller should not evade the right through:

• Asset sale,
• Parent-company share sale,
• Artificial bundled transaction,
• Unusual non-cash consideration.

Tag-Along Right

A tag-along right protects the minority shareholder.

If the majority shareholder sells its shares, the minority may require the buyer to purchase its shares:

• At the same price,
• On the same terms,
• In the same proportion or in full.

The clause should address:

• Control threshold triggering the right,
• Partial sale,
• Consideration other than cash,
• Escrow,
• Warranties,
• Liability limitations.

The minority should not be required to give operational warranties concerning matters it did not control.

Drag-Along Right

A drag-along right allows a specified majority to require the remaining shareholders to sell to a third-party buyer.

This can prevent a minority shareholder from blocking a sale of the entire company.

The clause should regulate:

• Required ownership threshold,
• Minimum price or valuation protection,
• Sale process,
• Notice,
• Same terms,
• Warranty allocation,
• Liability cap,
• Completion procedure.

A drag-along provision should be implemented through valid share-transfer documents and corporate formalities.

The clause does not by itself allow the majority shareholder to ignore mandatory limited company notarisation or approval rules.

Change of Control

A shareholder may transfer indirect control without transferring the joint venture shares themselves.

The agreement should define whether change of control of a shareholder:

• Requires consent,
• Triggers a transfer right,
• Triggers tag-along,
• Constitutes default.

Ordinary internal group restructuring may be excluded if the ultimate controlling parent remains unchanged.

Prohibited Transferees

The parties may prohibit transfers to:

• Competitors,
• Sanctioned persons,
• Financially unsuitable buyers,
• Persons lacking regulatory approval.

The definition of competitor should be objective.

A shareholder should not have an unlimited right to reject every potential buyer without a legitimate reason.

Deadlock

A deadlock occurs when the shareholders or directors cannot approve a decision required for the business to continue.

Deadlock commonly concerns:

• Budget,
• Business plan,
• Capital call,
• Appointment of CEO,
• New borrowing,
• Expansion,
• Sale,
• Dividend policy.

The agreement should distinguish between:

• Ordinary disagreement,
• Material deadlock,
• Persistent deadlock.

A minor disagreement should not immediately trigger a forced sale.

Escalation

The first deadlock step may be escalation to senior executives of the parent companies.

The clause should specify:

• Persons involved,
• Meeting deadline,
• Information to be exchanged,
• Negotiation period.

This mechanism can resolve disputes caused by local management rather than fundamental shareholder conflict.

Mediation

Commercial mediation may be used before triggering a forced exit.

Mediation is particularly useful where the dispute concerns:

• Valuation,
• Funding,
• Management,
• Contract interpretation.

The mediator does not ordinarily impose a binding solution unless the parties reach and sign a settlement.

Expert Determination

Technical or accounting disputes may be referred to an independent expert.

Suitable matters include:

• Whether a performance target was met,
• Calculation of EBITDA,
• Adjustment of purchase price,
• Compliance with technical specifications.

The agreement should state whether the expert acts as:

• Expert,
• Arbitrator.

The decision procedure, scope and binding effect should be defined.

Casting Vote or Independent Director

An independent director or chairperson may be given authority to resolve specified deadlocks.

This method may work for operational issues, but the parties may be unwilling to allow one individual to decide:

• Sale of the business,
• Major capital increase,
• Fundamental strategy.

The independent person’s appointment, qualifications, removal and conflicts should be regulated.

Buy-Sell Mechanisms

A persistent deadlock may trigger a buy-sell procedure.

Common mechanisms include:

Russian Roulette

One shareholder states a price per share.

The other shareholder must choose either to:

• Sell its shares at that price, or
• Buy the offering shareholder’s shares at the same price.

Texas Shoot-Out

Each shareholder submits a sealed price at which it is willing to buy the other’s shares.

The higher bidder buys the lower bidder’s shares.

Mexican Shoot-Out

The parties submit prices reflecting the minimum sale or maximum purchase terms under the agreed procedure.

These mechanisms may produce a quick result but can disadvantage a shareholder with weaker financing.

The agreement should therefore consider:

• Financial capacity,
• Funding period,
• Valuation fairness,
• Regulatory approval,
• Tax,
• Security for payment.

Put and Call Options

A put option allows a shareholder to require another shareholder to buy its shares.

A call option allows a shareholder to require another shareholder to sell.

Options may be triggered by:

• Deadlock,
• Material breach,
• Change of control,
• Insolvency,
• Failure to fund,
• Regulatory event.

The clause should identify:

• Trigger,
• Exercise period,
• Price,
• Valuation,
• Payment,
• Closing conditions,
• Default consequences.

The option should be coordinated with Turkish share-transfer formalities and any sector approval.

Valuation

Valuation provisions should state whether shares are valued based on:

• Fair market value,
• EBITDA multiple,
• Net asset value,
• Discounted cash flow,
• Independent expert valuation,
• Pre-agreed formula.

The agreement should address:

• Minority discount,
• Control premium,
• Shareholder loans,
• Related-party balances,
• Debt,
• Cash,
• Contingent liabilities.

A vague reference to “market value” may lead to another dispute.

Good Leaver and Bad Leaver

A management shareholder may be classified as:

• Good leaver,
• Bad leaver.

Good-leaver events may include:

• Death,
• Disability,
• Termination without cause,
• Agreed retirement.

Bad-leaver events may include:

• Fraud,
• Serious misconduct,
• Competing activity,
• Material confidentiality breach.

The classification may affect the price paid for the shareholder’s shares.

A severe discount should be proportionate and should not operate as an unlawful penalty or confiscation.

Events of Default

The agreement should define shareholder defaults such as:

• Failure to fund,
• Material breach,
• Insolvency,
• Sanctions violation,
• Unauthorised transfer,
• Competition breach,
• Loss of required licence.

Remedies may include:

• Cure period,
• Damages,
• Suspension of contractual rights,
• Put or call option,
• Forced transfer,
• Termination.

Voting rights attached to shares cannot always be suspended merely through a private contractual clause without a valid legal basis.

The agreement should distinguish between contractual remedies and formal corporate rights.

Exit Strategies

The parties should agree possible exit routes from the beginning.

Exit options include:

• Sale to strategic buyer,
• Sale to private equity investor,
• Initial public offering,
• Buyout by one shareholder,
• Sale of assets,
• Liquidation.

The agreement should regulate:

• Timing,
• Sale process,
• Appointment of adviser,
• Access to information,
• Management presentations,
• Buyer due diligence,
• Exclusivity,
• Allocation of transaction costs.

Initial Public Offering

Where an IPO is contemplated, the agreement should address:

• Conversion of share classes,
• Corporate governance changes,
• Lock-up,
• Registration rights,
• Underwriter cooperation,
• Termination of private veto rights,
• Public-company compliance.

Not every private shareholders agreement provision can continue after listing.

Liquidation

Liquidation should be a final solution where the business cannot continue or be sold.

The agreement should address:

• Approval,
• Liquidator nomination,
• Asset sale,
• Intellectual property,
• Employee termination,
• Debt repayment,
• Distribution of remaining assets.

The company must still follow mandatory Turkish dissolution and liquidation procedures.

Dispute Resolution

The agreement should state:

• Governing law,
• Court jurisdiction or arbitration,
• Seat,
• Language,
• Number of arbitrators.

International joint venture disputes are often suitable for arbitration because they involve:

• Foreign shareholders,
• Confidential information,
• Share transfers,
• Complex valuations,
• Cross-border enforcement.

Corporate resolutions, registry matters and certain non-arbitrable company-law issues may still require applications before Turkish courts or authorities.

Practical Joint Venture Checklist

Before signing, the parties should address:

1. Joint venture purpose.
2. Contractual or corporate structure.
3. Company type.
4. Initial capital.
5. Non-cash contributions.
6. Shareholding percentages.
7. Board nomination.
8. Management appointments.
9. Quorum.
10. Reserved matters.
11. Budget approval.
12. Bank authority.
13. Related-party transactions.
14. Future funding.
15. Dilution.
16. Dividend policy.
17. Intellectual property.
18. Confidentiality.
19. Non-compete obligations.
20. Competition clearance.
21. Transfer restrictions.
22. Right of first offer.
23. Right of first refusal.
24. Tag-along.
25. Drag-along.
26. Change of control.
27. Deadlock.
28. Put and call options.
29. Valuation.
30. Exit.
31. Governing law.
32. Arbitration or court jurisdiction.

Frequently Asked Questions

Can a foreign investor own 50% or more of a Turkish joint venture?

Yes. Foreign investors are generally subject to equal treatment with domestic investors, subject to sector-specific restrictions.

Is a Turkish partner legally required?

Not generally. A local partner may nevertheless be commercially or regulatorily useful in particular sectors.

Can a joint venture be established without forming a company?

Yes. A contractual joint venture may operate as an ordinary partnership depending on its structure.

Which company type is usually preferred?

Joint stock companies are often preferred for investment, financing and exit flexibility. Limited companies may suit closely held operations.

Is the shareholders agreement registered?

The full shareholders agreement is not ordinarily registered as the company’s articles. Corporate provisions intended to affect the company should be reflected in the articles or corporate resolutions where legally possible.

Which document prevails?

Mandatory Turkish law prevails. The shareholders agreement and articles should be drafted consistently.

Can one shareholder appoint board members directly?

A shareholder may have a contractual nomination right, but formal appointment must be made through the competent corporate procedure.

Can the board delegate every power?

No. The Turkish Commercial Code provides non-transferable board duties.

Can the shareholders agreement give the general assembly board powers?

Not where the power is legally non-transferable. The statutory corporate allocation cannot be overridden by contract.

What are reserved matters?

They are strategic decisions requiring special shareholder or director approval.

Do veto rights create joint control?

They may, especially where they cover budget, business plan, senior management or major investment.

Is every 50%–50% company a notifiable joint venture?

No. Competition notification generally requires joint control, full-function character and satisfaction of the applicable turnover thresholds.

What is a full-function joint venture?

It is a jointly controlled business performing on a lasting basis the functions of an autonomous economic entity.

What are the 2026 Turkish merger thresholds?

The updated figures include TRY 3 billion aggregate Turkish turnover, TRY 1 billion individual Turkish turnover and TRY 9 billion worldwide turnover under the relevant alternative tests.

Can the parties close before competition clearance?

A transaction requiring clearance should not be implemented before approval.

Can the foreign shareholder transfer dividends abroad?

Foreign investors may generally transfer dividends and investment proceeds through banks, subject to applicable rules and taxes.

Can shares in a joint stock company be transferred freely?

Registered shares are generally transferable unless the law or articles impose a valid restriction.

How is a limited company share transferred?

The transfer generally requires a written agreement with notarised signatures and, unless otherwise provided, general assembly approval.

What is a tag-along right?

It allows a minority shareholder to participate in a sale by the majority shareholder on equivalent terms.

What is a drag-along right?

It allows a qualifying majority to require the remaining shareholders to participate in a full company sale.

Does a drag clause automatically transfer the shares?

No. The required share-transfer and corporate formalities must still be completed.

What is a deadlock?

A deadlock is a persistent inability to approve a necessary strategic or operational decision.

How can a deadlock be resolved?

Possible methods include escalation, mediation, expert determination, independent director, buy-sell mechanism, put or call options and liquidation.

Is Russian roulette suitable for every joint venture?

No. It may be unfair where one shareholder has substantially greater financial capacity.

Can a shareholder be diluted for refusing a capital call?

The agreement may provide proportionate dilution, but the mechanism must comply with Turkish capital and corporate procedures.

Can a shareholder’s voting rights be suspended for breach?

Not automatically merely because a private agreement says so. The remedy must have a valid legal and corporate basis.

Can the joint venture use a shareholder’s trademark?

Yes, under a properly drafted licence or assignment.

Who owns technology created by the joint venture?

The transaction documents should decide this expressly.

Can the parties prohibit competition with the joint venture?

A proportionate non-compete may be agreed, subject to Turkish competition law.

Can joint venture disputes be arbitrated?

Many contractual shareholder disputes can be arbitrated. Certain mandatory corporate, registry and third-party matters may still require Turkish court proceedings.

Conclusion

A joint venture agreement should function both as an operating manual and as a separation plan.

The parties should first decide whether the cooperation will operate through:

• A contractual joint venture,
• Joint stock company,
• Limited company.

A corporate joint venture requires coordination between the shareholders agreement and the articles of association.

The shareholders agreement binds its parties contractually, while the articles and valid corporate resolutions govern the formal operation of the company.

Mandatory Turkish company law cannot be overridden by transferring non-delegable authority between the board and general assembly.

Governance clauses should regulate:

• Board nomination,
• Management,
• Quorum,
• Reserved matters,
• Budget,
• Related-party transactions,
• Banking authority.

Future funding is one of the most common sources of conflict. Capital-call provisions should state the amount, procedure and consequences of non-funding. Dilution, shareholder loans and forced-transfer remedies must be legally and commercially proportionate.

Share-transfer provisions should address:

• Lock-up,
• Affiliate transfers,
• Rights of first offer and refusal,
• Tag-along,
• Drag-along,
• Change of control,
• Prohibited transferees.

A 50%–50% joint venture should never be established without a workable deadlock procedure.

Possible solutions include:

• Escalation,
• Mediation,
• Expert determination,
• Buy-sell procedure,
• Put and call options,
• Sale or liquidation.

The agreement should also examine Turkish merger-control requirements.

A jointly controlled and full-function joint venture may require Competition Authority clearance where the applicable turnover thresholds are exceeded. Turkey substantially increased these thresholds in February 2026 and introduced an updated framework for coordination analysis between joint venture parents.

The final measure of a successful joint venture is not whether the parties agree on the signing date. It is whether the agreement continues to provide a workable result when they no longer agree.