Minority Rights in Joint Stock Companies: Disputes and Solutions

Entrance

Protecting the rights of minority shareholders in joint-stock companies is a crucial aspect of company law. Since minority shareholders generally have limited say in company management, they require specific regulations to protect their rights. Failure to protect minority rights can disrupt the internal balance of the company and cause harm to minority shareholders. This article will examine the rights of minority shareholders in joint-stock companies, the disputes that arise in protecting these rights, and the methods for resolving these disputes.

1. Minority Shareholder Rights

The rights of minority shareholders are regulated by the Turkish Commercial Code (TTK) and the articles of association of joint-stock companies. These rights guarantee fundamental rights of minority shareholders, such as the right to information, participation in company management, and the right to request audits in certain circumstances

• Right to Information and Inspection: Minority shareholders have the right to receive information about the company's financial situation and operations and to inspect certain documents. This right is particularly important with regard to reports and financial statements presented by the board of directors at the company's general meetings.
• Right to Call a General Assembly Meeting: According to the Turkish Commercial Code, minority shareholders holding at least 10% of the capital (5% in publicly traded companies) can request a general assembly meeting by applying to the board of directors. If the board of directors rejects this request, minority shareholders can apply to the court to have a general assembly meeting called.
• Right to Request a Special Auditor: Minority shareholders can request the appointment of a special auditor if they have doubts about the company's financial condition or certain transactions. This right allows minority shareholders greater access to company operations in a transparent manner.
• Right to Appeal Capital Increase and Decrease Decisions: Minority shareholders can challenge the legality of the company's capital increase or decrease decisions by filing a lawsuit.
• Right to Request Annulment of General Assembly Resolutions: Minority shareholders may file a lawsuit for the annulment of general assembly resolutions if they believe they are contrary to law or the company's articles of association.

2. Disputes Arising from Minority Shareholders

Various disputes may arise in the process of protecting the rights of minority shareholders. These disputes typically occur when the requests of minority shareholders are ignored or obstructed by the majority shareholders or the board of directors

• Violation of the Right to Information: Disputes may arise when the board of directors refuses or provides incomplete information to minority shareholders regarding their requests for information and inspection. In such cases, minority shareholders may apply to the court to obtain the required information and documents.
• Requests for Annulment of General Assembly Resolutions: Minority shareholders may request the annulment of general assembly resolutions if they believe that the decisions made by the majority shareholders violate their interests or are unlawful. Such lawsuits are frequently seen, particularly in cases involving capital increases or decreases.
• Rejection of Requests for Special Auditors: Disputes may arise if the board of directors or the general assembly rejects minority shareholders' requests for the appointment of a special auditor. In such cases, the court may appoint a special auditor to protect the rights of minority shareholders.
• Protecting Interests During Capital Increase and Decrease Processes: Disputes arise when minority shareholders suffer losses due to decisions made during capital increase or decrease processes that are not in the best interests of majority shareholders. Such disputes are particularly common in situations such as the dilution of minority shareholders' shares during a capital increase.

3. Ways to Protect the Rights of Minority Shareholders

Minority shareholders have access to various legal avenues and mechanisms to protect their rights. These avenues aim both to maintain balance within the company and to safeguard the interests of minority shareholders

• Lawsuit for Annulment of General Assembly Resolutions: Minority shareholders can apply to the court for the annulment of general assembly resolutions. These lawsuits may be filed on the grounds that the resolutions are contrary to the law or the articles of association. If the court decides to annul the general assembly resolution, this decision is considered revoked, and minority shareholders may be compensated for their losses.
• Application to the Court for Appointment of a Special Auditor: Minority shareholders may apply to the court if their request for the appointment of a special auditor is rejected. The court may evaluate the minority shareholders' request and appoint a special auditor.
• Action Against Abuse of Rights: Minority shareholders can file a lawsuit to seek compensation for damages if they believe that majority shareholders have abused their rights and infringed upon their interests.
• Requests for Interim Legal Protection and Provisional Measures: Minority shareholders may request interim legal protection and provisional measures if their rights are violated. These measures can protect the rights of minority shareholders during the dispute.

4. The Impact of Court Decisions on Minority Shareholders

Judicial decisions play a crucial role in protecting the rights of minority shareholders. In Türkiye, the Supreme Court has developed various precedents aimed at expanding and protecting the rights of minority shareholders

• Supreme Court Decisions on the Right to Information: The Supreme Court has stated that the right to information should not be limited only to the general assembly and that this right should be interpreted in a broad manner. These decisions have facilitated access to information for minority shareholders.
• Judicial Precedents Regarding the Annulment of General Assembly Resolutions: The Supreme Court has emphasized that general assembly resolutions should be annulled if they infringe upon the rights of minority shareholders, and has issued numerous rulings to this effect.

Conclusion

In joint-stock companies, protecting the rights of minority shareholders is of great importance for maintaining internal balance and preventing the victimization of minority shareholders. Both the development of legal regulations and judicial precedents play a significant role in protecting minority rights. Minority shareholders' rights, such as the right to access information, request audits, and object to general assembly decisions, ensure that companies have a transparent and fair management structure. Future legal regulations and judicial decisions will be important steps towards more effectively protecting these rights.