How are the rights of partners protected in a partial division?

When a company breaks up, who gets what share price?

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💬 Introduction: Does Splitting Jeopardize Partnership Rights?

Companies grow, branch out, and begin operating in different sectors over time. However, this diversification eventually creates both management challenges and a need for risk diversification. This is precisely why spin-offsare an important restructuring tool for companies.

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⚖️ Legal Basis for Partial Division: Turkish Commercial Code Article 159/2-b

The Turkish Commercial Code, in its current form numbered 6102, has for the first time systematically regulated the institution of "partial division".

Turkish Commercial Code Article 159/2-b:
“A capital company may transfer one or more parts of its assets to other capital companies, and the transferred value may pass directly to that company, not to the shareholders.”

These types of transactions:

• It takes place between private companies.
• The divided company does not cease to exist; it continues its operations.
• The acquiring company may be newly established or an existing one.
• Partners will either receive shares in the new company or remain within the divided company.

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🔍 The Fundamental Question for Partners in a Partial Split:

"What do I get out of the new structure?"

A partner's most fundamental right is to retain their ownership rights and partnership status, even if the company is divided. Otherwise, the division could amount to "expulsion from partnership."

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🧩 How are Capital and Share Transfer Calculated?

In a partial demerger, only a portion of the assets of the demerging company is transferred, so the shareholders' shares in the new company are determined proportionally to this transferred value.

📌 Basic Principles:

• The value of the assets is calculated using a valuation report
• Share transfers must comply with the principle of equality
• Partners must hold shares in the new company in proportion to their shareholding in the old company

🎯 Fair distribution = Trust among partners

📌 Supreme Court 11th Civil Chamber, Case No. 2018/14260, Decision No. 2020/4231.

"In a newly formed company through a partial demerger, the disproportionate distribution of shares to shareholders and the failure of the general assembly to justify this constitutes a violation of the principle of equal treatment."

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🏢 Partnership Rights in the New Company

Partners after the partial split;

• He remains in the spun-off company
• They can also be a shareholder in a newly established or existing acquiring company

But beware: Partnership in the new company is not automatic. Partners acquire this right either way

• It must be explicitly recognized by a general assembly resolution
• Or the shares should be transferred to the company that acquires them.

📌 At this point, the acquiring company's articles of association, new share percentages , and voting rights are redefined.

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🛡️ Partner Protection Mechanisms

✅ 1. Right of Inspection (Turkish Commercial Code, Article 149)

To the shareholders at least 30 days before the general assembly meeting :

• Partition agreement
• Division report
• Financial statements for the last three years
• The new draft of the company's articles of association
  must be submitted for review.

✅ 2. Right of Withdrawal (especially in Joint Stock Companies)

If a shareholder votes against a merger or demerger:

• They may request the transfer of their shares to the company or other partners
• can be separated through capital reduction
• You can request a cash payment on the basis of equity.

✅ 3. Annulment Case (Turkish Commercial Code Article 448)

If the decision to divide the country was made unfairly, improperly, or in a way that creates inequality:

• The partner may file a cancellation lawsuit within 2 months of registration
• The court may invalidate the transaction or order a share adjustment

📌 Supreme Court 11th Civil Chamber, Case No. 2015/8763, Decision No. 2016/5027.

"Even if a partial demerger is decided by the general assembly, the decision is not considered valid if it results in an unfair outcome among the shareholders."

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🧾 Voting Rights of Partners in a Partial Split

While the decision to split was being made at the general assembly:

• In limited companies, unanimity or a majority as stipulated in the articles of association,
• In joint-stock companies, a qualified majority of 75% is required.

Therefore, minority partners can also have a say in the decision-making process.

Minorities often add credibility to the system by preventing decisions on mergers and divisions from passing "without precautions.".

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⚠️ Risks and Precautions for Partners

❌ Making decisions without providing information

Solution: Prior access right under Article 149 of the Turkish Commercial Code

❌ Imbalance in share ratio

Solution: Independent valuation and equality check at the general assembly

❌ Loss of rights in the new company

Solution: Explicit clause in the division agreement to guarantee rights

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🧠 Frequently Asked Questions (FAQ)

❓ In a partial spin-off, can a partner forcibly become a shareholder in the new company?

No. This right must be explicitly recognized in the division agreement; otherwise, the partner will only remain in the old company.

❓ Can a minority group oppose a shared division?

Yes. You can file a cancellation lawsuit within 2 months of registration.

❓ What should I do if I don't receive my share in the new company?

If there is an injustice , annulment or compensation can be requested from the court.

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✅ Conclusion: Do Shareholder Rights End with a Split? No, They Are Reborn

Partial spin-offs are an important tool for companies to simplify their strategic and economic structures. However, this process should not eliminate shareholder rights; rather, be fairly redefined .

Supreme Court rulings also show that irregular and unequal division decisions risky not only commercially but also legally.

Because:

• Partners should be adequately informed
• Share ratios should be calculated fairly
• All rights must be protected in the new structure
• Legal action should be taken if necessary.

Gozdenur Turna