General Assembly of a Joint Stock Company: Definition, Authority, Duties and Calling Procedure

In joint-stock companies, the general assembly is the highest decision-making body. Composed of shareholders, this body is the platform where the company's will is embodied in a democratic and institutional manner, and where capital owners come together to shape the company's destiny. The general assembly is not just a meeting; it can be defined as the most fundamental "legal safeguard" and "oversight mechanism" that shapes the company's existence and future.

I. Definition of the General Assembly

The general assembly is the decision-making body where shareholders have a say in the management of the company. It meets periodically to oversee the board of directors, amend the articles of association, and determine company strategies. The Turkish Commercial Code (TTK) considers the general assembly the "sovereign body" of the company. Regardless of the broad powers it may possess, the board of directors is ultimately accountable to the general assembly. The general assembly represents the primary will of the company's legal entity; this will is shaped by the votes of the shareholders and forms the basis of legitimacy for all legal actions of the company.

II. Powers and Duties of the General Assembly

The powers of the general assembly are divided into two categories: "exclusive" (non-transferable) and "general" powers. As stated in Article 408 of the Turkish Commercial Code, the exclusive powers of the general assembly are as follows:

1. Amendments to the Articles of Association: Any changes to the articles of association, from the company name and scope of activity to capital and management style, are subject to the approval of the general assembly.

2. Election and Discharge of the Board of Directors: The general assembly has the authority to elect and remove members of the board of directors, and to discharge (discharge) the directors based on their annual activities. Discharge is the most important legal act that terminates the directors' liability.

3. Financial Statements and Profit Distribution: The primary task is to approve the company's annual balance sheets and profit/loss accounts, and to decide how the profits will be distributed (or allocated to reserves).

4. Company Dissolution: The decision to terminate (liquidate) a company shall be taken exclusively by the general assembly.

5. Significant Asset Transfers: Strategic transactions, such as the transfer or disposal of a significant portion of the company's assets, are subject to the approval of the general assembly.

These powers cannot be delegated to the board of directors. In other words, a board of directors cannot say, "Let's amend the articles of association instead of the general assembly" or "Let's discharge the directors." The general assembly is the sole authority that determines the company's "direction" using these powers.

III. Procedure for Calling the Meeting

For a general assembly to have legal validity, it must be properly convened. The call is the beginning of the meeting's legal legitimacy.

1. Authority to Call Meetings: As a rule, the board of directors is authorized to call the general assembly meeting. However, in cases such as the expiration of the board's term, the inability to form a board, or the rejection of a meeting request, shareholders may be granted the authority to call a meeting by a court order. Furthermore, minority shareholders representing 10% of the capital (5% in publicly traded companies) may request a meeting from the board of directors.

2. Meeting Notice Procedure: Meeting notices are sent using the method stipulated in the articles of association (e.g., registered mail, announcement, electronic notification). The notice must be sent at least two weeks before the meeting date. The notice must include the date, time, location, and agenda of the meeting

3. Agenda and Announcement: The agenda is the list of topics to be discussed at the general meeting. No decision can be made on a matter not on the agenda, unless there is an extraordinary circumstance (e.g., the dismissal of the auditor). The principle of "transparency and seriousness" prevails in determining the agenda. Shareholders should come prepared, knowing the agenda in advance, and be able to exercise their rights.

4. Announcement and Website: The call for proposals should be published not only in physical form but also on the company's website, if available. In accordance with companies' transparency obligations, all financial statements and reports (activity report, auditor's report) must be made available for shareholders' review prior to the meeting.

In summary: The general assembly is the democratic face of a joint-stock company. A deficiency in the calling procedure (for example, a call not made on time or an incomplete/incorrect agenda) the annulment . Therefore, for boards of directors, the calling procedure is not a formality, but a "legal shield" against judicial review of the decisions taken.

Meeting Procedures, Quorums, and Decision-Making Processes in the General Assembly

The general assembly of a joint-stock company is where the will of the shareholders is shaped within a legal framework. Every stage of this process, from the "list of attendees" to the "keeping of minutes," guarantees the legal validity of the decisions made. Articles 417-424 of the Turkish Commercial Code govern this process with its technical and legal details.

I. List of Participants and Attendees

The legitimacy of the general assembly begins with determining who voted. The attendance list (Article 417 of the Turkish Commercial Code)is prepared by the board of directors based on data from the Central Registry Institution (MKK) or the share register. This list clearly includes the shareholders' identification information, the amount of shares they hold, and those attending by proxy. Signed by the chairman, this list is the legal document of the meeting.

II. Meeting and Quorum Requirements

The same numerical majority is not required for every issue in the general assembly. The Turkish Commercial Code regulates "qualified quorums":

1. General Quorum (Turkish Commercial Code Article 418): Unless a stricter quorum is stipulated in the law or the articles of association, the general assembly convenes with the representation of at least one-quarter (25%) of the capital . If this is not achieved at the first meeting, no quorum is required at the second meeting. Decisions are taken by a majority of the votes cast by those present at the meeting .

2. Amendment of Articles of Association (Turkish Commercial Code Article 421/1): Unless otherwise stipulated, decisions are made by majority vote at a meeting where at least half (50%) of the capital is represented. If a quorum is not reached at the first meeting, the quorum will be one-third (33.3%) at the second meeting to be held within one month .

3. Specific Quorums:

   • Unanimity: Decisions regarding relocating the headquarters abroad or imposing additional obligations to cover balance sheet losses require unanimous consent

   • 75% Quorum: A complete change in the company's business activity, the creation of preferred shares, or restrictions on the transfer of registered shares require the affirmative vote of at least 75% of the capital

III. Chairing the Meeting and the Right to Postpone

The meeting is chaired by a chairman elected by the general assembly, whether or not the chairman is a shareholder (Turkish Commercial Code Article 419). The board of directors is obliged to prepare an internal regulation and submit it to the general assembly for approval.

The right of postponement (Article 420 of the Turkish Commercial Code) , an important safeguard , is granted to minority shareholders representing one-tenth (10%) of the capital. The discussion of the financial statements may be postponed for one month by a unilateral decision of the chairman at the request of the minority shareholders . This is a right granted to the minority shareholders to gain time to examine any financial statements they deem questionable.

IV. The Impact of Minutes and Decisions

Decisions made at the general assembly are binding on all shareholders, whether or not they attended the meeting (Turkish Commercial Code Article 423). The minutes (Turkish Commercial Code Article 422)are written evidence of the decisions made and the voting results (number of votes in favor/against). The minutes must be signed by the ministry representative and the meeting chairperson; otherwise, they are invalid. A notarized copy must be registered with the trade registry and published on the website.

V. Approval and Discharge of the Balance Sheet (Turkish Commercial Code Article 424)

The approval of the balance sheet by the general assembly generally results in the discharge (acquittal) of the board members and auditors . However, this "acquittal" is not unlimited. If the balance sheet is deliberately incomplete or misleading in a way that prevents a true picture of the company's financial situation, it will not have the effect of discharge even if approved. In other words, discharge obtained through a fraudulent balance sheet is invalid.

In summary: A general assembly meeting is not merely about gathering, but also about ensuring the legal quorum (meeting and decision-making numbers), keeping proper minutes, and respecting the legal rights of the minority, such as the right to adjournment. Violation of any of these rules may result in the annulment or invalidation of the decision taken.

I. Right to Participate in and be Represented at the General Assembly

A shareholder may attend the general meeting in person or through a representative. Restrictions in the articles of association requiring the representative to be a shareholder are invalid (Turkish Commercial Code Article 425). This provision allows shareholders to appoint any expert or trusted person they choose to vote on their behalf at the general meeting.

The right to exercise shareholder rights against the company depends on being registered in the share register for registered shares, and on holding the certificate and notifying the Central Securities Depository (CSD) for bearer shares (Turkish Commercial Code Article 426).

The representation process is based on the principles of transparency:

• The representative is obligated to follow instructions. Disobedience to instructions does not invalidate the vote, but it does create liability for the representative to the person they represent.

• The depositary's representative (such as a bank or brokerage firm) must contact the shareholder before the general meeting to receive instructions regarding the shares they hold. If no instructions are received, they will vote according to the board of directors' recommendation (Turkish Commercial Code Article 429).

• Multiple rights holders: If a share has multiple owners (e.g., heirs), they must appoint a joint representative to exercise their rights. In cases where there is a usufructuary, unless otherwise agreed, the usufructuary exercises the voting rights (Turkish Commercial Code Article 432).

II. Unauthorized Participation and Objections

Share transfers made with the intention of circumventing voting rights are invalid. If it is suspected that an unauthorized person has voted at the general meeting, every shareholder has the right to report this to the meeting chair and have it recorded in the minutes (Turkish Commercial Code Article 433). This is a vital "internal control" mechanism to protect the legitimacy of the meeting.

III. Exercise and Limitations of Voting Rights

Voting rights are, as a rule, proportional to the par value of the shares (Turkish Commercial Code Article 434). Each share has at least one voting right, but limitations may be imposed by the articles of association for those holding more than one share. Voting rights arise upon payment of the portion of the share's capital commitment determined by law or the articles of association.

IV. Disqualification from Voting (Prevention of Conflicts of Interest)

Article 436 of the Turkish Commercial Code mandates that shareholders be barred from voting in cases of "conflict of interest." This is an indispensable rule for the fair management of joint-stock companies

1. Personal Transactions: A shareholder may not vote in personal transactions between themselves, their spouse, or their ancestors and descendants and the company, or in lawsuits filed against the company.

2. Discharge of Directors: This is the most critical prohibition; board members cannot use their voting rights derived from their own shares in decisions regarding their own discharge. This provision is a fundamental "managerial control" tool that prevents directors from absolving themselves of their own actions.

Right to Information, Right to Inspection and Special Audit: Shareholder's Legal Guarantees

In joint-stock companies, share ownership is not only a capital investment but also brings with it the right to oversee management. Articles 437 and 438 of the Turkish Commercial Code grant shareholders the "access to information" and "special inspection" rights they need to exercise this oversight. These rights are the "capillaries" of share ownership and can never be restricted.

I. Right to Information and Inspection (Turkish Commercial Code Article 437)

The right to information is the most critical mechanism forming the basis of the decisions that shareholders will make at the general assembly.

• Availability Obligation: Company management is obligated to make the financial statements, activity reports, audit reports, and dividend distribution proposal at least 15 days prior . These documents must remain accessible for one year.

• Requesting Information at the General Assembly: Shareholders have the right to ask questions and request information from the board of directors about the company's affairs and from the auditors about the results of the audit at the general assembly. The information provided must be complete and truthful, in accordance with the principles of "honesty and accountability".

• Principle of Equality: If the board of directors has provided information to a shareholder outside of the general meeting (privately), it is obligated to provide the same information to other shareholders who request it. In this case, the board of directors cannot invoke the excuse of "confidentiality."

Refusal to Provide Information and Exceptions: The board of directors may refuse to provide information only "disclosure of company secrets" or "endangerment of company interests that need to be protected ." However, the permission of the general assembly or a decision of the board of directors is required for the examination of commercial books. If permission is granted, the examination may also be carried out through an expert.

Judicial Review: A shareholder whose request for information has been unfairly rejected or left unanswered may apply to the Commercial Court of First Instance within 10 days of the rejection. The court may, using a "simplified judicial procedure," a final decision ordering the provision of the information. This right can never be restricted by the articles of association or by a resolution of the board of directors .

II. Right to Request a Special Audit (Turkish Commercial Code Article 438)

It is a more advanced monitoring mechanism resorted to in cases where the right to information is insufficient or doubts cannot be resolved.

• Conditions: Two conditions must be met simultaneously in order for a special audit to be requested:

  1. First, the right to access and inspect information must have been exercised (i.e., the shareholder must have first requested the information but was not satisfied).

  2. Special auditing must be necessary for the exercise of shareholder rights.

• General Assembly Process: A shareholder may request a "special audit" at the general assembly, even if it is not on the agenda. If the general assembly approves this request, the company or any shareholder may apply to the Commercial Court of First Instance within 30 days to request the appointment of a special auditor.

Special Audit: Audit and Reporting Process Through the Courts

The general assembly's rejection of the request for a special audit does not mean the end of shareholders' right to oversight. Articles 439-444 of the Turkish Commercial Code grant minority shareholders the right to have the company examined by independent experts through legal action. This process is the strongest legal weapon shareholders have against management's attempts at "covering up" the company.

I. Requesting a Special Auditor from the Court (Turkish Commercial Code Article 439)

If the request for a special audit is rejected at the general assembly, minority shareholders (those holding 10% of the capital, 5% in publicly traded companies, or whose shares have a nominal value of at least 1 million TL) may apply to the Commercial Court of First Instance within three months.

There is only one condition for the court to appoint a special auditor: the claimants must present convincing evidence that the company's organs have violated the law or the articles of association, causing harm to the company or its shareholders. This is not merely a suspicion, but a demonstration of the beginning of concrete violations.

II. Appointment, Duties and Powers (Turkish Commercial Code Articles 440-441)

If the court deems the request justified, it will determine the subject of the examination (scope of the audit) and appoint one or more independent experts (special auditors).

• Access Rights: The special auditor has access to all of the company's books, correspondence, cash, and securities. The board of directors, employees, and other bodies are obligated to provide information to the auditor. If any restriction on access occurs, the court will resolve the dispute with a final decision.

• Independence and Confidentiality: The special auditor is obligated to protect company secrets in the performance of their duties and to conduct an honest and impartial review. They are required to obtain the company's opinion.

III. Reporting and Transparency (Turkish Commercial Code Articles 442-443)

The private auditor submits the findings of the audit to the court.

• Protection of Confidentiality: If the company claims that the report's contents disclose company secrets, it may request the court to keep the report confidential or to prevent the disclosure of specific portions. The court will make its decision by considering this balance.

• Presentation to the General Assembly: The report is presented by the board of directors to the first general assembly. Each shareholder may request a copy of the report and the board of directors' opinions on the report from the company for one year following the general assembly. This is a principle of transparency, ensuring that the results of the review are known to all shareholders.

IV. Sharing of Expenses (Turkish Commercial Code Article 444)

As a general rule, the costs of a special audit are borne by the company. However, the court may decide, in special circumstances, that these expenses be partially or fully borne by the shareholders (who requested the audit). If the special auditor was appointed by a general assembly resolution, the expenses are in any case borne by the company.

1. G) Annulment of general assembly decisions

I – Reasons for cancellation

ARTICLE 445– (1) The persons specified in Article 446 may file a lawsuit for annulment against the general assembly resolutions that are contrary to the provisions of the law or the articles of association and especially the principle of good faith, within three months from the date of the resolution, in the primary commercial court in the place where the company's headquarters are located.

 II – Persons who can file an annulment lawsuit

ARTICLE 446– (1) a) Those who are present at the meeting and vote against the decision and have their opposition recorded in the minutes,

1. b) Shareholders who, whether present at the meeting or not, and regardless of whether they voted against it or not, claim that the call for the meeting was not made in accordance with the procedure, that the agenda was not properly announced, that persons or their representatives who did not have the authority to attend the general assembly attended and voted, that they were unfairly prevented from attending and voting at the general assembly, and that the aforementioned irregularities influenced the adoption of the general assembly's decision,
2. c) The board of directors,
3. d) Each member of the board of directors shall be held personally liable if the implementation of the decisions will result in their personal liability

They can file a lawsuit for annulment.

H) Nullity

ARTICLE 447– (1) The general assembly, in particular;

1. a) Restricting or eliminating the shareholder's inalienable rights arising from the right to attend the general meeting, minimum voting rights, litigation, and the law,
2. b) Restricting the shareholder's rights to access information, inspect, and audit beyond the limits permitted by law,
3. c) That disrupt the fundamental structure of the joint-stock company or that violate the provisions for the protection of capital,

Their decisions are invalid.

 I) Miscellaneous provisions

I – Publication, security deposit and legal remedies

ARTICLE 448– (1) The board of directors shall duly announce the filing of the cancellation or nullification lawsuit and the hearing date, and post it on the company's website.

(2) The hearing cannot begin before the expiry of the three-month forfeiture period in the cancellation case. If more than one cancellation case is filed, the cases are heard together.

(3) The court may decide that the plaintiffs must provide security against possible damages at the request of the company. The court determines the nature and amount of the security.

 II – Postponement of the execution of the decision

ARTICLE 449– (1) If a lawsuit for annulment or nullification is filed against a general assembly decision, the court may decide to postpone the execution of the decision in question after obtaining the opinion of the board members.

 III – The effect of the decision

ARTICLE 450– (1) A court decision regarding the annulment or nullification of a general assembly resolution shall be binding on all shareholders after it becomes final. The board of directors is obliged to immediately register a copy of this resolution with the trade registry and post it on its website.

 IV – Liability of those who file annulment and nullification lawsuits in bad faith

ARTICLE 451– (1) If a lawsuit for annulment or nullification is filed against the decision of the general assembly in bad faith, the plaintiffs are jointly and severally liable for the damages suffered by the company as a result.