PREEMPTIVE RIGHTS IN A JOINT STOCK COMPANY

right of first refusal

ARTICLE 461–

(1) Each shareholder has the right to purchase the newly issued shares in proportion to the ratio of their existing shares to the capital.

(2) The pre-emptive right of a shareholder may be restricted or abolished by the decision of the general assembly regarding the increase of capital only if there are justifiable reasons and with the affirmative vote of at least sixty percent of the share capital. In particular, public offerings, acquisitions of businesses, business parts, affiliates and the participation of employees in the company are considered justifiable reasons. No one shall be unfairly benefited or harmed by the restriction or abolition of pre-emptive rights. Except for the condition regarding the quorum, this provision also applies to the decision of the board of directors in the registered capital system. The board of directors shall explain the reasons for restricting or abolishing pre-emptive rights; the reasons for issuing new shares with or without a premium; and how the premium is calculated in a report. This report shall also be registered and published.

(3) The board of directors determines the principles for exercising the new share subscription right by a resolution and gives shareholders at least fifteen days in this resolution. The resolution is registered and published in the newspaper in article 35 (…)[66]. It is also posted on the company's website.

(4) The right of pre-emption is transferable.

(5) The company cannot prevent shareholders to whom it has granted pre-emptive rights from exercising these rights by claiming that the transfer of registered shares is restricted by the articles of association.

General Information

According to Article 461/1, each partner has the right to acquire newly issued shares in proportion to their existing shares in the capital. For pre-emptive rights to arise, the partnership must increase its capital and issue new shares.

For example, if one of the partners owns 10% of the shares, and the capital is increased by one fold, their share in the partnership will become 5%

It falls into disuse. This pre-emptive right is intended to ensure that the shares and positions of this partner within the partnership are preserved exactly as they are

It is well-known.

Article 461/1 also regulates the measure and limits of the right of pre-emption. In order to exercise this right, the partner must first..

It is necessary to know the percentage of share each partner holds in the partnership. Each partner is obligated to prove the amount of their share. Partner share

Ownership can be proven through the share register, whether in terms of registered shares, bare shares, or share certificates

If a share certificate has been issued, it is also possible to prove the amount of the share with these certificates. For bearer shares, proof lies in the share itself

This is possible with promissory notes or other official documents showing the amount of the note.

However, pre-emptive rights do not impose any obligations on the shareholder. In other words, shareholders cannot acquire new shares

It cannot be forced.

The pre-emptive right is exercised by a shareholder through a unilateral declaration of intent. According to Article 461/3, the Board of Directors has the right to acquire new shares

It determines the principles of its use by a decision. The decision is registered in the trade registry and TTS before the registration of the increase

It is announced in the newspaper and posted on the website. The board of directors' decision indicates the share issue prices and pre-emptive rights

Shareholders are given at least 15 days to exercise their rights. This period may be extended. It is a forfeiture period.

If the partner fails to comply with the principles in Article 461/3 of the Board of Directors and cannot exercise their joint right, the partner suffers direct damage, and the damage..

The partner may apply to the board members for compensation. If the shares are held by the partnership, the partner may file a performance lawsuit against the partnership.

The right of pre-emption may be restricted or abolished by a decision of the General Assembly under the conditions in Article 461/2. This decision must necessarily include the following:

The reason must be stated. It cannot be done through the partnership agreement. There are certain conditions. The right of pre-emption can only be exercised by the General Assembly

It can be restricted or removed by and during the decision to increase. Even if it is not an item on the agenda, it still applies

It can be discussed in the General Assembly. The General Assembly has the authority to abolish/limit the right of pre-emption only if there are justifiable reasons.

Shareholders can assess whether the pre-emptive right has been abolished for a justifiable reason

It is essential in this regard.

When the General Assembly makes this decision, a 60% affirmative vote of the share capital is required. This percentage is determined by establishing a rule in the contract

It cannot be downloaded.

No one shall be unfairly benefited by the limitation or abolition of priority rights

or cannot be damaged or lost.

According to Article 461/4, the right of pre-emption is transferable. This transfer cannot be prohibited or restricted by the partnership. According to Article 461/5..

Accordingly, contextual rules can be applied to those who receive the transfer.

According to Article 461/5, the partnership allows partners who have been granted pre-emptive rights to exercise these rights, and the registered shares..

They cannot prevent their transfer by claiming that it is restricted by the main contract. However, this rule applies only to..

This applies to rights to acquire shares that have been originally gained, i.e., rights arising from the status of a shareholder.

The pre-emptive right can also be exercised in privately held joint-stock companies subject to the registered capital system. Similarly..

It can be restricted or removed. This can be done by the Board of Directors. However, for this, the Board of Directors must comply with the articles of association

It must be authorized. There must be justifiable reasons here as well. However, since there is no General Assembly decision here, the 60% quorum is not met

cannot be searched. In the registered capital system, the Board of Directors also decides on the removal or limitation of pre-emptive rights

The reasons for issuing new shares with and without a premium, and how the premium is calculated, are explained in a report. This report is then registered and published.

The violation of a priority right may, in particular, necessitate the annulment of the restriction decision.

Even in the registered capital system, a board decision can be overturned.

According to Article 456/1, except for capital increases from internal sources, capital cannot be increased unless the cash consideration for the shares has been fully paid. However, the non-payment of amounts that are not considered significant in relation to the capital does not prevent a capital increase. For pre-emptive rights to arise, a valid decision to increase the share capital and the issuance of new shares are required.

 The pre-emptive right in capital increases is an important partnership right established to prevent a change in a partner's position within the partnership. The new Turkish Commercial Code (TTK) strengthens this pre-emptive right. Indeed, according to the TTK, the General Assembly can only decide to restrict or completely abolish the pre-emptive right for justifiable reasons and with aggravated quorum requirements.

 

The Importance of a Lawyer:

It examines whether the "just cause" put forward by company management is genuine, proportionate, and in accordance with the principle of fairness.It identifies and intervenes in decisions that are improperly taken or that aim to oppress the minority.

It audits the compliance of the board of directors' report with regulations and whether the share premium is in line with the market value. It prevents existing shareholders from suffering losses by issuing new shares below their true value.

The minority shareholder is represented at the general assembly. By voting against the decision, they ensure that their reasoned dissenting opinion is fully recorded in the meeting minutes. The first and most critical condition for filing an annulment lawsuit is that this dissenting opinion is written in accordance with proper procedure.

Within 3 months of the announcement/approval of the General Assembly decision, a lawsuit for the annulment or, if the conditions are met, the nullification of the decision is filed in the Commercial Court of First Instance. Additionally , a stay of execution (precautionary measure) is obtained to prevent the company from undertaking irreversible transactions in order to halt the registration of the capital increase

It ensures that the decisions to be made (meeting quorums, announcement periods, calling procedures, and pre-emptive right exercise periods) comply with the law. It prevents future lawsuits from blocking the capital increase and the board of directors from becoming liable for compensation.

In processes involving the transfer of pre-emptive rights to third parties or other partners, it prepares the contracts; manages the transfer restrictions (contextual rules) and the conditions under which the transfer is binding on the company.