Joint stock companies (JSCs) represent the most advanced form of capital companies in Turkish law. Entrepreneurs seeking to attract investment or establish a corporate structure are advised to prefer the joint stock company model. The Turkish Commercial Code (TCC) No. 6102 stipulates two mandatory bodies within a JSC: the general assembly and the board of directors. Among these, the general assembly is regarded as the decision-making body of the shareholders. Shareholders participate in corporate decisions by exercising their voting rights during general assembly meetings.
Although the general assembly may delegate certain authorities to the board of directors or third parties, specific duties and powers are non-transferable and are explicitly stipulated as such in the TCC. This limitation is intended to protect the shareholders, who are the actual owners of the company, against the board of directors.
Non-Transferable Duties and Powers of the General Assembly
Article 408 of the TCC governs the non-transferable duties and powers of the general assembly. According to this article, the following matters fall within the exclusive authority of the general assembly:
- Amendments to the Articles of Association: As such amendments result in structural changes to the company, they must be approved by the general assembly. However, in JSCs subject to the registered capital system, decisions on capital increases and related amendments may be made by the board of directors.
- Election of Board Members: Under the TCC, the election, term of office, remuneration, attendance fees, bonuses, and discharge of board members fall within the exclusive powers of the general assembly. This ensures accountability of the board to the shareholders. Therefore, only the general assembly may grant a vote of confidence or discharge of liability to the board members. The only exception for dismissal is a temporary appointment within the board itself in the case of resignation.
- Appointment and Dismissal of the Auditor
- Dividend Distribution: Dividend distribution is one of the primary financial benefits for shareholders. As a natural consequence, decisions regarding the allocation of annual profits fall under the exclusive authority of the general assembly.
- Dissolution of the Company: The company may be dissolved due to reasons such as achievement of its objective, expiration of its term, or bankruptcy. Decisions regarding the company’s continuation or dissolution are reserved exclusively for the general assembly.
- Sale of a Significant Portion of the Company’s Assets: Company assets represent the full economic value of the business, including tangible and intangible elements. A decision to sell must be approved by shareholders representing at least 75% of the capital at the general assembly. If this quorum is not met in the first meeting, the same quorum applies to the second meeting. The law does not define "a significant portion" numerically, leaving the evaluation to the judge based on each case. However, the Capital Markets Board has provided guidance in the Communiqué on Significant Transactions and the Right to Exit (II-23.3), published in the Official Gazette on June 27, 2020.
Besides Article 408 of the TCC, other legal provisions also enumerate non-transferable duties and powers of the general assembly. Some examples include:
- Merger: A merger must be approved by a qualified majority representing at least three-quarters of the voting shares present at the general assembly, provided the quorum requirement is satisfied.
- Division: Following the completion of preconditions and procedures, the management body must submit the division agreement or division plan to the general assembly for approval.
- Change of Type: Since JSCs are capital companies, they may only convert into other capital companies or cooperatives, but not into partnerships. Such decisions can only be made by the general assembly.
Conclusion
In conclusion, the authority of the general assembly in joint stock companies is specifically structured to cover decisions that define the company's core structure and long-term direction. The non-transferable powers listed in the TCC are designed to protect shareholders and ensure transparent governance. For entrepreneurs seeking to build a robust and sustainable corporate foundation, the joint stock company model offers a balanced and advantageous structure.
Asist Law Firm
“This note is prepared solely for informational purposes and in accordance with current legal regulations. This note does not constitute legal advice.”
