Types of Lawsuits That Can Be Filed Against General Assembly Resolutions in Joint Stock Companies
A joint-stock company is a legal entity with a fixed capital divided into shares, where liability for debts is limited solely to the company’s assets, and the shareholders are only liable up to the amount they have committed to the company. These companies are established to conduct and sustain a wide range of commercial activities and, due to their preference over other company types, have a significant impact on the economy. A joint-stock company has two mandatory founding bodies: the board of directors and the general assembly. While the board of directors primarily performs managerial functions, the general assembly operates as the decision-making mechanism. In the general assembly, each shareholder has the right to express themselves and participate in decisions regardless of the number or ratio of shares held. This is because shareholders in joint-stock companies hold many rights, including attending the general assembly and voting. The structure, duties, rights, and obligations of the general assembly in joint-stock companies are regulated under the Turkish Commercial Code No. 6102. Additionally, the provisions regarding the convening and decision-making of the general assembly are set out in Article 409 and the subsequent articles of the same Code. The general assembly is the body that makes decisions in cases explicitly stated in the articles of association and the Turkish Commercial Code No. 6102. However, the decisions made by the general assembly may not always be fully accepted or may not comply with legal regulations. The Turkish Commercial Code No. 6102 contains provisions on the legal remedies available against such general assembly decisions. This study is prepared in two parts. The first part primarily discusses the general assembly organ of joint-stock companies and its overall working structure, general assembly meetings, decisions made, and the legal nature of these decisions. It also addresses the regulations concerning the invalidity of general assembly decisions within the relevant legal framework. Subsequently, it will cover the types of declaratory actions that can be filed against general assembly decisions on grounds of nullity and voidness.
I. GENERAL ASSEMBLY AND GENERAL ASSEMBLY DECISIONS IN JOINT-STOCK COMPANIES
1) General Assembly
A joint-stock company is a type of legal entity with a defined capital divided into shares, where the company is solely liable for its debts with its assets, and the shareholders are only liable up to the amount they have committed to the company. [1] A joint-stock company acquires its legal entity status upon registration in the commercial registry. [2]
According to the Turkish Commercial Code No. 6102 (“TCC”), a joint-stock company has two founding bodies: one is the board of directors, and the other is the general assembly. In the absence of either of these bodies, the dissolution of the legal entity may be considered.
The board of directors is a body composed of one or more persons appointed by the articles of association of the joint-stock company or elected by the general assembly, tasked with managing and representing the company. [3] The duties and authorities of the board of directors are determined by the articles of association and the Turkish Commercial Code.
The general assembly is a body composed of the shareholders or their authorized representatives, which makes decisions on matters explicitly stated in the articles of association and the Turkish Commercial Code. In other words, the general assembly is an organ tasked with discussing and resolving predetermined agenda items upon a properly conducted invitation of the shareholders or their authorized representatives. In accordance with the principle of adherence to the agenda, the general assembly reviews the agenda items and makes decisions on these matters by the votes of the shareholders or authorized representatives. [4] At the general assembly meeting, discussions are held, and decisions are made by voting on matters such as the election of company organs, the board of directors’ annual report, determination of the distribution ratios of profit and earnings shares, discharge of board members, as well as other issues deemed necessary regarding the company’s activities during the fiscal period. The general assembly also has non-transferable duties and powers, which are explicitly listed in the Turkish Commercial Code. [5]
2) General Assembly Meeting
The regulations regarding the convening and decision-making of the general assembly are set forth in Article 409 and the following articles of the Turkish Commercial Code. The general assembly can convene in two forms: ordinary general assembly meeting and extraordinary general assembly meeting. These general assembly meetings are held at the company’s headquarters. However, it is possible to designate a meeting place different from the company’s headquarters through the articles of association.
The general assembly is divided into two groups based on the manner of convening: convened and un-convened, as well as physical and electronic.[6] Pursuant to the Turkish Commercial Code, in a convened general assembly meeting, shareholders are called to the meeting by a notice published in the manner specified in the articles of association, on the company’s website, and in the Turkish Trade Registry Gazette. The call for each general assembly meeting, excluding the announcement and meeting days, is made at least two weeks prior to the meeting date. Shareholders registered in the share ledger, as well as those who have previously submitted share certificates or documents proving share ownership to the company and have provided their addresses, are notified of the meeting date, agenda, and the newspapers in which the notice has been or will be published by registered mail with return receipt requested.
a) Ordinary General Assembly Meeting
The general assembly convenes once a year as an ordinary meeting and, if necessary, as an extraordinary meeting. According to the Turkish Commercial Code, ordinary general assembly meetings must be held within three months following the end of each fiscal year. The fiscal year is accepted as the company’s financial year. During the ordinary general assembly meeting held within three months after the fiscal year ends, the election of corporate bodies, examination of financial statements, evaluation of the board of directors’ annual report, determination of the method for using profits and the distribution rates of dividends and profit shares, discharge of the board members, and discussions on other matters related to the fiscal period take place, followed by resolutions. Since this meeting is required to be held regularly every year, it is referred to as the ordinary general assembly meeting.
b) Extraordinary General Assembly Meeting
An extraordinary general assembly meeting is held in urgent situations and when the company needs to convene outside of regular times. The agenda for extraordinary general assembly meetings is not specifically defined in the Turkish Commercial Code; however, it is possible to include and discuss any matter within the authority of the general assembly, including those normally on the agenda of ordinary general assemblies. The agenda for the extraordinary general assembly meeting is determined by the party calling the general assembly to convene urgently.
In joint-stock companies, the general assembly can be convened by the body or person authorized by the Turkish Commercial Code and designated in the articles of association. [7] Accordingly, those authorized by the Turkish Commercial Code to call the general assembly for an extraordinary meeting are the board of directors, a sole shareholder with court permission, minority shareholders, and liquidators. Meeting calls made by bodies and/or persons not authorized by the Turkish Commercial Code or the company’s articles of association to convene the general assembly are invalid.
3) Legal Nature of General Assembly Resolutions
Resolutions adopted by the general assemblies of joint-stock companies are decisions formed by the votes of shareholders or their authorized representatives and have the nature of a legal transaction. [8] Indeed, general assembly resolutions consist of declarations of will that produce legal effects. However, whether these resolutions constitute a unilateral legal act or a multilateral legal act is debated in doctrine.[9] Nevertheless, since it is accepted that resolutions adopted by the general assembly are legal transactions, the invalidity of these resolutions possessing the nature of legal transactions may arise. As nullity, voidness, and annullability of general assembly resolutions constitute distinct forms of invalidity, the lawsuits that can be filed in these cases differ accordingly and are separately regulated in the Turkish Commercial Code.
II. LAWSUITS FOR DECLARATION OF NULLITY THAT CAN BE FILED AGAINST GENERAL ASSEMBLY RESOLUTIONS DUE TO NULLITY
Since general assembly resolutions are legal acts, they must fulfill certain conditions to be considered valid acts. For example, compliance with mandatory legal rules, not being contrary to the articles of association, conforming to the principle of good faith, and meeting the quorum requirements for meetings and decisions are some of the conditions that a valid general assembly resolution must satisfy.[10]
The ground of nullity for general assembly resolutions is not explicitly regulated in the Turkish Commercial Code. However, due to their legal nature, it is possible for general assembly resolutions to be defective due to nullity. Accordingly, if mandatory formal legal rules are not complied with when adopting general assembly resolutions, such resolutions will be defective due to nullity. Examples of such defects include failure to reach the required quorum, the call for the general assembly meeting being made by an unauthorized organ or person, convening the meeting without following the proper notice procedure or no notice being given at all, failure to have the Ministry of Customs and Trade official attend the meeting when required by the Turkish Commercial Code, the meeting minutes not being signed by the Ministry representative, or in a meeting held without a call, at least one shareholder leaving the meeting prematurely. Resolutions taken under these circumstances and resolutions on matters outside the agenda may be deemed null and void. However, doctrinal opinions also suggest that these decisions could be subject to annulment or cancellation, so each decision should be examined on a case-by-case basis.[11]
If a legal act is defective due to nullity, it is considered never to have occurred. Therefore, general assembly resolutions deemed null and void are treated as if they never existed and have no legal effect or consequences. Consequently, such resolutions cannot be enforced, nor can they be registered or published in the trade registry.[12] A general assembly resolution deemed null, and void cannot gain validity in any way.
Nevertheless, it is possible to file a declaratory action to establish that a general assembly resolution is defective due to nullity. With such an action, the nullity of the resolution can always be claimed, and the judgment given at the end of this declaratory action will be explanatory in nature. This action is not subject to any statute of limitations or forfeiture period. Moreover, any person with a legal interest may file a declaratory action based on nullity against the company.[13] However, whether the legal interest requirement continues throughout the declaratory action proceedings is also important. In any case, the court is obliged to carefully examine ex officio whether the contested general assembly resolution is defective due to nullity.[14]
Although the Turkish Commercial Code does not explicitly regulate nullity, it is necessary to accept that the procedural rules applicable to declaratory actions filed due to annulment also apply to declaratory actions filed due to nullity. Therefore, procedural matters such as the competent court and the duties of the board of directors regarding declaratory actions filed for nullity are not detailed here, but it should be noted that the rules applicable to declaratory actions filed for annulment, which will be explained in detail below, also apply in this context.
III. DECLARATORY ACTIONS FOR NULLITY THAT CAN BE FILED AGAINST GENERAL ASSEMBLY RESOLUTIONS
In the Old Turkish Commercial Code No. 6762, there was no provision regarding nullity of general assembly resolutions; however, with the New Turkish Commercial Code No. 6102, alongside annullability, nullity of general assembly resolutions was also regulated under Article 447. The nullity concept is defined under Article 27 of the Turkish Code of Obligations No. 6098 (“TCO”) titled “Absolute Nullity” as: “Contracts that violate mandatory provisions of the law, morality, public order, personality rights, or whose subject matter is impossible are absolutely null and void.” Article 447 of the TCC explains nullity as: “Resolutions of the general assembly are null and void, particularly if they: a) restrict or eliminate shareholders’ inalienable rights to attend the general assembly, minimum voting rights, litigation, and rights granted by law; b) limit shareholders’ rights to obtain information, inspection, and audit beyond legally permitted scope; c) distort the fundamental structure of the joint-stock company or contravene provisions on capital protection.”
Although the TCC includes a provision illustrating nullity, it is widely accepted in doctrine that the general provisions of Article 27 of the TCO should also apply to general assembly resolutions.[15] In our view, the regulation in TCC Article 447 offers a general evaluation, and the more encompassing general provision in TCO Article 27 should also apply to general assembly resolutions. Accordingly, even if a general assembly resolution appears valid formally, it should be considered null and void if it contradicts mandatory legal rules, morality, ethics, public order, or if its subject matter is inherently impossible.
If a legal transaction is defective due to nullity, that legal transaction is invalid from the outset. The most important difference between nullity and voidness of a general assembly resolution at this stage is that in the case of nullity, a formally existing general assembly resolution has actually been made. However, this general assembly resolution, which is void in substance, is considered stillborn in doctrine.[16] Therefore, even if a general assembly resolution defective due to nullity formally exists, it will not produce any legal effect or result. In fact, even if the cause of the nullity later ceases to exist, the void general assembly resolution will not gain validity.[17] Another difference between nullity and voidness is that in the case of a null general assembly resolution, the claim of nullity cannot be raised in bad faith, contrary to the principle of good faith. However, the principle of good faith has no effect on the assertion of voidness.[18]
Under the circumstances listed in Article 447 of the Turkish Commercial Code (“TTK”) and Article 27 of the Turkish Code of Obligations (“TBK”), the relevant general assembly resolutions are deemed absolutely null and void. It is possible to file a declaratory action to establish that such a general assembly resolution is null and void due to nullity. Through this declaratory action, the nullity of the general assembly resolution can be asserted at any time, and the judgment rendered at the conclusion of this action will have an explanatory nature. This action is not subject to any statute of limitations or preclusive period. Moreover, the declaratory action based on nullity may be brought against the company by any person who has a legal interest. The competent court for this declaratory action is the commercial court of first instance. The authorized commercial court is the court in the location of the company’s headquarters.
There is a dual procedural distinction: if the company or shareholders file a lawsuit for the nullity of the general assembly resolutions on behalf of the joint-stock company, the procedure under Article 1521 of the Turkish Commercial Code applies, and this lawsuit must follow the summary procedure. If the party filing the declaratory action for nullity of the general assembly resolutions is the bankruptcy administration or persons with a legal interest, the written procedure applies since there is no special provision otherwise.
Pursuant to Article 448 of the Turkish Commercial Code, if a declaratory action is filed for the nullity of a general assembly resolution, the board of directors must duly announce the filing of the lawsuit and the hearing date. If the legal entity has a website, this announcement must also be published there. The court may require plaintiffs to provide security. According to Article 449 of the Turkish Commercial Code, the court may decide to suspend the execution of the contested resolution after hearing the board members.
If the court rules that the resolution is null and void and this judgment becomes final, the decision will be binding on all shareholders. Pursuant to Article 450 of the Turkish Commercial Code, the board of directors is obliged to immediately register a copy of this decision with the trade registry and publish it on the company’s website.
If the nullity action was filed maliciously, the plaintiffs shall be jointly and severally liable for the damages suffered by the company pursuant to Article 451 of the Turkish Commercial Code.
IV. CONCLUSION
The general assembly is the organ in joint-stock companies that performs the function of decision-making. For this reason, the general assembly holds significant importance for the legal entity of a joint-stock company. Accordingly, the principles governing the convening and decision-making of the general assembly are detailed in the Turkish Commercial Code No. 6102. The general assembly can convene in two forms: ordinary and extraordinary. In both types of meetings, the agenda items are discussed and concluded. It is possible to adopt either positive or negative decisions regarding these items. In any case, the decisions made as a result of the general assembly meeting constitute a legal transaction. Since these decisions are considered legal transactions, they may be subject to invalidity. The general provisions and cases of invalidity are regulated under the Turkish Code of Obligations No. 6098. In addition, the Turkish Commercial Code No. 6102 also contains provisions concerning the invalidity of general assembly decisions. Although the Turkish Commercial Code No. 6102 regulates only nullity and voidability for general assembly decisions, the absence (yokluk) of such decisions may also arise. Accordingly, three distinct types of invalidity—absence, nullity, and voidability—must be considered regarding decisions made by the general assemblies of joint-stock companies.
If the formal elements of the general assembly decisions are absent, the decision is considered null and void from the outset. In this case, the general assembly decision is regarded as never having come into existence. However, if a general assembly decision is formally valid but substantively void or impossible, this situation is referred to as nullity. A decision afflicted by nullity can also be characterized as a stillborn decision. In both cases, it is not possible to consider the general assembly decision as valid. The lawsuit that can be filed against general assembly decisions afflicted by absence or nullity is a declaratory action. However, if a general assembly decision is formally and substantively proper but violates the law, the articles of association, or particularly the principle of good faith, then the possibility of annulment must be discussed. The second part of this series will provide a detailed explanatory article on the annulment of general assembly decisions and the annulment lawsuits that can be brought against such decisions.
REFERENCES
Azize Akgül, “Anonim Şirketlerde Genel Kurul Kararlarının Geçersizlik Halleri”, Kocaeli University Faculty of Law Journal January-February 2019, Volume: 10, Issue: 19-20, (“Akgül”) pp.129-163
Burak Polat, “Anonim Şirket Genel Kurul Kararlarına Karşı Açılan İptal Davası Sırasında Pay Devrinin Davacılık Sıfatına Etkisi” , TAAD , January 2021 , Issue: 45 , p.3
Assistant Professor Sami Kocabıyık, “Anonim Şirket Olağan Genel Kurul Toplantısının Zamanında Yapılmamasının Doğurduğu Hukuki Sorunlar”
Mehmet Cemil Türk, “Anonim Şirketlerde Genel Kurul Kararlarının İptali”, Selçuk University Social Sciences Institute, Department of Private Law, Master's Thesis, Konya, 2018 , p. 82
Mustafa Yavuz, “Anonim ve Limited Şirket Genel Kurul Kararlarının İptalinde Etki Kuralı”, Customs and Trade Journal, December 2021, Issue: 26, (“Yavuz”) p.54
Oruç Hami Şener, “Teorik ve Uygulamalı Ortaklıklar Hukuku”
Prof. Dr. Hasan Pulaşlı, “Anonim Şirket Genel Kurul Kararlarının Sakatlığı ve Müeyyidesi”
Ünal Tekinalp, “Tek Kişilik Ortaklık I” , p.230
Assistant Prof. İsmail Kırca, Associate Professor Dr. Feyzan Hayal Şehirali Çelik, Associate Professor Dr. Çağlar Manavgat, “Anonim Şirketler Hukuku Volume I” , p.64 / Emine Bilgetekin, “Anonim Ortaklık Genel Kurul Kararlarının İptalinde Davacı Sıfatı”, Marmara University Institute of Social Sciences, Department of Private Law, Master's Thesis, İstanbul 2019, p.39
A joint-stock company is a legal entity with a fixed capital divided into shares, where liability for debts is limited solely to the company’s assets, and the shareholders are only liable up to the amount they have committed to the company. These companies are established to conduct and sustain a wide range of commercial activities and, due to their preference over other company types, have a significant impact on the economy. A joint-stock company has two mandatory founding bodies: the board of directors and the general assembly. While the board of directors primarily performs managerial functions, the general assembly operates as the decision-making mechanism. In the general assembly, each shareholder has the right to express themselves and participate in decisions regardless of the number or ratio of shares held. This is because shareholders in joint-stock companies hold many rights, including attending the general assembly and voting. The structure, duties, rights, and obligations of the general assembly in joint-stock companies are regulated under the Turkish Commercial Code No. 6102. Additionally, the provisions regarding the convening and decision-making of the general assembly are set out in Article 409 and the subsequent articles of the same Code. The general assembly is the body that makes decisions in cases explicitly stated in the articles of association and the Turkish Commercial Code No. 6102. However, the decisions made by the general assembly may not always be fully accepted or may not comply with legal regulations. The Turkish Commercial Code No. 6102 contains provisions on the legal remedies available against such general assembly decisions. This study is prepared in two parts. The first part primarily discusses the general assembly organ of joint-stock companies and its overall working structure, general assembly meetings, decisions made, and the legal nature of these decisions. It also addresses the regulations concerning the invalidity of general assembly decisions within the relevant legal framework. Subsequently, it will cover the types of declaratory actions that can be filed against general assembly decisions on grounds of nullity and voidness.
I. GENERAL ASSEMBLY AND GENERAL ASSEMBLY DECISIONS IN JOINT-STOCK COMPANIES
1) General Assembly
A joint-stock company is a type of legal entity with a defined capital divided into shares, where the company is solely liable for its debts with its assets, and the shareholders are only liable up to the amount they have committed to the company. [1] A joint-stock company acquires its legal entity status upon registration in the commercial registry. [2]
According to the Turkish Commercial Code No. 6102 (“TCC”), a joint-stock company has two founding bodies: one is the board of directors, and the other is the general assembly. In the absence of either of these bodies, the dissolution of the legal entity may be considered.
The board of directors is a body composed of one or more persons appointed by the articles of association of the joint-stock company or elected by the general assembly, tasked with managing and representing the company. [3] The duties and authorities of the board of directors are determined by the articles of association and the Turkish Commercial Code.
The general assembly is a body composed of the shareholders or their authorized representatives, which makes decisions on matters explicitly stated in the articles of association and the Turkish Commercial Code. In other words, the general assembly is an organ tasked with discussing and resolving predetermined agenda items upon a properly conducted invitation of the shareholders or their authorized representatives. In accordance with the principle of adherence to the agenda, the general assembly reviews the agenda items and makes decisions on these matters by the votes of the shareholders or authorized representatives. [4] At the general assembly meeting, discussions are held, and decisions are made by voting on matters such as the election of company organs, the board of directors’ annual report, determination of the distribution ratios of profit and earnings shares, discharge of board members, as well as other issues deemed necessary regarding the company’s activities during the fiscal period. The general assembly also has non-transferable duties and powers, which are explicitly listed in the Turkish Commercial Code. [5]
2) General Assembly Meeting
The regulations regarding the convening and decision-making of the general assembly are set forth in Article 409 and the following articles of the Turkish Commercial Code. The general assembly can convene in two forms: ordinary general assembly meeting and extraordinary general assembly meeting. These general assembly meetings are held at the company’s headquarters. However, it is possible to designate a meeting place different from the company’s headquarters through the articles of association.
The general assembly is divided into two groups based on the manner of convening: convened and un-convened, as well as physical and electronic.[6] Pursuant to the Turkish Commercial Code, in a convened general assembly meeting, shareholders are called to the meeting by a notice published in the manner specified in the articles of association, on the company’s website, and in the Turkish Trade Registry Gazette. The call for each general assembly meeting, excluding the announcement and meeting days, is made at least two weeks prior to the meeting date. Shareholders registered in the share ledger, as well as those who have previously submitted share certificates or documents proving share ownership to the company and have provided their addresses, are notified of the meeting date, agenda, and the newspapers in which the notice has been or will be published by registered mail with return receipt requested.
a) Ordinary General Assembly Meeting
The general assembly convenes once a year as an ordinary meeting and, if necessary, as an extraordinary meeting. According to the Turkish Commercial Code, ordinary general assembly meetings must be held within three months following the end of each fiscal year. The fiscal year is accepted as the company’s financial year. During the ordinary general assembly meeting held within three months after the fiscal year ends, the election of corporate bodies, examination of financial statements, evaluation of the board of directors’ annual report, determination of the method for using profits and the distribution rates of dividends and profit shares, discharge of the board members, and discussions on other matters related to the fiscal period take place, followed by resolutions. Since this meeting is required to be held regularly every year, it is referred to as the ordinary general assembly meeting.
b) Extraordinary General Assembly Meeting
An extraordinary general assembly meeting is held in urgent situations and when the company needs to convene outside of regular times. The agenda for extraordinary general assembly meetings is not specifically defined in the Turkish Commercial Code; however, it is possible to include and discuss any matter within the authority of the general assembly, including those normally on the agenda of ordinary general assemblies. The agenda for the extraordinary general assembly meeting is determined by the party calling the general assembly to convene urgently.
In joint-stock companies, the general assembly can be convened by the body or person authorized by the Turkish Commercial Code and designated in the articles of association. [7] Accordingly, those authorized by the Turkish Commercial Code to call the general assembly for an extraordinary meeting are the board of directors, a sole shareholder with court permission, minority shareholders, and liquidators. Meeting calls made by bodies and/or persons not authorized by the Turkish Commercial Code or the company’s articles of association to convene the general assembly are invalid.
3) Legal Nature of General Assembly Resolutions
Resolutions adopted by the general assemblies of joint-stock companies are decisions formed by the votes of shareholders or their authorized representatives and have the nature of a legal transaction. [8] Indeed, general assembly resolutions consist of declarations of will that produce legal effects. However, whether these resolutions constitute a unilateral legal act or a multilateral legal act is debated in doctrine.[9] Nevertheless, since it is accepted that resolutions adopted by the general assembly are legal transactions, the invalidity of these resolutions possessing the nature of legal transactions may arise. As nullity, voidness, and annullability of general assembly resolutions constitute distinct forms of invalidity, the lawsuits that can be filed in these cases differ accordingly and are separately regulated in the Turkish Commercial Code.
II. LAWSUITS FOR DECLARATION OF NULLITY THAT CAN BE FILED AGAINST GENERAL ASSEMBLY RESOLUTIONS DUE TO NULLITY
Since general assembly resolutions are legal acts, they must fulfill certain conditions to be considered valid acts. For example, compliance with mandatory legal rules, not being contrary to the articles of association, conforming to the principle of good faith, and meeting the quorum requirements for meetings and decisions are some of the conditions that a valid general assembly resolution must satisfy.[10]
The ground of nullity for general assembly resolutions is not explicitly regulated in the Turkish Commercial Code. However, due to their legal nature, it is possible for general assembly resolutions to be defective due to nullity. Accordingly, if mandatory formal legal rules are not complied with when adopting general assembly resolutions, such resolutions will be defective due to nullity. Examples of such defects include failure to reach the required quorum, the call for the general assembly meeting being made by an unauthorized organ or person, convening the meeting without following the proper notice procedure or no notice being given at all, failure to have the Ministry of Customs and Trade official attend the meeting when required by the Turkish Commercial Code, the meeting minutes not being signed by the Ministry representative, or in a meeting held without a call, at least one shareholder leaving the meeting prematurely. Resolutions taken under these circumstances and resolutions on matters outside the agenda may be deemed null and void. However, doctrinal opinions also suggest that these decisions could be subject to annulment or cancellation, so each decision should be examined on a case-by-case basis.[11]
If a legal act is defective due to nullity, it is considered never to have occurred. Therefore, general assembly resolutions deemed null and void are treated as if they never existed and have no legal effect or consequences. Consequently, such resolutions cannot be enforced, nor can they be registered or published in the trade registry.[12] A general assembly resolution deemed null, and void cannot gain validity in any way.
Nevertheless, it is possible to file a declaratory action to establish that a general assembly resolution is defective due to nullity. With such an action, the nullity of the resolution can always be claimed, and the judgment given at the end of this declaratory action will be explanatory in nature. This action is not subject to any statute of limitations or forfeiture period. Moreover, any person with a legal interest may file a declaratory action based on nullity against the company.[13] However, whether the legal interest requirement continues throughout the declaratory action proceedings is also important. In any case, the court is obliged to carefully examine ex officio whether the contested general assembly resolution is defective due to nullity.[14]
Although the Turkish Commercial Code does not explicitly regulate nullity, it is necessary to accept that the procedural rules applicable to declaratory actions filed due to annulment also apply to declaratory actions filed due to nullity. Therefore, procedural matters such as the competent court and the duties of the board of directors regarding declaratory actions filed for nullity are not detailed here, but it should be noted that the rules applicable to declaratory actions filed for annulment, which will be explained in detail below, also apply in this context.
III. DECLARATORY ACTIONS FOR NULLITY THAT CAN BE FILED AGAINST GENERAL ASSEMBLY RESOLUTIONS
In the Old Turkish Commercial Code No. 6762, there was no provision regarding nullity of general assembly resolutions; however, with the New Turkish Commercial Code No. 6102, alongside annullability, nullity of general assembly resolutions was also regulated under Article 447. The nullity concept is defined under Article 27 of the Turkish Code of Obligations No. 6098 (“TCO”) titled “Absolute Nullity” as: “Contracts that violate mandatory provisions of the law, morality, public order, personality rights, or whose subject matter is impossible are absolutely null and void.” Article 447 of the TCC explains nullity as: “Resolutions of the general assembly are null and void, particularly if they: a) restrict or eliminate shareholders’ inalienable rights to attend the general assembly, minimum voting rights, litigation, and rights granted by law; b) limit shareholders’ rights to obtain information, inspection, and audit beyond legally permitted scope; c) distort the fundamental structure of the joint-stock company or contravene provisions on capital protection.”
Although the TCC includes a provision illustrating nullity, it is widely accepted in doctrine that the general provisions of Article 27 of the TCO should also apply to general assembly resolutions.[15] In our view, the regulation in TCC Article 447 offers a general evaluation, and the more encompassing general provision in TCO Article 27 should also apply to general assembly resolutions. Accordingly, even if a general assembly resolution appears valid formally, it should be considered null and void if it contradicts mandatory legal rules, morality, ethics, public order, or if its subject matter is inherently impossible.
If a legal transaction is defective due to nullity, that legal transaction is invalid from the outset. The most important difference between nullity and voidness of a general assembly resolution at this stage is that in the case of nullity, a formally existing general assembly resolution has actually been made. However, this general assembly resolution, which is void in substance, is considered stillborn in doctrine.[16] Therefore, even if a general assembly resolution defective due to nullity formally exists, it will not produce any legal effect or result. In fact, even if the cause of the nullity later ceases to exist, the void general assembly resolution will not gain validity.[17] Another difference between nullity and voidness is that in the case of a null general assembly resolution, the claim of nullity cannot be raised in bad faith, contrary to the principle of good faith. However, the principle of good faith has no effect on the assertion of voidness.[18]
Under the circumstances listed in Article 447 of the Turkish Commercial Code (“TTK”) and Article 27 of the Turkish Code of Obligations (“TBK”), the relevant general assembly resolutions are deemed absolutely null and void. It is possible to file a declaratory action to establish that such a general assembly resolution is null and void due to nullity. Through this declaratory action, the nullity of the general assembly resolution can be asserted at any time, and the judgment rendered at the conclusion of this action will have an explanatory nature. This action is not subject to any statute of limitations or preclusive period. Moreover, the declaratory action based on nullity may be brought against the company by any person who has a legal interest. The competent court for this declaratory action is the commercial court of first instance. The authorized commercial court is the court in the location of the company’s headquarters.
There is a dual procedural distinction: if the company or shareholders file a lawsuit for the nullity of the general assembly resolutions on behalf of the joint-stock company, the procedure under Article 1521 of the Turkish Commercial Code applies, and this lawsuit must follow the summary procedure. If the party filing the declaratory action for nullity of the general assembly resolutions is the bankruptcy administration or persons with a legal interest, the written procedure applies since there is no special provision otherwise.
Pursuant to Article 448 of the Turkish Commercial Code, if a declaratory action is filed for the nullity of a general assembly resolution, the board of directors must duly announce the filing of the lawsuit and the hearing date. If the legal entity has a website, this announcement must also be published there. The court may require plaintiffs to provide security. According to Article 449 of the Turkish Commercial Code, the court may decide to suspend the execution of the contested resolution after hearing the board members.
If the court rules that the resolution is null and void and this judgment becomes final, the decision will be binding on all shareholders. Pursuant to Article 450 of the Turkish Commercial Code, the board of directors is obliged to immediately register a copy of this decision with the trade registry and publish it on the company’s website.
If the nullity action was filed maliciously, the plaintiffs shall be jointly and severally liable for the damages suffered by the company pursuant to Article 451 of the Turkish Commercial Code.
IV. CONCLUSION
The general assembly is the organ in joint-stock companies that performs the function of decision-making. For this reason, the general assembly holds significant importance for the legal entity of a joint-stock company. Accordingly, the principles governing the convening and decision-making of the general assembly are detailed in the Turkish Commercial Code No. 6102. The general assembly can convene in two forms: ordinary and extraordinary. In both types of meetings, the agenda items are discussed and concluded. It is possible to adopt either positive or negative decisions regarding these items. In any case, the decisions made as a result of the general assembly meeting constitute a legal transaction. Since these decisions are considered legal transactions, they may be subject to invalidity. The general provisions and cases of invalidity are regulated under the Turkish Code of Obligations No. 6098. In addition, the Turkish Commercial Code No. 6102 also contains provisions concerning the invalidity of general assembly decisions. Although the Turkish Commercial Code No. 6102 regulates only nullity and voidability for general assembly decisions, the absence (yokluk) of such decisions may also arise. Accordingly, three distinct types of invalidity—absence, nullity, and voidability—must be considered regarding decisions made by the general assemblies of joint-stock companies.
If the formal elements of the general assembly decisions are absent, the decision is considered null and void from the outset. In this case, the general assembly decision is regarded as never having come into existence. However, if a general assembly decision is formally valid but substantively void or impossible, this situation is referred to as nullity. A decision afflicted by nullity can also be characterized as a stillborn decision. In both cases, it is not possible to consider the general assembly decision as valid. The lawsuit that can be filed against general assembly decisions afflicted by absence or nullity is a declaratory action. However, if a general assembly decision is formally and substantively proper but violates the law, the articles of association, or particularly the principle of good faith, then the possibility of annulment must be discussed. The second part of this series will provide a detailed explanatory article on the annulment of general assembly decisions and the annulment lawsuits that can be brought against such decisions.
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Turkish
