Türkçe
The measures taken in our country due to Coronavirus (COVID-19) epidemic, definitely affect the internal operations of joint stock and limited liability companies.
In particular, the curfews and the restrictions on meetings and gathering in crowded environments make it difficult and even impossible to physically gather the general assemblies of companies.
So, what are the legal regulations regarding this situation? Are there any sanctions imposed for the failure to convene the ordinary general assembly of companies due to the epidemic? Is it possible to obtain general assembly decisions without physical meeting?
WHAT ARE THE CONSEQUENCES OF THE FAILURE TO CONVENE THE ORDINARY GENERAL ASSEMBLY MEETINGS OF THE JOINT STOCK AND LIMITED LIABILITY COMPANIES WITHIN THE PERIODS IMPOSED UNDER TURKISH COMMERCIAL CODE?
In accordance with Articles 409 and 617 of the Turkish Commercial Code (“TCC”), the ordinary general assembly meetings of joint stock companies and limited liability companies should be held every year within the first three months as from the completion of the related accounting year. Similarly; it is also indicated under Article 7 of the “Regulation on the Rules and Procedures for General Assembly Meetings of Joint Stock Companies and the Representatives of Ministry of Commerce to be Present in Such Meetings” that the general assembly meetings should be held every year within the first three months as from the completion of the related accounting year, in other words until the end of March.
However, neither in the TCC nor in the regulation mentioned, any sanction was envisaged for the ordinary general assemblies that were not held within the mentioned period of three months. Therefore; if a limited liability or joint stock company general assembly is held after March, this will not affect the validity of the related general assembly resolution and even if it is obtained at a later date, the resolutions will be valid, provided that the meeting is duly held in accordance with the legal requirements.
In that respect; it would be possible to postpone the general assembly meeting, which cannot be physically held due to the current conditions, to the soonest date following March on which the conditions would be appropriate. In that case the resolutions of such general assembly will be legally valid and applicable.
IS THERE ANY SANCTION IMPOSED FOR THE FAILURE TO CONVENE THE ORDINARY GENERAL ASSEMBLY MEETINGS DUE TO CORONAVIRUS (COVID-19)?
Many areas and activities such as meetings, conferences, theaters, cinemas, restaurants and cafes are closed, banned or restricted, and citizens are advised to stay at home and maintain social distance within the measures taken by the government for Coronavirus (COVID-19) epidemic. In that respect; of course, it would be possible to consider the general assembly meetings within this scope, unless it is a necessity for the company.
Although, in accordance with the Circular of the Ministry of Internal Affairs dated 16.03.2020 “General meetings of NGOs (Associations, foundations) and all kinds of meetings and activities of the same which require gathering of people, including trainings (except for executive activities requiring enforcement) are temporarily postponed as of 16.03.2020, Monday 24:00”, the general assembly meetings of the commercial companies are excluded within the scope of this Circular. Excluding companies from the scope of the Circular is aimed to ensure the continuity of the activities of the companies and not to prevent their operations in this economically difficult process. In that respect; despite the measures taken within the scope of the coronavirus epidemic, it is possible to convene the general assembly meetings, board of directors’ meetings and board of managers’ meetings of the companies.
However; it is considered that the measures applied in relation to the general assembly meetings of non-governmental organizations within the scope of the above stated Circular, may also be applied in terms of joint stock and limited liability companies. Additionally, in the Presidential Circular No. 2020/3 dated 19.03.2020, it was announced that all kinds of scientific, cultural, artistic and similar meetings and activities to be held in open or closed areas should be postponed until the end of April. Therefore; the purpose of postponing the general assemblies of non-governmental organizations will also be valid for corporate companies and the general assemblies of the same may also be postponed as part of the measures taken to prevent people from gathering in order to protect public health.
For these reasons, the postponement of the general assembly meetings of the companies, failure of the board of directors to make the call for general assembly in this direction and even the cancellation of a call which was made before will not cause any liability and therefore no sanction will be imposed.
IS IT POSSIBLE TO CONVENE THE GENERAL ASSEMBLY MEETINGS ELECTRONICALLY DURING CORONAVIRUS (COVID-19) EPIDEMIC?
It stated under the letter of the Ministry of Commerce dated 19.03.2020 and numbered E-00053356610 that the companies may convene their general assemblies electronically in order to prevent the spread of Coronavirus (COVID-19) epidemic. In accordance with such letter of the Ministry;
“…It is advised to companies that use the electronic general assembly system pursuant to article 1527 of the Turkish Commercial Code and want to hold a general assembly meeting to use their discretion about electronic participation without any physical participation in the general assembly meetings of the shareholders, in order to ensure that meetings are held in a physical environment with the participation of a minimum level of shareholders to prevent the epidemic.
Within this framework, measures have been taken to enable companies, which do not have a provision in company contracts or articles of association that allows board meetings to be held in electronic environment, to convene their meetings through the ‘Electronic General Assembly Meeting System’ and ‘Electronic Board of Directors System’.
Companies should benefit from this opportunity by obtaining support service from the Central Registry Agency and in a way that does not eliminate the obligation to participate in the electronic environment by the right holders, and the contract amendment regarding the provision, which enables the convene of an electronic assembly by the companies, should be made at the first general meeting to be convened thereafter.
In accordance with article 1527 and subsequent articles of the TCC; in order for companies to hold general assembly meetings electronically, a provision must be included in the company’s articles of association. In this context; with the said letter, it was attempted to enable the meetings, which are planned to be held in the period of the epidemic, to be held through the “Electronic General Assembly System” and “Electronic Board System” even there is no provision in the articles of association that allows meetings to be held electronically.
However; there is no legal basis for the regulation imposed under such letter of the Ministry, which allows companies to hold their general assembly meetings in electronic environment although the same do not have any provision to allow electronical meetings. As stated above, it is clearly regulated under the TCC that there should be a provision under the articles of association of joint stock and limited liability companies to hold general assembly meetings electronically. It is not legally possible for the Ministry or any of its Directorates to impose a new regulation which is against an explicit provision of TCC. Therefore; since the letter of the Ministry of Commerce is against the explicit provisions of TCC, complying with such new regulation may cause problems for companies in future.
Participation in the general assembly is one of the most fundamental rights of shareholders. In the event that a company, which does not have a provision under its articles of association to allow electronical meeting, conducts its general assembly meeting electronically in line with any administrative decision, the shareholder deprived of this right to attend such meeting shall have the authority to exercise his legal rights. For companies which have a general practice to convene general assembly meetings electronically and have a provision under their articles of association in that respect may continue to hold meetings electronically during the epidemic. However, such application may cause some shareholders to deprive of their shareholding rights in a company which has not yet tried such electronical meeting system and do not have legal ground to apply such option. For example; under the current circumstances, it would not be possible for the shareholder to make the necessary preparation and transactions for electronic participation, such as receiving an electronic signature, etc.
In that respect; the shareholder, who is deprived of the right to attend the general assembly or has difficulty in using the shareholder rights, may request for the cancellation of the relevant general assembly decision. However, in this case, such shareholder should prove the existence of the situations specified under Paragraph 1/b of Article 446 of the TCC.
IT IS POSSIBLE FOR JOINT STOCK AND LIMITED LIABILITY COMPANIES TO COLLECT SIGNATURES OF GENERAL ASSEMBLY RESOLUTIONS BY CIRCULATION?
In accordance with 4th Paragraph of Article 617 of the Turkish Commercial Code; “Unless any shareholder requests for an oral meeting, general assembly decisions can be made by taking the written consent of other shareholders to the proposal of one of the shareholders regarding the agenda item. Submitting the same proposal for the approval of all shareholders is required for the validity of the decision.” Based on the above stated provision, it is explicitly regulated that general assembly resolutions can be signed by circulating without having a physical meeting in limited liability companies.
However, a similar regulation is not included for joint stock companies under the TCC. Nevertheless; if a resolution is obtained by circulating in joint stock companies and no shareholder object to this method and/or apply for the annulment of the said resolution, such general assembly meeting resolution will be valid and applicable.
ERKUT LAW OFFICE
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