I. INTRODUCTION
Within the scope of the Turkish Commercial Code No. 6102 (“TCC”), one of the invalidation cases of the resolutions of the board of directors and general assembly of joint stock companies is nullity. In this framework, null decisions contain founding elements, however they are ineffective and invalid from the beginning, since they do not contain validity conditions that are material enough to concern public order.1
The nullity of the board of directors' resolutions of joint stock companies is specifically regulated in Article 391 of the TCC, the nullity of the general assembly resolutions, on the other hand, is specifically regulated in Article 447 of the TCC. However, due to the use of the phrase “especially” in the relevant provisions, the reasons for nullity are not limited to the cases specified in these provisions. The fact that the resolutions of the board of directors and the general assembly are contrary to the mandatory provisions of the law, morality, public order and personal rights pursuant to Article 27 of the Turkish Code of Obligations numbered 6098, leads to the nullity of these resolutions.2 Specific nullity reasons of the board of directors and the general assembly will be included within the framework of this article.
II. NULLITY OF BOARD OF DIRECTORS' RESOLUTIONS
Determination of nullity may be demanded due to special reasons listed below in the framework of Article 391 of the TCC regarding the decisions of the board of directors that is responsible for the management and administration of joint stock companies.
a. Resolutions Contrary to the Equal Treatment Principle
The principle of equal treatment is the equal treatment of shareholders under equal conditions, according to Article 357 of the TCC. The board of directors, which is the administrative and representative body of joint stock companies, is obliged to treat shareholders equally under equal conditions, when making decisions. For example, the board of directors cannot discriminate among the shareholders by allowing the transfer of some shares and banning the transfer of some shares in the transfer of registered shares by using its authority under Article 491 of the TCC3.
b. Resolutions That Do Not Comply with the Fundamental Structure of Joint Stock Companies or Do Not Take into Account the Principle of Protection of Capital
Some of the characteristics that make up the fundamental structure of joint stock companies are the anonymity of the shareholders, the division of the capital into shares, the principle of single debt meaning limited liability with paying the committed capital, the transferability of shares, independent auditing and answerability.
The principle of protection of capital is one of the main principles of a joint stock company. Accordingly, in joint stock companies; the resolutions of the board of directors that are contrary to the provisions of the TCC regarding the minimum capital, the prohibition of the company to acquire or pledge its own shares, the type of assets that can be put as capital in kind, the valuation of the capital in kind, and the issuance of shares at a price below the nominal value are examples of nullity.4
c. Resolutions Violating, Restricting or Complicating the Exercise of Inalienable Rights of the Shareholder
Inalienable rights, in general, are the rights to participate in the general assembly, to be represented and the rights related to it, the right to file liability lawsuits against the directors, the right to demand dividends, the right to receive and review information, the minimum voting right, and the right to be treated equally. Limiting the shareholder's right to represent themselves in the general assembly by exceeding the scope of Article 425 of the TCC5, preventing the participation of the shareholder in some general assembly meetings or making their participation conditional, establishing usufruct rights on the share of a shareholder who owns a total of one share and thus making the them a non-voting shareholder, and limiting the rights of the shareholders to file lawsuits6 are examples of null and void decisions.
d. Resolutions Containing the Non-Transferrable Powers of Other Bodies and Concerning the Transfer of Such Powers
Within the scope of Article 408 of the TCC, the non-transferable duties and powers of the general assembly are important transactions such as amending the articles of association, election of the members of the board of directors and auditors, and granting privileges to the shareholders. Therefore, the execution of a transaction that falls under the non-transferable duties and powers of the general assembly within the scope of the aforementioned article, through the board of directors, causes the nullity of the relevant resolution.
III. NULLITY OF GENERAL ASSEMBLY RESOLUTIONS
The reasons for the nullity of the general assembly resolutions of joint stock companies are based on violations of the main building blocks of joint stock companies, within the framework of Article 447 of the TCC. General assembly resolutions that have the following results are subject to nullity in Article 447 of the TCC:
a. Resolutions Limiting or Eliminating the Shareholder's Right to Participate in the General Assembly, Minimum Vote, Litigation, and the Inalienable Rights of the Shareholder under the Law
The explanations were made in subsection “c” under the heading no. II regarding the scope of the shareholders' inalienable rights. However, in terms of general assembly resolutions, the existence of nullity may also be asserted if the inalienable rights arising from shareholding are limited by a provision to be included in the articles of association.
b. Resolutions Limiting the Shareholder's Right to Obtain Information, Inspection and Auditing Except to the extent Permitted by Law
The shareholder's right to obtain information, inspection and audit is among the indispensable rights. The right to receive information can be denied on the grounds that, company secrets will be disclosed or other company interests that need to be protected may be endangered if the requested information is provided. Explicit permission of the general assembly or a decision of the board of directors is required in order to exercise the right to review. If permission is obtained, the examination can also be carried out through a specialist. The shareholder's right to special audit is subject to the approval of the general assembly under the articles 438 and 439 of the TCC, and if approval cannot be obtained by the minority shareholders, the matter is subject to a request from the court. General assembly resolutions limiting the right to obtain information, and auditing beyond the limits specified herein are null and void.
c. Resolutions That Alter the Fundamental Structure of Joint Stock Companies or are Contrary to the Principle of Protection of Capital
Within the scope of the TCC, resolutions against the principle of single debt, limited liability, protection of capital, and the inalienable rights and powers of the bodies of the joint stock company are invalid as they violate the fundamental structure of joint stock companies.
IV. CONCLUSION
The superstitious decisions of the general assembly and the board of directors in joint stock companies have been mentioned above. Nullity suit is regulated under Article 391 of the TCC for the resolutions of the board of directors and under Article 448 of the TCC for the resolutions of the general assembly, and it is in the nature of a declaratory action. This lawsuit can be filed by all interested parties and will be directed against the company. Null decisions containing gross violations are not subject to a period of deprivation, as they do not constitute an effect. The competent court in nullity cases is the commercial court of first instance, to which the headquarters of the company is located. The decision that is found to be null will be deemed invalid from the beginning.
1 Veysel Başpınar, Partial Nullity of Debt Contracts, Ankara, 1998, p. 23.
2 Yargıtay 11. HD, E. 2017/495, K. 2019/56, T. 07.01.2019
3 Mustafa Yavuz, Invalidity of Board of Directors Decisions in Joint Stock Companies, Customs Trade Journal, 2020, p. 13. https://dergipark.org.tr/tr/download/article-file/1190564
4 Güzin Üçışık, Evaluation of the Regulations Regarding the Invalidity of the Decisions of Board of Directors of Joint Stock Companies in Turkish Law, Journal of Financial Research and Studies, Volume 3, Issue 5, 2011, p. 57-65.
Finansal Araştırmalar ve Çalışmalar Dergisi, Cilt 3, Sayı 5, 2011, s. 57-65.
5 Hasan Pulaşlı, General Principles of Corporate Law, 5th Edition, Ankara, 2017, p.391
6 Ünal Tekinalp, New Law of Capital Partnerships, 3rd Edition, Istanbul, 2013, p.346-347
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