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Exit Right, Does It Do What It Says On The Box?
Investors trust Shareholders Agreements will deliver when the time comes for their Exit. After all, a typical SHA toolbox contains a fancy assortment of drag, tag, call, put options, deadlock mechanisms such as Mexican shoot-out and Russian roulette provisions. Do these various options deliver the solutions they purport to provide and perform as they are drafted in the SHA?... Do they do what it says on the box?
These are indeed valid contractual obligations under Turkish Law and breach of them would trigger a right to compensation for the wronged Investor, if (and this is a big IF) the Investor can quantify and prove the amount of actual damage it suffered due to breach of these obligations. This is easier said than done given that in practice it is challenging to prove damages associated with an Exit that never materialized.
In an ideal world, the wronged Investor should be able to obtain a ruling that will result in the specific performance of its tag/drag/call/put options. However, specific performance is close to impossible under Turkish Law and this is where things get interesting.
What if the SHA was governed by English Law and the dispute resolution mechanism was ICC arbitration? What if the shares are kept with an Escrow? What if the Investor got a share pledge from the other party as collateral? What if there are hefty penalty clauses to motivate the other party to do the right thing? Could off shoring the holding vehicle and the SHA provide more robust remedies? If yes, what are preferable jurisdictions?
So can Investors ensure a smooth Exit in Turkey?
Join us on January 21st for BASEAK and Dentons’ joint webinar to find out.