Articles of Association, Shareholders’ Agreement and Shareholding Structure
The articles of association are the company’s fundamental framework registered with the trade registry. A shareholders’ agreement, on the other hand, may establish the shareholders’ own private arrangement on voting, management, financing, share transfers, exit and dispute resolution. The two texts must complement each other; however, not every provision of a shareholders’ agreement binds the company organs, third parties or the trade registry in the same way.
Depending on the company’s commercial objectives, the following matters may be regulated:
- Share classes and privileges
- Rights to nominate and represent on the board of directors
- Meeting and resolution quorums
- Veto rights or important decisions subject to approval
- Financing and obligations to provide additional funds
- Principles of profit distribution
- Financial rights and attendance fees of members of the management body
- Information, reporting and audit arrangements
- Confidentiality, non-competition and non-solicitation of employees clauses
- Restrictions on share transfers
- Rights of pre-emption (önalım), call, put and buy-back rights
- Tag-along and drag-along arrangements
- Mechanisms for resolving management deadlock
- Valuation, exit and liquidation scenarios
- Governing law, jurisdiction and arbitration clauses
The agreement’s compliance with mandatory provisions, the company type and the articles of association is assessed separately.
Share Transfers, Rights over Shares and Investment Transactions
The transfer of a company share is also searched for in everyday usage as a “stock transfer”; however, in joint-stock and limited liability companies it is subject to different rules regarding form, company approval, registration, notification and the share ledger. Signing a transfer agreement does not mean in every case that all company law consequences arise automatically.
In share transactions, the following are
- The seller’s shareholder status and power of disposal
- The type of share, the share certificate and share ledger records
- Restrictions on transfer in the articles of association
- Approval of the general assembly or the management body
- Notary, registration and notification requirements
- Pledges, attachments, usufruct and other restrictions over the share
- Rights of pre-emption (önalım), call, put, buy-back and tag-along rights
- Sale price, payment schedule and price adjustment mechanisms
- Representations and warranties and indemnification obligations
- Non-competition, confidentiality and the transition period
- Tax, competition and sector permits
reviewed as a whole.
In venture capital and early-stage company investments, the term sheet, the distinction between a capital increase and a transfer of existing shares, dilution, share options, founder obligations, investor rights, subsequent investment rounds and the exit framework are addressed separately. The nature and applicability under Turkish law of financing instruments convertible into shares are assessed according to the actual economic and legal structure, not the name of the document used.
Family Companies, Institutionalization and Succession
In family companies, company law, family relationships and inheritance planning often intersect. If the distribution of management authority, the position of family members who do and do not work in the company, profit distribution, share transfers, death or incapacity and the involvement of the new generation in management are not regulated in advance, they may turn into a shareholder dispute.
In this scope, the following are
- Aligning the articles of association and the shareholders’ agreement
- The legal limits of internal arrangements in the nature of a family constitution
- Management, representation and the professional manager model
- Share transfers and restrictions on transfers outside the family
- Death, inheritance and the passing of shares
- Valuation, exit and share buy-out mechanisms
- Succession and continuity of management
- Decision-making and negotiation methods that prevent shareholder disputes
assessed.
Review the Contract and the Authority Together Before a Share Transfer
A share transfer in a limited liability company requires written form and notarized signatures; unless the company agreement provides otherwise, general assembly approval is required. In a joint-stock company, on the other hand, the type of share, whether it is embodied in a certificate and restrictions on transfer are decisive.
What should the shareholders’ agreement resolve?
Decision deadlock, additional financing needs, the value of the share, the payment schedule, tag-along and exit terms must be regulated clearly. Not every provision of a shareholders’ agreement automatically becomes a provision of the articles of association; its effect on the company and on third parties is reviewed separately.
The legal structure of the investment matters as much as its name
Will the investment be made by paying the share price to an existing shareholder, or by contributing capital to the company? This distinction changes who receives the money, the shareholding percentages and the registration steps. For a share option or a financing instrument convertible into shares, form, authority and applicability are checked.
Continuity in a family company
Scenarios of death, incapacity, transfer of management and sale outside the family should be addressed without creating conflicts among the articles of association, the shareholders’ agreement and inheritance planning. A family constitution alone is not the legal basis of all company transactions.
Related detailed page: Guardianship Law, Guardians and Curators