How Can The General Assembly of a Joint Stock Company Convene Without Its Compulsory Organs? 9 June 2017
I. Introduction
The general assembly is amongst the compulsory organs of a joint stock company. It consists of shareholders which give decisions on certain topics provided by the Law such as the nomination, dismissal and acquittal of board of director members and auditors; distribution of profit, revision of articles of association and increase of capital. As a rule, it convenes either as an ordinary or as an extraordinary general assembly. Ordinary general assembly meetings are held within three months as of the end of each financial year and for at least once a year. On the contrary, an extraordinary general assembly meeting may be held anytime if deemed necessary. (Turkish Commercial Code (“TCC”), Art. 409). In addition, minority shareholders are entitled to request the call of General Assembly when certain conditions arise (TCC, Art. 411).
II. General Assembly of a Joint Stock Company without an Executive Organ
One of the compulsory organs of a joint stock company may not exist due to reasons such as the resignation of its members or the expiration of their term of office. If Board of Directors does not exist due to abovementioned reasons, the question of how the general assembly will be held without it arises because Board of Directors is the main organ which is authorized to call the General Assembly to a meeting. This question shall be dealt with under two separate subtitles; the first one is examining the situation when term of office of Board of Directors expires and the other one is resignation of members along with other reasons.
a. Expiration of Term of Office
Pursuant to Art. 362 of the TCC, the members of the board of directors of a joint stock company may be elected for a term up to three years and after the expiration of their term of office, they may be reelected by the general assembly unless otherwise specified in the articles of association of the company. The board of directors is authorized to call the general assembly to a meeting and to set its agenda regardless of whether it is ordinary or extraordinary. The board of directors is still entitled to call the general assembly to a meeting although their term of office has expired (TCC, Art.410/1).
Prior to the adoption of this provision, the Supreme Court accepted by way of purposive interpretation that the board of directors whose term of office expired could call the general assembly to a meeting only to reelect new members of the board of directors and it ruled that the agenda of the general assembly should be set accordingly.
In this regard, the board of directors whose term of office has expired is still authorized to call the general assembly to a meeting until a new board of directors is formed.
b. Resignation and Other Reasons
In the event that the joint stock company has no board of directors either due to resignation of its members or due to other reasons, alternative ways of call to a general assembly meeting shall be evaluated. If the quorum cannot be reached, the call to a general assembly meeting can be made by individual shareholders with the decision of the Commercial Court of First Instance, as stated in TCC, Art.530.
i. Authorization of Individual Shareholders to Call the General Assembly to a Meeting
According to Paragraph 2 of Article 410 of the TCC, in cases where the board of directors, which is mainly authorized to call for a general assembly, do not convene consistently, do not exist or the quorum is not reached or it is not possible for it to be reached, one of the shareholders can apply to the court with the request for the general assembly be held. The decision of the court upon this request is final.
The individual shareholder must prove in his application that the right to call the general assembly exists, meaning that the board of directors cannot consistently convene and that it is not possible for the quorum to be reached, in addition to stating the agenda and the reasons why it is necessary.
ii. Minority Shareholders
Shareholders that hold at least one tenth of the capital may request the board of directors in a written manner to call the general assembly to a meeting by indicating the retarding reasons and the related agenda or may request the addition of the topics that they want to discuss to the agenda of the general assembly meeting which is already agreed to be held. The requests are made through a notary. If the board of directors accepts the request, the call to a general assembly meeting will be made in a manner as to enable the convention of the general assembly within 45 days. Otherwise, the minority shareholders who have made the related request will call the General Assembly to meeting. (TCC Art.411).
If these requests are expressly refused or not responded to within seven days, the minority shareholders may take their requests to the competent court where the head office of the company is located. If the court finds that the request for a meeting is reasonable, it will appoint a trustee whose duty is to make the invitation to the general assembly.
In the event that there is no executive board member or the quorum cannot be reached, the request of the minority shareholder will not be responded and accordingly, the minority shareholder would apply to the court for the same to appoint a trustee in order to gather the general assembly of the joint stock company that has no board of directors.
iii. Lack of compulsory organs regulated under Article 530 of the TCC
According to Article 530 of the TCC if one of the compulsory organs is missing or general assembly cannot be held for a long time, shareholders, creditors of the company or upon the request of Ministry of Customs and Trade, may apply to commercial court of first instance where the Company's head office is located and the court may take necessary precautions which are requested by one of the parties.
The court may grant a specific period for the company to take all the necessary actions in order to maintain the compliance of the same with the related legislations, by also consulting to the board of directors of the company. If this period elapses and the company still fails to comply with the laws, the court may order the dissolution of the company.
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