VETO RIGHT ON THE CORPORATIONS 7 September 2021
VETO RIGHT ON THE CORPORATIONS
- WHAT IS THE VETO RIGHT?
Veto right provides the power to restrain a decision to its holder. This right might belong to the one who has the authority to decide on a relevant issue or might belong to more than one person or everyone who has an influence on making the decision. The owner of the right may prevent the given decision by using its veto right, even if all the conditions for making a decision are met.
- WHAT ARE THE TYPES OF VETO RIGHTS
The veto right is classified in terms of the source of the right. Accordingly, the first of these types is the veto right arising from the law.
a) Veto Right Arising From the Law
According to Article 421 of the Turkish Commercial Code No. 6102, several resolutions on the certificate of association, such as the creation of preference shares or the relocation of the company's headquarters abroad, are taken unanimously by the company's shares or its representatives constituting the entire capital. In this case, each stakeholder may take the opposite attitude and prevents the relevant decision from being taken. In this case, stakeholders have a veto right recognized by law.
b) Veto Right Arising From the Contract
The second type of veto right arises from the contract. Here, the right of veto is reflected in the certificate of association or shareholders' agreement with the common will of the stakeholders. The veto right arising from the contract is divided into two as veto right granted to certain share groups on certain issues and veto right granted to certain shareholders. This division is important because the Turkish Commercial Code accepts that the privilege may be granted only to the share. Therefore, the veto right granted to certain share groups on certain issues is considered a privilege. On the other hand, a veto right granted to certain shareholders cannot be considered a privilege. As stated above, the Turkish Commercial Code grants privilege to the share, not to the person or authority. In this case, even though the veto right granted to the shareholders exists, it cannot be considered a privilege. It is described as a contractual right and does not have the characteristics of a right of company law.
The veto right granted in the shareholders' agreement or the certificate of association is not a provision of the actual certificate of association. This non-corporative veto right is evaluated within the scope of the law of obligations, not the company law.
- CONCLUSION
Veto right gives its holder to restrain relevant decision. There are two types of veto rights which are veto rights arising from the contract and veto rights arising from the law. Veto right arising from the contract might be in favor of shares on certain issues or in favor of certain people as well. It should be noted that even if the veto right is granted in favor of certain people with the certificate of association, it will not be considered a provision of the actual certificate of association and will not have any consequences within the framework of partnership law.
