Postponement of General Assembly Meetings in Joint Stock Companies
Introduction
Under Turkish law, the procedures and principles of the general assembly meetings of joint stock companies are regulated under the Turkish Commercial Code[1] (“TCC”) numbered 6102 and the Regulation on the Procedures and Principles of General Assembly Meetings of Joint Stock Companies and Representatives of Ministry of Customs and Trade to be Present at These Meetings[2] (“Regulation”). These provisions include the general assembly call procedure, announcement, agenda, opening and conduct of the meeting, meeting and decision quorums, as well as the conditions under which the meeting may be postponed, and the rules to be applied in the second meetings to be held in the event of postponement. This Newsletter discusses the conditions stipulated by the TCC and/or the Regulation for postponement and the provisions to be applied in case of postponement.
Circumstances where the General Assembly Meetings may be Postponed
- Failure to Meet Meeting or Decision Quorum
Although the postponement of a meeting due to failure to attain meeting or decision quorum is not explicitly regulated under the TCC, Article 418/2 implicitly allows postponement through mentioning a second meeting to be held if the quorum is not reached.
Nevertheless, according to Article 28/1 of the Regulation, the meeting shall be postponed if the minimum quorum envisioned by the law and the articles of association is not reached before the meeting starts, or if it is understood as a result of the roll call that is made during the meeting that the shares present at the meeting are below the decision quorum calculated according to the list of attendees before the meeting. The Regulation does not provide a provision as to who shall decide on the postponement. In this case, one should accept that the meeting shall be postponed by the chairman.
- By the Decision of the General Assembly
The second paragraph of Article 28 of the Regulation also provides an opportunity that is not regulated under the TCC. According to this Article, the general assembly duly called pursuant to the law and the articles of association may be postponed only before discussion of the agenda commences, and by a decision to be taken by the general assembly[3]. The meeting as mentioned here is a meeting in which the meeting quorum is met. Otherwise, it is not possible for the general assembly to take a postponement decision since meeting quorum is not met. The Article does not require any reason for the postponement[4].
- Requests regarding the Discussion of the Financial Statements
Article 420 of the TCC entitles the minority shareholders to request postponement of discussion of financial statements and affiliated issues. Accordingly, upon the request of the shareholders holding one-tenth of the capital in non-listed companies, and one-twentieth in publicly held companies, the discussion of such matters shall be postponed to one month hence. Article 413/3 of the TCC is a guide in the determination for which subjects are “issues affiliated with the discussion of financial statements”. According to the Article, the dismissal of the members of the board of directors and the election of new members are affiliated with the discussion of the year-end financial statements.
A decision from the general assembly is not necessary for a postponement to be made as per the Article; the meeting shall be postponed by the decision of the chairman, upon request. Article 28/3 of the Regulation explicitly states that postponement by the chairman is compulsory, if requested. All objections to be raised by the minority shareholders on the financial statements must be made at the first meeting and written in the minutes.
In order to postpone the discussion of financial statements again, at the second meeting following the postponement of the meeting upon request of the minority shareholders, either for the same or different reasons, the points of the financial statements that have been objected to and recorded in the minutes should not have been answered by the concerned parties in accordance with the principles of honest accountability criterion. In that case, upon the request of postponement by the minority, the meeting shall be postponed to one month hence, once again. The principle of honest accountability constitutes clarification that covers both meticulous and truth accountability principles; therefore, it refers to the presentation of meticulous, accurate, and true facts and outcomes that enables auditing and, therefore, allows shareholders to consciously exercise their rights[5].
- For Security Reasons
Article 28/5 of the Regulation regulates a postponement situation that is not listed under the TCC. Pursuant to the Article, through taking the opinion of law enforcement officers and the Ministry representative, if any, the general assembly may be postponed by the chairmanship upon the understanding that the meeting cannot be held in a healthy manner for security reasons. The general assembly does not need to take a separate decision for this. As a matter of fact, the situation regulated under this Article is the situation where a general assembly meeting cannot actually be held. In such a case, the general assembly cannot be expected to take such a decision.
- Failure to Provide Electronic General Assembly System
Article 1527 of the TCC allows for general assembly meetings to be held electronically. Pursuant to the Regulation on Electronic General Assemblies to be held in Joint Stock Companies[6] (“EGA Regulation”), in all general assembly meetings of joint stock companies implementing the electronic general assembly system, the right-holders and their representatives shall be enabled to exercise their rights to participate in the meeting, to make suggestion, to express opinions and to vote through the established electronic system.
Article 28/6 of the EGA Regulation regulates a postponement circumstance specific to companies that have implemented this system. According to the article, if it is determined that the conditions stipulated under the EGA Regulation are not met in the general assembly meetings of companies implementing the electronic system for participation in the general assembly meetings, the chairmanship of the meeting may postpone the meeting by taking the Ministry representatives’ opinion. It is worth mentioning that according to Article 32/1-b of the Regulation, a Ministry representative must be present at all general assembly meetings of the companies which implement electronic system for participation in the general assembly meetings.
Procedures and Principles of the Second Meeting
According to Article 21/2 of the Regulation, provided that the agenda is unchanged, if the meeting is postponed due to the absence of quorum, the request of the minority, the decision of the general assembly, or for any other reason, the meetings that are to be held are legally deemed as continuation of the previous meeting. Regarding the procedures and principles of these meetings, comprehensive regulations exist within the various articles of the Regulation.
Time of Meeting
Upon postponement of the discussion of financial statements upon the request of the minority, the second meetings shall be held one month hence. According to Çamoğlu, this is the minimum period granted in favor of the minority, and the meeting may be postponed for more than one month[7].
The second meeting to be held due to the absence of meeting or decision quorum in meetings where the amendments to the articles of association are discussed must be held within one month at the latest.
Call for Meeting
In the event of a postponement, the general assembly shall be called for the second meeting based on the call procedures stipulated in the law and/or in the articles of association. Pursuant to Article 11/1-e of the Regulation, the reason for postponement, as well as the meeting quorum, must be indicated in the announcements to be made and in letters to be sent to shareholders for this purpose. Article 10/3 of the Regulation expressly states that the provisions included in the call for the first meeting with respect to the call for the second meeting to be held in the event of failure to meet the quorum, are invalid.
Paragraph 4 of Article 10 of the Regulation, which concerns the call, provides a special regulation for the postponement of the discussion of the financial statements upon the request of the minority, and states that the companies obliged to set up a website must publish the announcement to be made on the website no later than five days after the date of the postponement decision.
Quorums to be applied
According to Article 418/1 of the TCC which regulates the ordinary meeting quorum in general assembly meetings, if the shareholders or their representatives corresponding to one quarter of the capital, at a minimum, are not present in the first meeting, no quorum is required for the second meeting to be held. Whatever the amount of capital they represent, the shareholders or their representatives present at the second meeting are authorized to negotiate and decide. Decisions shall be taken with the majority of the votes of those who are present at the meeting.
On the other hand, Article 421 of the TCC, which regulates meeting and decision quorums for the amendment to the articles of association, if at least one-half of the capital is not represented in the first meeting, the required meeting quorum for the second meeting is the representation of at least one-third of the capital. Decisions shall be taken with the majority of those present at the meeting. The meeting to be held after the expiry of the one month period provided for the second meeting shall not be deemed to be the second meeting, but will be considered to be the first meeting; therefore, the meeting quorum shall still be one-half of the capital[8].
Finally, if the quorums required for the general assembly meetings in which the amendment to the articles of associations indicated under Articles 421/2 and 421/3 of the TCC will be discussed are not met in the first meeting, the following meetings shall also require the same quorums. Article 22 of the Regulation enumerates all of the general assembly decisions that will require the same quorum at the second meeting.
Other Issues
Article 15/1-h of the Regulation mentions the minutes of the previous meeting among the documents which are necessary to be present at the second meeting. It is among the duties and powers of the chairmanship of the meeting to determine whether the postponement minutes in question are fully present at the meeting, and to have this so indicated in the meeting minutes. Considering this provision, it is worth mentioning that the postponement must be recorded in the minutes.
Conclusion
According to the TCC and the Regulation, in joint stock companies, it is possible to postpone general assembly meetings in situations where (i) the meeting and decision quorums are not met, (ii) a decision by the general assembly has been taken in such a direction, (iii) the minority requested postponement of the discussion of the financial statements, (iv) security reasons necessitate, and (v) there is a failure to provide electronic general assembly system. In such cases, the general assembly should be called to the meeting again by the competent body in accordance with the call procedures. Special quorums are stipulated under the TCC for second meetings to be held. The detailed provisions of the Regulation on the procedures and principles of these meetings should be adhered to.
[1] TCC (Official Gazette, 14.02.2011, No. 27846) entered into force on 01.07.2012.
[2] The Regulation (Official Gazette, 28.11.2012, No. 28481) entered into force through publication (except Article 19/2-b and the provisions regulating the obligation to announce on the website).
[3] For a criticism of the provision regarding that the decision can only be made before the discussion of the agenda starts, see Çamoğlu (Poroy/Tekinalp): Ortaklıklar Hukuku I, Güncelleştirilmiş 13. Bası, İstanbul 2014, p. 521.
[4] For different opinions about the necessity to indicate a reason, see Pulaşlı, Hasan: 6102 Sayılı Türk Ticaret Kanuna Göre Şirketler Hukuku Şerhi, C. I, Ankara 2011, p. 749, fn. 246. Whether or not this request constitutes abuse of right, see Pulaşlı, p. 749, fn. 347.
[5] Preambles of Articles 200 and 437 of the TCC; Pulaşlı, p. 749.
[6] The Regulation (Official Gazette, 28.08.2012, No. 28395) entered into force on 01.10.2012.
[7] Çamoğlu (Poroy/Tekinalp), p. 521.
[8] Çamoğlu (Poroy/Tekinalp), p. 514.
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