Authors: Corporate Law Department, Prof. Dr. Ali Paslı, Att. Mustafa Şahin

Introduction

In the structure of a joint stock company, the relationship among shareholders is governed not only by the provisions of the Turkish Commercial Code (“TCC”) and the articles of association, but—particularly in structures involving institutional investors, venture capital funds, and strategic investors—many critical aspects relating to the operation of the company may also be regulated through a shareholders’ agreement (“SHA”) executed among the parties. The principle of freedom of contract enshrined in Article 12 of the Turkish Code of Obligations No. 6098 (“TCO”) allows shareholders to elaborate the partnership relationship at a contractual level, provided that such arrangements do not contravene the mandatory provisions of the TCC or public order. Within this framework, pursuant to Articles 26 and 27 of the TCO, contractual freedom is limited by mandatory rules, morality, public order, and personal rights; these limits constitute the normative framework determining the validity of SHA provisions.

An SHA is a contract of a relative (inter partes) nature governing the obligational relationship among shareholders. Within the framework drawn by the articles of association, it regulates—at a more finely calibrated and relative level—the obligations undertaken by shareholders toward each other and toward the company, the manner in which rights are exercised, and the parties’ intentions regarding the future of the company. For this reason, the SHA is positioned as a “complementary” legal instrument that shapes both the corporate structure and the economic balance among shareholders.

The Legal Nature of the SHA and Its Relationship with the Articles of Association

An SHA is, under the law of obligations, a contract of a relative nature. As a rule, its parties are the shareholders; in certain structures, the company itself may also be included as a party. However, unlike the articles of association—which constitute the fundamental charter of a joint stock company—the SHA is not registered with the trade registry nor published, and therefore does not acquire publicity vis-à-vis third parties. Consequently, the rights and obligations arising from an SHA are, as a rule, binding only upon its parties and are enforced within the framework of general contractual remedies and the sanctions stipulated in the agreement in cases of breach of obligation or undertaking.

The articles of association, by contrast, constitute the constitutive document of the company under the TCC, determining the company’s organs, share classes, privileges, and decision-making mechanisms. Provisions included in the articles of association and registered with the trade registry and published in the Turkish Trade Registry Gazette produce effects vis-à-vis third parties by virtue of the principle of publicity. For this reason, corporate arrangements such as management or profit participation privileges granted to share classes, or increased quorums in the general assembly, must be reflected not only in the SHA but also in the articles of association; otherwise, such rights cannot be directly asserted against third parties or corporate bodies.

Indeed, pursuant to Articles 478 and 479 of the TCC, privileges and share class arrangements must be stipulated in the articles of association in order to be effective against third parties and to alter the balance of authority and responsibility among corporate organs. Regulating such matters solely within an SHA limits their effect to a relative obligational relationship under the law of obligations.

Typical Subject Matters Regulated in SHAs

The scope of an SHA is determined by party autonomy; the law does not prescribe a closed framework for such agreements. In practice, however, a certain degree of standardization has emerged over time.

The first axis concerns the exercise of shareholder rights. Provisions relating to conditioning share transfers, restricting transfers for certain periods, subjecting transfers to approval, granting pre-emptive rights to other shareholders under specified conditions, establishing option mechanisms for the sale or purchase of shares upon the occurrence of certain events, and anti-dilution provisions protecting investors against dilution in capital increases fall within this axis. The critical issue here is drawing the fine line between imposing new obligations on shareholders in a manner prohibited by law and contractually regulating the technical and economic conditions of share transfers. In this respect, Article 329/2 of the TCC is of particular importance, as it provides that shareholders may not be imposed, through the articles of association, with obligations other than the obligation to contribute capital. Accordingly, additional funding obligations, conditional sale–purchase undertakings, or personal performances may, as a rule, be regulated in an SHA; however, such obligations must be regarded not as internal “shareholder obligations” vis-à-vis the company, but as personal obligations arising among the contracting shareholders.

Furthermore, within the framework of Articles 491 and 492 of the TCC concerning the restriction of the transfer of registered shares, restrictions included in the articles of association produce effects vis-à-vis third parties, whereas transfer restrictions stipulated solely in an SHA do not extinguish shareholder status before the company or third parties, even if the transfer is effected in breach of contractual obligations. In such cases, only contractual remedies under the law of obligations—such as termination or damages—may be asserted against the breaching party.

The second axis concerns corporate governance and management. The composition of the board of directors, representation rights of specific share classes on the board, and mechanisms such as information rights, audit rights, and budget approval are often regulated in detail in SHAs. At this stage, privileged shares come into play. Corporate rights such as the privilege to appoint board members, voting privileges, or profit participation privileges must be stipulated as privileges in the articles of association in order to produce intra-company effects. The SHA, in turn, provides a more detailed framework governing the exercise of these privileges and the coordination among shareholders. In this way, privileged shares and SHA provisions are designed together to protect either the investor or the founder. This dual structure is indispensable for compliance both with the privilege regime under Articles 478 and 479 of the TCC and with the mandatory corporate framework set forth in Article 340 of the TCC.

The third axis relates to financial provisions and exit mechanisms. Dividend policies, dividend preferences, conditions for participation or non-participation in capital increases, funding obligations, provisions governing value distribution among shareholders in liquidation or change-of-control scenarios, and coordination rules for IPOs and secondary sales are regulated in SHAs. In particular, tag-along and drag-along rights have become characteristic elements of SHAs in Turkish practice, as in international practice. Tag-along rights typically serve to protect minority shareholders, while drag-along rights function as a balancing mechanism in favor of the majority. These provisions often give rise to personal obligations to transfer shares upon the fulfillment of certain conditions.

The fourth axis concerns non-compete obligations, confidentiality, and dispute resolution. Prohibitions on founders and key shareholder-managers competing with the company, confidentiality obligations aimed at protecting company secrets, and arbitration clauses providing for dispute resolution outside state courts have become indispensable, especially in structures involving foreign investors. Since non-compete and confidentiality obligations impose personal obligations on shareholders beyond their shareholder status, they are more suitably regulated in SHAs rather than in the articles of association, in light of the limitations set by Article 329/2 of the TCC. As regards dispute resolution, arbitration clauses included in SHAs generally cover disputes arising from the performance or breach of contractual obligations under the SHA. By contrast, the arbitrability of actions for annulment of general assembly resolutions under Article 445 of the TCC remains limited and controversial in doctrine and practice, given their public order dimension.

The SHA–Articles of Association Relationship and Registration Considerations

The relationship between the SHA and the articles of association can be technically reduced to two questions: first, whether a particular arrangement must necessarily be reflected in the articles of association in order to produce effects within the company; and second, which provisions the Turkish Trade Registry and MERSİS practice allow to be registered.

Arrangements such as the recognition of privileged shares, granting board representation rights to share classes, conferring voting or profit privileges, and adopting increased quorums for certain general assembly resolutions affect third parties and the internal balance among corporate organs. Unless such provisions are reflected in the articles of association through registration and publication, they will produce legal effects only within the framework of the SHA and only vis-à-vis its parties.

In practice, the Trade Registry and MERSİS have increasingly adopted a restrictive approach toward including in the articles of association provisions—other than classical privilege and share class arrangements—that impose personal obligations on shareholders. This approach is a natural consequence of both the single-obligation principle under Article 329/2 of the TCC and the mandatory corporate framework under Article 340 of the TCC. Provisions imposing personal obligations on shareholders, such as mandatory sale–purchase obligations or additional funding requirements, are therefore more coherently regulated within SHAs, which are contracts of relative effect under the law of obligations, rather than within the company’s “constitution,” i.e., the articles of association.

This landscape necessitates the deliberate construction of a “dual structure” when drafting an SHA. Privileges and organ arrangements intended to be binding within the corporate structure and vis-à-vis third parties must be regulated in the articles of association, while more flexible provisions governing reciprocal obligations, voting behavior, share transfers, and financing scenarios should be addressed in the SHA. In this manner, compliance with the limits imposed by the TCC and registry practice is ensured, while a robust contractual protection mechanism is established among the parties.

Minority–Majority Balance: In Whose Favor Does the SHA Operate?

An SHA is not a one-sided instrument solely for the protection of minorities; rather, it often establishes a balance by protecting both minority and controlling shareholders through different provisions. Both domestic and foreign literature generally recognize that tag-along rights primarily serve to protect minority shareholders by allowing them to participate in an exit on the same terms when the majority sells its shares. Drag-along rights, by contrast, represent the other side of the balance by enabling the majority to compel minority shareholders to participate in a sale, thereby ensuring transaction integrity and bargaining power vis-à-vis potential buyers, while typically guaranteeing equal treatment and price parity for the minority.

Anti-dilution provisions, particularly in structures where investors hold minority positions, serve to protect the investor’s economic position in subsequent funding rounds. Mechanisms such as full ratchet or weighted average adjustments aim to prevent the investor’s value or ownership ratio from falling below a certain level. Board representation privileges, enhanced information and audit rights, and requirements that certain fundamental decisions be subject to investor or privileged share class approval also typically operate in favor of minority strategic investors.

Conversely, strict lock-up provisions, long-term non-compete obligations, or mandatory sale provisions triggered by specific events may reinforce control in favor of majority or founder shareholders. Accordingly, characterizing an SHA simply as a “minority agreement” or a “majority agreement” would be misleading. The decisive factor is which provisions are designed in whose favor and how they interact with the privileged share structure. In assessing this balance, the interplay between statutory minority rights under the TCC—such as information and inspection rights, the appointment of a special auditor, and the right to call a general assembly—and the contractual protection mechanisms under the SHA must also be considered. When combined, these layers create a multi-tiered protection regime for both minority and majority shareholders.

Comparative Law Perspective: Aktionärbindungsvertrag and Shareholders’ Agreements

Comparative law provides an important reference point for understanding the position of SHAs in Turkish law. In Swiss and German law, the Aktionärbindungsvertrag—long recognized in practice but not expressly regulated by statute—is characterized in doctrine as a contract under the law of obligations or, in certain cases, as a simple partnership. It is generally accepted that such agreements cannot alter the company’s mandatory structural rules and bind the company only to the extent it is a party, while being binding among the contracting shareholders with respect to voting arrangements, share transfers, funding obligations, and exit mechanisms.

In Anglo-Saxon legal systems, shareholders’ agreements are structured as binding contracts parallel to the articles of association, typically regulating minority rights, management balance, tag-along and drag-along rights, anti-dilution provisions, and non-compete and confidentiality obligations. Recent English and Canadian sources increasingly describe tag-along and drag-along rights as “balancing rights” that ensure transaction integrity for the majority while securing equal treatment opportunities for the minority.

This comparative overview demonstrates that, under Turkish law, the SHA should not be positioned as an alternative to the articles of association, but rather as a complementary instrument—often bearing the characteristics of a “partnership agreement” among shareholders—that details the obligational relationship among the parties rather than the internal corporate structure. The normative framework under Turkish law is constructed through the general contract provisions of the TCO on the one hand, and the corporate provisions of the TCC—such as Articles 340, 329/2, 478–479, 491–492, 371, and 445—on the other. Within this framework, the Aktionärbindungsvertrag and shareholders’ agreement models known in comparative law are effectively “localized” within the mandatory limits of the TCC.

Conclusion: Structuring the SHA from the Right Perspective

SHAs have become increasingly prevalent in Turkish joint stock company practice. However, they must be designed not as a “shadow articles of association” replacing the company’s charter, but as a complementary instrument operating alongside it and implementing party autonomy without circumventing the mandatory provisions of the TCC. Privileged shares, share classes, management and profit distribution privileges, and increased quorums—due to their structural effects—must be regulated in the articles of association, whereas detailed rules concerning voting behavior, share transfers, exit mechanisms, funding obligations, and non-compete and confidentiality arrangements should be shaped within the SHA. This approach ensures both legal certainty and commercial flexibility.

The minority–majority balance should not be assessed through a single provision, but through a holistic evaluation of mechanisms such as tag-along, drag-along, anti-dilution, board representation, information rights, and lock-up provisions. Comparative practice consistently shows that a well-designed SHA protects neither only the minority nor only the majority, but rather establishes a predictable and balanced contractual framework safeguarding both sides in different respects. In Turkish law, constructing this framework within the mandatory limits of the TCC and the TCO is of decisive importance for transaction security and for ensuring predictable judicial outcomes in potential future disputes.