A company’s articles of association are the constitution of the relationship between its shareholders. A few extra hours at incorporation often prevent a shareholder crisis altogether.
1. Restrictions on share transfers
In limited companies, share transfers generally require general assembly approval (Article 595). Setting out when approval may be refused, together with pre-emption and first refusal rights, keeps unwanted parties out of the company.
2. Meeting and decision quorums
Statutory quorums may not suit every company. In two-shareholder companies with equal stakes, deadlock-resolution mechanisms should be provided for.
3. Privileged shares
Privileges in voting, dividends or nominating board members are common tools when investors come in. Their scope and duration must be written clearly.
Good articles of association prove their worth not when shareholders agree, but when they don’t.
4. Non-compete
Limits on competing activities by shareholders and managers should be agreed in advance, especially for shareholders with other businesses in the same sector.
5. Exit and exclusion
In a limited company, a shareholder may be excluded for just causes set out in the articles (Article 640). Defining exit and exclusion grounds and the method for valuing the departing share in advance shortens any dispute considerably.
Further advice. For arrangements that cannot be placed in the articles or should remain confidential, prepare a shareholders’ agreement consistent with the articles.
Relevant legislation
- Turkish Commercial Code No. 6102, Arts. 339 et seq., 573 et seq., 595, 638–641
This article is for general information only and does not constitute legal advice. Please consult a lawyer about your specific circumstances.
