16.05.2024

Authors: Oğuzhan Onur, Enis Kadıoğlu

“…And so did the French legal system back in 1896, when Armand Peugeot, who had inherited from his parents a metalworking shop that produced springs, saws and bicycles, decided to go into the automobile business. To that end, he set up a limited liability company. He named the company after himself, but it was independent of him. If one of the cars broke down, the buyer could sue Peugeot, but not Armand Peugeot. If the company borrowed millions of francs and then went bust, Armand Peugeot did not owe its creditors a single franc…”[1]

In the current legal system, companies, with their rights and obligations, capable of initiating lawsuits and being sued, are the inured imaginary entities of modern life. Companies are established with a certain amount of capital, and the owners of the capital are referred to as "shareholders." Nowadays, through a banking application, it has become possible to become a "shareholder" of a company within seconds. This information note summarizes the "right to obtain information and examination" of shareholders regarding the company they own shares in, in the context of joint-stock companies, and is presented for your information.

1.     Share and Shareholding

In our legal system, regulations regarding "companies" are primarily contained in the Turkish Commercial Code numbered 6102 ("TCC"). One of the types of companies regulated in the TCC is joint-stock companies. Companies traded on the stock exchange and whose shares can be bought and sold in daily life are also “joint-stock” companies.

Joint-stock companies, as of 1 January 2024, can be established with a minimum capital of 250,000.00-TRY (Two Hundred Fifty Thousand Turkish Liras). After the establishment of the company, the shareholders hold the status of "shareholder" in proportion to their capital ownership. Following the establishment of the company, shares of the company can be transferred or the company's shares can be offered to the public. In this regard, the "shareholders" of the company can change, and the number of "shareholders" can increase.

2.     Rights of Shareholders

In TCC shareholders are granted various rights and authorities. Some of these rights and authorities include: the right to attend general meetings, the right to vote, the right of the dividend, the right to obtain information and examination... The effective exercise of shareholder rights ensures that the shareholders influence the operation of the company.

3.     Right to Obtain Information and Examination of Shareholders

Shareholders’ right to obtain information and examination regarding the company in which they hold shares is one of the fundamental rights arising from shareholding. The right to obtain information and examination of a shareholder in a joint-stock company is primarily regulated in Article 437 of TCC.

4.     Scope of the Right to Obtain Information and Examination

In TCC it is stipulated that a shareholder may request information regarding the "affairs of the company" and the "manner and results of the audit." In this context, in order to determine the scope of the right to obtain information and examination, it is necessary to specifically and primarily establish what is encompassed by the term "affairs of the company."

The term "affairs of the company" encompasses all kinds of transactions conducted by the company with natural or legal persons, all actions taken in this regard, and all legal, commercial, or contractual activities of the company.

In this regard, a shareholder has the right and authority to obtain information about all kinds of activities and transactions of the company in which they hold shares. As previously stated, being informed about the company in which one is a shareholder is one of the most fundamental rights.

Especially for publicly traded companies whose shares are traded on the stock exchange, the values of their shares can appreciate or depreciate in line with the company's activities and transactions. This situation directly affects the shareholder's personal economic assets.

Another important right granted to shareholders under the "right to obtain information and examination" in TCC is the right to examine the company's financial statements, audit reports, and activity reports. By examining these documents and reports, shareholders also indirectly exercise oversight over the company in which they hold shares.

The publication of the mentioned documents related to publicly traded companies whose shares are traded on the stock exchange on the Public Disclosure Platform makes it significantly easier for shareholders to examine the relevant documents and reports.

Formun Üstü

5.     Limit of the Right to Obtain Information and Examination

In TCC, it is stated that a shareholder's request for information can only be rejected in 2 (two) cases. Accordingly, a shareholder's request for information can only be rejected if (i) disclosure of company secrets would result from providing the information, or (ii) other company interests that need protection would be jeopardized.

Formun Üstü

The purpose of this regulation regarding the limitation of the "right to obtain information and examination" is to protect the company and ultimately, the shareholder.

As previously mentioned, companies, essentially a "figment of human imagination," can acquire rights and obligations in current legal system; they can engage in commercial, legal, or contractual relationships with other companies and/or individuals.

In this regard, it is reasonable and understandable for a company to keep certain matters as "secrets" to protect its interests and not disclose them to third parties. The company is a separate and independent entity from the shareholders and is obligated to protect the interests of its own "fictional" existence in addition to the shareholders.

If the right to obtain information and examination of a shareholder is maliciously exercised and the company's "secrets" are disclosed to a malicious shareholder, the company's commercial and/or economic interests will be harmed. This situation will directly harm the company itself and indirectly harm the shareholders of the company. Therefore, the company may reject the shareholder's request for information in the specified circumstances.

6.     Exercise of the Right to Obtain Information and Examination

The right to obtain information and examination can be exercised in various ways and at various times.

In accordance with TCC, companies are required to make the financial statements, annual activity report, and other documents specified in the TCC available for shareholders to inspect at the company's headquarters and, if any, branches, 15 (fifteen) days before the ordinary general assembly meeting date that companies are required to hold. Shareholders can visit the company's headquarters or branches to examine the specified documents and exercise their right to obtain information and examination in this manner.

The right to obtain information and examination can also be exercised by directly addressing questions to the company. This aspect of the right to obtain information and examination is primarily exercised at the company's general assembly meeting. During the convened general assembly, a shareholder asks their questions to the board of directors on behalf of the company either in writing or verbally. A shareholder can also direct their questions regarding the manner and results of the company's audit to the auditor.

It is essential for the board of directors or the auditor to respond to the shareholder's questions at the general assembly where the question/s were asked. However, if the answers to the questions require the examination of various documents, this fact is recorded in the minutes of the meeting, and the answers to the questions can be provided at the next general assembly meeting.

For publicly traded companies whose shares are traded on the stock exchange, the anticipated response time for questions raised by shareholders at the general assembly is more limited. In this context, if questions asked at the general assembly of a publicly traded company (i) are not related to the agenda of the general assembly and/or (ii) are too comprehensive to be answered immediately, the questions must be answered in writing within 15 (fifteen) days at the latest by the "investor relations department" of the company, and the answers must be publicly disclosed on the company's website within 30 (thirty) days from the date of the general assembly.

Formun Üstü

It is also possible for a shareholder to submit their questions to the board of directors in writing before the general assembly meeting. This way, the board of directors is provided with the opportunity to conduct necessary examinations and make preparations for answering the questions before the general assembly meeting.

As previously mentioned, the right to obtain information and examination is primarily intended to be exercised at the general assembly meeting. However, it is acknowledged that shareholders have the right to obtain information and examination outside of general assembly meetings as well; hence, they can address their questions to the company outside of these meetings.

7.    Legal Actions That Can Be Taken in Case of Violation of the Right to Obtain Information and Examination

Formun Üstü

If a shareholder's request for information and examination is rejected, left unanswered, or deemed insufficient, legal actions that the shareholder can take are also regulated in TCC.

Accordingly, a shareholder whose request for information and examination has been rejected may apply to the commercial court of first instance in the location of the company's headquarters within 10 (ten) days following the rejection; in other cases, they can apply within a reasonable period.

To expedite the resolution of the lawsuit filed by the shareholder, the trial is conducted under the simplified procedure, and the decision rendered by the court is "final".

As part of the lawsuit, the court examines whether the shareholder's right to obtain information and examination has been violated within the limitations specified in TCC.

If the court finds the shareholder's request to be "justified", it may issue a decision instructing the company to provide the shareholder with the requested information.

8.     Conclusion

The right to obtain information and examination is one of the fundamental and important rights arising from shareholding.

This right grants a shareholder the right and authority to obtain information about the company in which they hold shares and indirectly "inspect" the company. However, this right can only be restricted in limited circumstances specified in TCC.

If you have any questions regarding the right to obtain information and examination, please feel free to reach out to us at any time.