e-book2013

NEWSLETTER 2013

106

Squeeze-Out Right of the Company

AbrogatedTurkishCommercial CodeNo. 6762 foresawthe annulment

of shares in the event shareholders failed to fulfill the obligation to fully

pay up the share capital subscription. This is preserved under the TCC.

However, through this mechanism, the shareholder shall be deprived

only of shares whose subscription he failed to fully pay. For instance,

a shareholder who fully paid the subscription value of its then-current

shares, who subscribed for newly issued shares but defaulted on their

payment may only be deprived of the newly issued shares as a result of

the capital increase. Annulment, therefore, does not always result in the

cessation of partnership with a shareholder.

The squeeze-out of shareholders from joint stock companies is

therefore an important innovation introduced under the TCC. Pursuant to

the TCC, squeeze-out is granted under three circumstances.

The first is that companies party to a merger transaction may, under

the merger agreement, grant shareholders the right to acquire shares or

to just receive consideration without obtaining any shares. The TCC

allows merger agreements to only grant consideration to shareholders,

accordingly such persons may not acquire any shares in the merged (or

acquiring) company. However, pursuant to TCC Art. 141, in the event

the merger agreement only contains a provision of consideration and

not shareholding for the existing shareholders, this agreement must be

approved by the transferor/acquired company with an affirmative 90% of

the total votes in that company.

The second circumstance whereby squeeze-out is allowed is specific

to group companies. The mother company in a group, which owns at

least ninety percent of the shares of its subsidiary, may squeeze-out the

remaining minority, if such minority violates the good faith principle,

causes trouble or acts recklessly, by purchasing its shares in the company.

The squeeze-out right provided for here may only be exercised in the

presence of just cause. The legislative justification of TCC Art. 208

regulating the squeeze-out under these circumstances states that it serves

to end the disturbing actions of shareholders who continuously object to

the decision making of the company for various reasons and to ensure

peace within the company.