NEWSLETTER-2017

21 COMMERCIAL LAW increase shall be used in accordance with the principle of equal treat- ment. The general assembly is entitled to restrict this right only with an objective justification and, if it is necessary, for the legitimate interests of the company, for example, in the event of capital increase for the purposes of adding new shareholders to the company, or expanding the environment of investors. A decision of the Court in 1966 sets forth essential principles related to the pre-emptive right 9 . In this case, the share capital of the company has been increased, and the general assembly has resolved that shareholders, other than those who were members of the board of directors, or employees of the company could not exercise their pre-emptive rights. The objective was to decrease the participation of some shareholders to the company’s profit, as they were compet- ing with the company through working within the company’s area of business. The Court resolved that the restriction of the pre-emptive right would be valid only if it had an indispensable and significant motive related to the company’s progress and continuity; otherwise, it would be rendered invalid due to the violation of the principle of equal treatment. The decision states that the restriction of the pre-emptive right in the specific case caused significant material damages to the shareholders whose rights were restricted and impaired their right to vote, that there were no valid grounds for this resolution, which was in violation of the principle of equal treatment, and that the intention of protecting the company against competition could not be a valid reason for this inequality. In a case subject to the decision of the Turkish Court of Appeals in 1997 10 , the share capital of the company has been increased, and all of the increased capital has been covered from the debts of the company to one of the shareholders. The Court resolved that even if this is for the payment of the debt, allowing only such shareholder to exercise its pre-emptive right prevented other shareholders to participate in the capital increase and, therefore, violated the principle of equality. 9 JDT 1966 I 264-277; Erdem, p. 413. 10 Court of Appeals 11th Civil Chamber, E. (File Number) 1997/5583, K. (Decision Number) 1997/6609, dated 06.10.1997 (www.kazanci.com ).