Wholesale of a Significant Amount of Company Assets
Introduction
Article 408, paragraph 2, subparagraph (f) of the Turkish Commercial Code No. 6102 ("TCC") lists the "wholesale of a significant amount of company assets" among the unassignable and exclusive duties and powers of the general assembly. However, this provision does not clearly regulate what is meant by the concept of a "significant amount of company assets" and how these assets may be sold wholesale. This situation has led to various debates in the doctrine and practice. In this article, the TCC, doctrinal opinions, and the case law are discussed and evaluated concerning the wholesale of a significant amount of company assets in joint stock companies.
Basic Concepts
What is meant by a significant amount
The TCC does not include any definition or ratio regarding the significant amount. This issue, which is left to the discretion of the judge according to the case at hand, causes difficulties in practice[1]. The judge assesses whether the asset subject to the sale constitutes a significant amount for the continuity of the company's activities in each case[2].
In the doctrine, it is argued that the judge may take the regulations of publicly traded companies as a source for determining significant assets within the framework of Article 4 of the Turkish Civil Code No. 4721[3] . In this context, it is claimed that Article 23 of the Capital Markets Law, which regulates significant transactions in public joint stock companies, and especially the criteria of the Communiqué on Significant Transactions and Retirement Right (II-23.3) issued by the Capital Markets Board may be taken as a basis. In these regulations, the legislator has characterized transactions such as mergers, spin-offs, and conversions as material transactions regardless of the volume and value criteria. In contrast, certain volume and value criteria have been adopted for matters such as the transfer of assets or the establishment of limited real rights that result in the transfer of assets to be considered material transactions.
Some authors, on the other hand, suggest that legislators should stipulate a certain ratio by the principle of legal security. Accordingly, it may be regulated that if the value of the assets subject to the sale exceeds a certain percentage about the value of the total assets of the company, the significant amount requirement shall be fulfilled[4].
The Court of Cassation characterizes assets vital for the company's survival as significant assets. For example, the transfer of assets vital for the company's survival constitutes a considerable amount[5].
However, since the purpose of the regulation is to protect the shareholders and the capital, the Court of Cassation evaluates whether the transaction is in favor of the company while determining the significant amount. For example, in a dispute regarding the cancellation of the decision of the board of directors, the Court of Cassation stated that the sale of 10 flats was made for the insolvent company to get out of this situation, that this situation served the interests of the company and that the decision was by the objective good faith rules. For these reasons, the Court of Cassation rejected the cancellation of the Board of Directors' decision[6].
In another decision of the Court of Cassation[7], the Court of Cassation stated that an immovable property, which should be transferred to the municipality free of charge under the Decision of the Council, would not constitute a significant asset for the company. In a case subject to the decision of the Court of Cassation dated 12.10.2023, the court of first instance applied for an expert opinion to determine whether the exit share was a significant asset[8].
What to Understand from Company Assets
The TCC stipulates that a general assembly resolution is required to sell a significant amount of assets, both for active companies and companies in liquidation. According to Article 538 of the TCC, which is discussed in the section on liquidation of joint stock companies, a general assembly resolution is required for the wholesale sale of a significant amount of active assets. According to the predominant opinion, the terms asset and active asset have the same meaning[9] . Neither Article 538 of the TCC nor Article 408/2-f of the TCC stipulates what should be understood as company assets. The doctrine [10] defines company assets as "all tangible and intangible elements and monetary value of the company's commercial enterprise".
What to Understand from Wholesale
There is an opinion in the doctrine that transactions that are of the same importance and have the same financial consequences as the sale for the company should also be interpreted within the framework of this concept, and within this scope, transactions such as mortgages, sureties and assignments will also be subject to the decision of the general assembly[11] . In the decisions of the Supreme Court, it is accepted that transactions such as the transfer of the overriding right constitute a wholesale transfer of a significant amount of company assets[12] . The 11th Civil Chamber of the Court of Cassation[13] , in one of its decisions, did not consider the sale of the factory building and the immovable belonging to the company within the scope of the financial leasing agreement, with the condition of being taken back at the end of the lease period, as a wholesale sale.
What should be understood by wholesale is also controversial in the doctrine. While one view argues that the transaction is meant to be concluded with a single contract, the other view[14] argues that wholesale can also be evaluated for successive transfers made quickly. On the other hand, some authors argue that the wholesale concept should not be interpreted narrowly and state that a wholesale sale of assets may also be in question if a single element is sold[15]. However, in one of its decisions, the Court of Cassation ruled that a wholesale asset sale cannot be mentioned if the real estate is sold by dividing it into parcels instead of a wholesale sale[16].
Violation of the Regulation
Under the case law of the Court of Cassation, the sale of a significant asset of the company by a resolution of the Board of Directors without a resolution of the General Assembly shall result in the nullity of the resolution of the Board of Directors, and the sale agreement[17] .
There are different opinions in the doctrine regarding the validity of the agreement. According to some authors, if the general assembly subsequently consents to the transaction, the contract shall be valid. Otherwise it shall be null and void from the beginning[18]. Another opinion argues that Article 371/4 of the TCC should be applied by analogy in sales contrary to the general assembly's decision, and bona fide third parties should be protected[19] . Furthermore, it is also argued that the sale made without a general assembly resolution is not binding on the company, is null and void, and will only become valid if approval is granted[20].
General Assembly
Quorum for the General Assembly Resolution
Although Article 408/2(f) of the TCC regulates that the wholesale sale of a significant amount of assets in joint stock companies is among the unassignable powers of the general assembly, it does not stipulate a special quorum for this decision. This ambiguity has caused discussions both in the doctrine and in practice[21], and different opinions have been put forward as to whether the aggravated quorums introduced for companies in the liquidation process in Art. 538/2 of the TCC can be applied by analogy[22] . The Court of Cassation, on the other hand, ruled that Article 538/2 could be applied by analogy to companies that were not in liquidation during the former Commercial Code[23] .
However, Article 22, paragraph 12 of the Regulation on the Procedures and Principles of the General Assembly Meetings of Joint Stock Companies and the Ministry Representatives to be present at these Meetings stipulates that "In the general assembly meeting, the decision to sell a significant amount of company assets wholesale shall be taken with the affirmative votes of the shareholders constituting at least seventy-five percent of the company capital. If this quorum is absent in the first meeting, the same quorum shall be sought in the second meeting.” Although the Regulation stipulates a 75% quorum, it is criticized in the doctrine for being contrary to the hierarchy of norms since this quorum is not explicitly included in the law[24].
In its decision dated 08.12.2021[25] , the 11th Civil Chamber of the Court of Cassation, contrary to its previous approach, clearly stated that the general assembly resolution regarding the wholesale of a significant amount of assets should be adopted by the ordinary majority within the framework of Article 418 of the TCC. The Court of Cassation emphasized that the aggravated quorums specific to companies in liquidation cannot be applied to active companies and that a quorum that is not expressly regulated by the law cannot be introduced by regulation. With this decision, the doctrinal view is that the general assembly resolutions regarding the wholesale of a significant amount of assets in joint stock companies that are not in the liquidation process will be taken by ordinary meeting and resolution quorums have been adopted.
On the other hand, in its decision dated 4.11.2024, the same chamber of the Court of Cassation[26] reiterated that Article 538/2 of the TCC should be applied by analogy to the decision quorum. Since there are a considerable number of supporters of the view that Article 538/2 of the TCC should be applied by analogy in the doctrine, it would be appropriate for the Ministry of Trade to address the aggravated quorum regulation introduced by the regulation at the level of the TCC and to make a precise legal regulation that eliminates ambiguities.
Interpretation of the Provision in terms of Limited Liability Companies
Articles 573 et seq. of the TCC, which regulate limited liability companies, do not contain any article equivalent to the articles on joint stock companies regarding the sale of significant assets, nor does Article 644, which refers to joint stock companies, contain any reference to Article 408. There is no reference to Article 408. On the other hand, under Article 643 of the TCC, it is stated that the provisions regarding the liquidation procedure and the powers of the company organs in liquidation shall apply to joint stock companies. As a matter of fact, in a Court of Cassation decision dated 16.6.2022, the Court of Cassation ruled that if the assets transferred by the company are sufficient to cause the company's liquidation, a general assembly resolution regarding the sale of assets under Art. 538[27] . In the dissenting opinion, it is underlined that the provisions regarding joint stock companies cannot be applied to limited liability companies by analogy, and therefore, a general assembly resolution is not required. In a recent decision of the General Assembly of Civil Chambers of the Court of Cassation, it is clearly stated that Art. 538 may be applied by analogy to companies not in liquidation[28] . In the doctrine, some authors believe that this is due to a deliberate silence, as well as those who argue that the provisions of joint stock companies can be applied by analogy.
Conclusion
Under Article 408/2(f) of the TCC, the general assembly has the non-transferable power to sell a significant assets in joint stock companies. However, the Court of Cassation's doctrinal opinions and case law shape the determination of the significant amount and what should be understood by the company assets and wholesale sales. Differences of opinion and changing jurisprudence are noteworthy, especially about the quorum of the general assembly. It is still controversial whether the provisions on asset sales for joint stock companies can be applied to limited liability companies. To eliminate these uncertainties and establish legal security, some legal regulations are needed.
- Kendigelen, Abuzer: Yeni Türk Ticaret Kanunu, Değişikliklikler, Yenilikler ve İlk Tespitler, İstanbul 2011, p. 308.
- Ayoğlu, Tolga: Önemli Miktarda Şirket Varlığının Toptan Satışında Genel Kurul Kararının Hukuki Niteliği,
- Kadir Has Üniversitesi Hukuk Fakültesi Dergisi, Kadir Has University Law Faculty Journal, Volume: 5, Issue: 1, 2017, p.95.
- Çamoğlu, Ersin (Poroy, Reha/Tekinalp, Ünal): Ortaklıklar Hukuku I, Updated, Rewritten 15th Edition, Istanbul 2021, p. 532.
- Biçer, Levent/Hamamcıoğlu, Esra: " Anonim Ortaklıklarda Genel Kurulun Devredilemez Yetkileri Kapsamında Önemli Miktarda Şirket Varlığının Toptan Satışı ve Uygulama Alanı (TTK m. 408/2-f)", Kadir Has University Journal of Law Faculty, C. 1, S. 1, 2013, p. 41.
- Court of Cassation - 11th HD, E. 2013/17904 K. 2014/2783 T. 18.02.2014
- Court of Cassation - 11th HD., E. 2019/1299 K. 2020/384 T. 15.01.2020.
- Court of Cassation . 11TH HD., E. 2016/14687 K. 2019/5193 T. 14.10.2019
- Court of Cassation - 11th HD., E. 2020/8038 K. 2022/4957 T. 16.06.2022.
- Biçer/Hamamcıoğlu, p.40.
- Çamoğlu (Poroy/Tekinalp), p. 531.
- Çamoğlu (Poroy/Tekinalp), p. 532; Biçer/Hamamcıoğlu, p. 48.
- Court of Cassation 1st HD., E. 2022/7148 K. 2024/1308 T. 21.02.2024.
- Court of Cassation 11th HD., E. 2017/3887, K. 2019/949, T. 07.02.2019.
- Çamoğlu (Poroy/Tekinalp), p. 532.
- Altaş, Soner: " Anonim Şirketlerde Önemli Miktarda Şirket Aktifinin Toptan Satışı Sorunu", Mali Çözüm Dergisi, 2014, p. 98.
- Court of Cassation 11 HD, E. 6072 K. 270, 30.01.1985.
- Ayoğlu, p. 99; Court of Cassation 11th HD, E. 2016/3810 K. 2017/3294, 01.06.2017; 11th HD, E. 2023/2994 K. 2024/5755 T. 10.07.2024.
- Biçer / Hamamcıoğlu, p. 47.
- Ayoglu, p. 99.
- Kırca (Şehirali Çelik / Manavgat), Anonim Şirketler Hukuku I, Ankara, 2013, p. 644-645; Biçer / Hamamcıoğlu, p. 47; Ayoğlu, p. 100.
- Kendigelen, p. 309; Biçer/Hamamcıoğlu, p. 43
- For the view that the quorum in Article 538/2 may be applied by analogy, see: Çamoğlu (Poroy/Tekinalp), p. 532. For the contrary view, see: Kendigelen, p. 309.
- See 11th HD. E. 12130, K. 13978, T. 01.07.2013; 11th HD. E. 4501 K. 1130, T. 14.02.2005; 11th HD. E. 8998 K. 19, T. 17.01.2000; Çamoğlu (Poroy/Tekinalp), p. 532.
- Biçer/Hamamcıoğlu, p.44.
- Court of Cassation 11th HD., E. 2020/306 K. 2021/6945 T. 8.12.2021.
- Court of Cassation 11th HD., E. 2023/5897 K. 2024/7689 T. 4.11.2024.
- Court of Cassation 11th HD., E. 2020/8038 K. 2022/4957 T. 16.6.2022.
- Court of Cassation - HGK, E. 2022/1004 K. 2023/860 T. 27.9.2023.
All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.
Other Contents
In the rapidly digitalizing world, e-commerce is spreading rapidly, strengthening the impact of sales made via the Internet and traditional channels. According to the Ministry of Trade data for 2023, Türkiye's e-commerce volume increased by 115.15% compared to the previous year, reaching 1.85 trillion Turkish liras...
In an extraordinary dissolution, ex officio cancellation from the trade registry without liquidation is regulated under the provisional Article 7 of the Turkish Commercial Code No. 6102 (“TCC”). Under Paragraph 15 of the relevant provision, the creditors of the company or cooperative, which was ex officio canceled...
As the global business landscape evolves, foreign companies increasingly seek to expand their presence in promising markets. Türkiye, positioned between Europe and Asia, offers suitable opportunities for this expansion. Among the methods foreign companies use to establish a foothold but not a company in...
In joint stock companies, the body in charge of managing and representing the company is the board of directors. The members of the board of directors are liable to the company for the damages caused by their negligence in the performance of their duties...
Sales contracts are the most common and most important contracts of commercial life . Determining the rights and obligations of the parties as a result of the defects encountered in the goods subject to the sale is one of the most common legal problems in commercial sales...
Under Article 365 of the Turkish Commercial Code No. 6102 ("TCC"), each member of the board of directors, which is the body responsible for the administration and representation of a joint stock company, is obliged to fulfill their duties arising from the law and the articles of association within the limits...
Law No. 7262 dated 27.12.2020 introduced an obligation to notify the Central Registry Agency (“CRA”) regarding the issuance and transfer of bearer shares under the Turkish Commercial Code No. 6102 (“TCC”) and stipulates that those who violate the notification requirement under Art. 486/2 of the TCC shall be...
Similar to previous years, in 2024, mergers and acquisitions (“M&A”) transactions continue to be shaped by global economic dynamics, geopolitical risks and technological innovations...
The common goal (in the ideal world) of people who become shareholders by participating in the capital of a company or managers by participating in the management body is to manage the company in the best way and to obtain maximum economic benefit...
The most common forms of agency agreements can be categorized under three main headings. These can be listed as an Agency Agreement, Distributorship Agreement, and Franchise Agreement...
Employee shareholding, which means the ownership of some or all of the capital of a publicly traded or closed company by employees, has attracted great interest in many countries around the world, particularly in the United States of America, due to the advantages it provides to the national economy, the...
There are many different rules that newly established companies must consider and comply with when starting their commercial activities. One of these rules is the "Evasion of Law" article regulated under Article 356 of the Turkish Commercial Code No. 6102 ("TCC"). The relevant rule aims to prevent the...
The Turkish automobile and light commercial vehicle market left the 2000s behind with steadily rising sales figures and the 2010s with high and stable sales figures as well. In this period, the growth of the market was driven not only by high purchase power but also by easy access to credit and product diversity...
Turkish Commercial Code No. 6102 ("TCC") provides the right to exit from the company to the shareholders of limited liability companies and the right to squeeze out the shareholder from the company, unlike the structure of joint stock companies, with the exit and squeeze out institutions specially regulated for...
Turkish Commercial Code No. 6102 (“TCC”) preserves the rule that the board of directors shall manage and represent joint stock companies. The TCC regulates how the power of representation shall be exercised, the registration and announcement of the persons authorized to represent, the transfer of the...
Merger and acquisition processes are one of the legal processes that most seriously affect the identities and legal status of companies. After the completion of legal, tax, financial and operational due diligence reports, the parties initiate the negotiation process in case they reach an agreement on proceeding with the...
A popular business model for expanding market reach and brand recognition worldwide is franchising. Despite being less common than distribution agreements in the form of mono-brand store agreements, franchising is another significant method for extending luxury brands' distribution networks. Luxury brands use...
In the decision dated 14.06.2022 and numbered 2019/149 E. 2022/894 K., the Court of Cassation General Assembly (“CCGA”) evaluated the theory of piercing the corporate veil in the context of the relationship between the guarantor and the borrowing company in a dispute arising from a loan agreement...
The European Union continues to be an important investment center for foreign investors. According to data from the European Commission's "Second Annual Report on the monitoring of foreign direct investment in the European Union", the European Union received €117 billion worth of foreign direct investment in...
Transfer of shares is arguably the first legal transaction that comes to mind among the legal transactions regarding the shares of a capital company, and the most common transaction in practice. However, the shares of a capital company may also be subject to various transactions, other than share purchase...
Law No. 6563 on the Regulation of Electronic Commerce (E-commerce Law or Law) has recently undergone a radical change in order to regulate the behavior of the players in the rapidly growing and developing e-commerce sector. The new regulations that came into force as of January 1, 2023 envisage important...
On 11 June 2021, the German Federal Parliament approved the German Supply Chain Due Diligence Act (Lieferkettensorgfaltsgesetz) (“Act”) which affects not only German entities but also their suppliers in foreign countries (including Turkish entities). The main focus of the Act, which entered into force on...
On 21 December 2007, the Federal Council approved the draft revision of the Swiss Code of Obligations, which also includes amendments to company law. On 28 November 2014, the Federal Council referred the draft revision for consultation. Following extensive discussions and a long enactment process, the...
The Turkish Commercial Code No. 6102 ("TCC") regulates maritime trade contracts under the fourth part of the fifth book of the Code. Among the types of contracts regulated in this section, the most frequently used contract in international maritime transport practice is the freight contract regulated under...
Prohibition on hidden income shifting is one of the most important issues that is broadly regulated under Capital Markets Law No. 6362 (“CML”). In conjunction with CML Article 21, which has a broader context than Article 15 of the abrogated Capital Markets Law No. 2499, another significant step has been taken...
As a result of developing commercial activities and large-scale investments, especially concluded in the fields of construction, energy and mining, companies are seeking to participate in these investments by uniting their powers and expertise to take advantage of financial opportunities together. This tendency...
The Turkish Commercial Code (“TCC” or “Law”) has enabled companies to apply different structural models and to implement new legal formations by including spin-off provisions to its Article 159 et seq. In accordance with the provisions of the law, companies may transfer a certain element, or elements, of their...
The International Federation of Consulting Engineers is a professional association established in 1913, known as the FIDIC (Fédération Internationale Des Ingénieurs-Counseils). Its members are duly elected from consultant-engineer associations of various countries, and membership to the association is...
Incoterms are a set of rules introduced by the International Chamber of Commerce (ICC) to explain the commercial terms that are widely used in international trade. The purpose of Incoterms rules is to facilitate and expedite international trade in a safe and secure manner...
The regulation applicable to all Turkish ports prepared by the Ministry of Transport, Maritime Affairs and Communications that entered into force after being published in the official gazette on October 31, 2012 (˝the Regulation˝), consolidates all the bylaws, regulations and instructions in a single Regulation...
As a rule, rights and obligations arising from an agreement have legal consequences only between the creditor and the debtor which are parties to the agreement. This principle is referred to as "privity of contract." In general, contracts for the benefit of third parties, where the fulfillment of an...
The rules of e-commerce, which grow and develop with the digitalizing world, are changing. E-commerce has become the driving force of the digital economy. However, considering the growth rate of e-commerce and the transformation it has undergone in a short time, it is obvious that some...
The dissolution of a company is a specific type of dissolution, which results in the cancellation of the legal personality which was gained by registration at incorporation. The specific proceeding which leads to the dissolution, and thus, the termination of a company upon the constitutive decision...
Companies in which shares or authority to manage is held by members of a family are considered to be “family businesses”. Family members can hold shares that control the company, as well as retain management authority. Having a family business means opportunity, security and income for...
Turkey ratified the Convention on the Contract for International Carriage of Goods by Road (“CMR”) in accordance with Act No. 3939 dated 7 December 1993, and the CMR entered into force in Turkey on 31 October 1995. In accordance with Article 1 / 1 of the CMR, the carriage of goods by road...
Ordinary partnerships are governed by Article 620 et seq. of the Turkish Code of Obligations No. 6098 (“TCO”). An ordinary partnership agreement is defined as an agreement whereby two or more persons undertake to join efforts and/or goods to reach a common goal...
The concept of disguised profit transfer in joint stock companies, in its broadest meaning, covers the transfer of company assets to related parties and may occur in different ways. This concept is regulated in detail under capital markets legislation...
Share subscription agreements, which are commonly encountered in start-up investments, set out the terms and conditions of an investor’s participation in a company as a shareholder by subscribing the new shares issued in a capital increase...
The electronic signature, which has the same legal consequences as wet signatures if it meets certain conditions, has taken its place in many legal systems and has enhanced commercial life. Although there are various types and applications in different legal systems...
INCOTERMS are a set of rules introduced by the International Chamber of Commerce (ICC) to explain the commercial terms that are widely used in international trade. The purpose of the Incoterms rules is to contribute to and facilitate the safe and swift conduct of international trade...