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Shareholder Disputes

Commercial Law

Companies are legal structures formed by partners who come together for a particular purpose. Over time, however, the partners’ expectations about the company’s management, investment decisions, profit distribution or the future of the company may diverge. This can lead to serious legal disputes between the partners.

Shareholder disputes are an area of commercial law in which disagreements between the partners, or between partners and the company’s management, must be assessed under the Turkish Commercial Code (TTK) and related legislation.

In such disputes, the aim is not only to resolve the disagreement between the parties. It is also important to protect the company’s commercial activities, balance the partners’ rights and ensure the continuity of the business.

Why Do Disputes Arise Between Company Partners?

Although partnerships are initially built on mutual trust and shared goals, different views may emerge as the company grows or economic conditions change.

Partners having different ideas about how the company should be managed, disagreements in decision-making or problems of trust over the use of company resources can damage the partnership.

In family companies or companies with a small number of partners in particular, the overlap between personal relationships and business decisions can make disputes more complex.

The Main Subjects of Shareholder Disputes

Problems between company partners can arise in different ways. In some cases the problem stems from the company’s management, while in others the infringement of the partners’ financial rights is at issue.

Partners being unable to obtain sufficient information about the company’s activities, problems with general meeting resolutions, profits not being distributed, allegations that company assets are being mismanaged, or a complete breakdown of trust between the partners are among the most common types of dispute.

Partners’ Rights to Information and Inspection

One of the most important rights of company partners is the right to be informed about the company’s activities.

If partners cannot obtain sufficient information about the company’s financial position, activities and management decisions, this can cause serious problems in the partnership.

For minority partners in particular, protecting the rights to information and inspection is important for ensuring that the company is managed transparently.

Dividend Distribution and the Partners’ Financial Rights

One of the basic purposes of a partnership is to obtain an economic benefit from the company’s activities. In practice, however, partners may disagree about the distribution of profits.

The company making no distribution despite being consistently profitable, allegations that company resources are being used for the benefit of certain partners, or restrictions on the partners’ financial rights may require legal examination.

In such cases, the company’s resolutions, financial records and partnership structure must be assessed together.

Disagreements in Company Management

A significant share of disputes between partners stems from decisions relating to the company’s management.

Partners may hold different views on the appointment of managers, company strategy, investment decisions, admitting new partners or the company’s growth plans.

In resolving disagreements over company management, both the protection of the partners’ rights and the need to avoid harming the company’s activities must be taken into account.

Withdrawal and Exclusion of a Partner

In some cases, the relationship between the partners may reach a point where the company cannot continue in a healthy way. In such situations, a partner leaving the company or, under certain conditions, being excluded from it may come onto the agenda.

Withdrawal (ortaklıktan çıkma) and exclusion (ortaklıktan çıkarılma) can have different legal consequences depending on the type of company, the articles of association and the specific facts of the case.

In these processes, the value of the partners’ shares, the company’s financial structure and the rights of the parties must be carefully assessed.

Partnership Problems in Limited and Joint Stock Companies

The partners’ rights and the legal remedies available to them can differ depending on the type of company.

In limited companies (limited şirket), relationships between partners may be more personal, while in joint stock companies (anonim şirket) shareholding and capital structure are more prominent.

For this reason, resolving a dispute requires a correct analysis of the type of company and the relevant legal provisions.

Share Transfers and Admission of New Partners

Share transfers are one of the issues that frequently lead to disputes in company partnerships.

A partner wishing to transfer their shares, the existing partners’ attitude towards a new partner or restrictions in the articles of association may require legal assessment.

If a share transfer is not carried out in accordance with the required procedure, or the partners’ rights are not taken into account, it may later become the subject of a lawsuit.

Litigation in Shareholder Disputes

It is not always possible to resolve problems between partners by agreement. In that case, legal proceedings may be needed to annul company resolutions, to withdraw from the company, to protect rights or to obtain compensation for losses.

During litigation, company records, general meeting resolutions, commercial books, financial documents and the relationships between the parties are examined in detail.

For this reason, shareholder disputes require looking not only at the current problem but also at the company’s past.

A significant share of shareholder disputes can be prevented through sound legal planning when the company is set up or when the partnership begins.

Clearly setting out the partners’ powers, decision-making methods, profit distribution principles and exit conditions can reduce problems that may arise in the future.

In companies with more than one partner in particular, building a legally sound partnership structure is very important for the sustainability of the company.

Shareholder disputes are not merely a disagreement between the parties. They are also significant processes that can affect the company’s future, its employees, its customers and its commercial reputation.

For this reason, each dispute should be handled by assessing the company’s structure, the partners’ rights and the commercial objectives together.

With a sound legal assessment, the partners’ rights can be protected, the continuity of the company’s activities can be ensured and lengthy disputes can be avoided.

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