A shareholders’ agreement is intended to make it convenient to move to law of obligations, which offers a wider margin of freedom than corporate law which restricts the contract freedom.

Pursuant to the imperative provisions of Turkish Code of Commerce, a shareholder is only obliged to subscribe certain capital to the company by virtue of the articles of association made by and among the shareholders in the course of the company’s incorporation. That said, it is a fact that shareholders are also willing to govern and define their relations, respective rights and obligations in detail. Shareholders prefer to sign a shareholders’ agreement in order to bridge over this gap in laws.

As, in line with the legislator’s approach that a shareholder’s sole obligation is to inject capital (“single debt principle”), provisions that may be incorporated to an articles of association are rather limited, shareholders’ agreements are commonly used by shareholders as they are willing to freely govern and define specific matters.

Thanks to that agreement, all or some of the shareholders undertake to do, not to do or to give something to or for each other.

  • It offers a flexibility that would not be otherwise available under an articles of association.
  • It clearly lays down mutual rights and obligations of shareholders among themselves or towards the company.
  • It governs and defines relations between investors and founders.
  • It serves to regulate the processes of Employee Stock Options
  • It serves as an instrument to avoid any potential disputes.
  • It allows regulation of potential share transfers, keeping the company’s shareholding structure intact.
  • It assures that the confidentiality between shareholders is secured.
  • The power of balance is not compromised owing to additional hedging mechanisms for minority shareholders.
  • It may serve as a method to determine public offering method in future.

For Which Type of Companies is A Shareholders’ Agreement Particulary Recommended?

These kinds of agreements have been widely popular for closed-type joint-stock companies, like family corporations, since old times, and they are critically important to maintain the shareholding structure intact in start-up companies with a fast growth potential as the latter is founded with a focus on an innovative product, process or service idea. Therefore, it is recommended that a shareholders’ agreement must be strictly signed between founder shareholders at the time of incorporation or by future shareholders who will invest in them at a later time.

Moreover, this kind of agreement is suggested in order to govern all relations in a company with a diversified group of shareholders if such relations are not satisfactorily defined or addressed in Turkish Code of Commerce.


Parties to A Shareholders’ Agreement

Parties to a shareholders’ agreement should be the “shareholders” of the company. In practice, while there are occasions where the company itself is made a party to the agreement, it is a matter of debate, in particular, in case of violation of imperative provisions, if a company may specifically be a party to the agreement.

A shareholders’ agreement is an agreement that is binding for shareholders who are parties to it and their heirs within the meaning of “law of obligations”. Notwithstanding the foregoing, it is a fact that it indirectly affects other shareholders and the relevant company even if they are not parties to it.