Corporate and M&A

Author: Defne Pırıldar

Introduction

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 family members. For this reason, it is important to keep the shares and/or authority to manage them within the family and establish continuity for future generations. In family businesses, family and commercial relationships can be intertwined; sometimes family businesses may face the risk of being terminated due to alienation and family animosities. Therefore, it is important to foresee policies for transfer of shares in line with family values and goals.

Within the scope of the articles of association, family constitutions and shareholders’ agreements, special mechanisms may be designed for the needs of family businesses. Many subjects may be included in these documents, from family values to corporate governance principles, from share transfer to dispute resolution mechanisms. These legal documents allow the creation of various mechanisms to maintain the shareholding structure and control of a family over the company in case of commercial conflicts among family members. If such conflicts do occur, the termination of joint stock companies for just cause under the Turkish Commercial Code (“TCC”), and share transfer limitations come into play. This newsletter will elaborate on share transfer limitations and introduce a decision of the Court of Cassation that reveals its approach regarding family businesses and termination for just cause.

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