What Is an Action for Annulment of a Joint Stock Company's General Assembly Resolution?
General assembly resolutions play a central role in the management of joint stock companies. However, such resolutions must comply with the law, the company's articles of association and the principle of good faith. Under Article 445 of the Turkish Commercial Code, resolutions violating these rules may be challenged through an action for annulment.
What Is Corporate Law?
Corporate law regulates legal relationships involving:
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Company formation,
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General assemblies,
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Boards of directors,
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Shareholder rights,
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Share transfers,
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Corporate agreements,
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Shareholder disputes,
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Annulment of corporate resolutions,
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Directors' liability.
What Is an Action for Annulment?
Article 445 of the Turkish Commercial Code allows certain persons to challenge general assembly resolutions that violate the law, the articles of association or, in particular, the principle of good faith.
What Are the Grounds for Annulment?
A general assembly resolution may be challenged where it is contrary to:
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The law,
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The articles of association,
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The principle of good faith.
Commercial disadvantage alone does not automatically constitute a legal ground for annulment.
Who May File an Action?
Article 446 identifies several categories of persons entitled to file an action, including qualifying shareholders, the board of directors and, in certain circumstances, individual board members whose personal liability may result from implementation of the resolution.
Shareholders Present at the Meeting
A shareholder who attends the meeting must generally vote against the resolution and have the objection recorded in the minutes in order to bring an annulment action on that basis.
Shareholders Who Did Not Attend
Certain procedural irregularities may allow a shareholder to bring an action even if the shareholder did not attend or vote against the resolution. These may include improper notice, improper publication of the agenda, unauthorised participation, or unlawful exclusion from attendance or voting, provided the relevant irregularity affected the adoption of the resolution.
What Is the Filing Period?
The action must be filed within three months from the date of the general assembly resolution.
Which Court Has Jurisdiction?
The action is filed before the Commercial Court of First Instance at the place where the company's registered office is located.
What Is Nullity of a General Assembly Resolution?
Some serious defects may result not merely in annulment but in nullity.
Article 447 identifies resolutions that restrict or eliminate certain indispensable shareholder rights, unlawfully restrict information and inspection rights, disrupt the fundamental structure of the joint stock company, or violate capital-protection rules as void.
Can Implementation of the Resolution Be Suspended?
Yes. Where an annulment or nullity action has been filed, the court may, after hearing the board members, order that implementation of the challenged resolution be suspended.
Who Is Bound by the Judgment?
Once final, a judgment annulling or declaring the nullity of a general assembly resolution is effective against all shareholders. The board must register the judgment with the trade registry and publish it on the company's website.
Bad-Faith Litigation
Where an annulment or nullity action is brought in bad faith, the claimants may be jointly liable for losses caused to the company as a result.
Conclusion
The action for annulment of a general assembly resolution is an important mechanism for protecting shareholder rights and ensuring that corporate decisions comply with the law and the articles of association.
Under the Turkish Commercial Code, qualifying actions must generally be filed within three months before the Commercial Court of First Instance at the company's registered office. More serious defects may instead give rise to nullity under Article 447.