Overview
The right to obtain information and inspection set out in Article 437 of the Turkish Commercial Code No. 6102 (“TCC”), and the right to request a special audit set out in Article 438 of the TCC, are closely inter-related shareholder rights. They are particularly significant for shareholders who are not involved in the management of the company, enabling them to obtain information regarding the company’s activities and financial position.
The right to obtain information and inspection is a precondition to the right to request a special audit. Accordingly, a shareholder may not directly exercise the right to request a special audit without first exercising the right to obtain information and inspection.
The conditions for, and the manner of, exercising these two rights, together with the application procedure, are set out below.
Right to Obtain Information and Inspection
The right to obtain information and inspection under Article 437 of the TCC has two aspects:
- The company must make available, at its registered office and branches, for shareholders’ inspection at least fifteen (15) days prior to the general assembly meeting, the financial statements, the consolidated financial statements, the board of directors’ annual report, the auditors’ report(s) and the board of directors’ profit-distribution proposal. Of these, the financial statements and the consolidated financial statements must remain available for shareholders’ inspection at the registered office and branches for one (1) year. Each shareholder is entitled, at the company’s expense, to request a copy of the income statement and the balance sheet; and
- At the general assembly, a shareholder may request information from the board of directors on the company’s affairs, and from the auditors on the manner and results of the audit.
The first aspect is a right exercisable outside the general assembly, whereas the second aspect is exercised at the general assembly. In other words, save for the documents prepared and made available prior to the meeting, information may be requested from the board of directors only during the general assembly.
Information provided by the board of directors must, in line with the principles of accountability and good faith, be diligent, accurate and complete, and must also cover the company’s affiliated/controlled companies.
A request for information may be refused only if providing the information would result in the disclosure of the company’s trade secrets or would jeopardise other protectable legitimate interests of the company. However, if any shareholder has been provided—by virtue of being a shareholder—with information outside the general assembly on a given matter, then upon the request of another shareholder the same information must be provided to that shareholder in the same scope and detail, even if it is not on the agenda. In such a case, the board of directors may not rely on trade secret or company-interest grounds to refuse disclosure.
Inspection of the relevant parts of the company’s commercial books and correspondence that relate to a shareholder’s question requires the explicit permission of the general assembly or a resolution of the board of directors. If permission is granted, the inspection may be conducted through an expert. The general assembly grants such permission by a simple majority of the shareholders present.
A shareholder whose requests for information or inspection are left unanswered, unjustifiably refused or postponed, and who thereby cannot obtain information within the meaning of Article 437 of the TCC, may apply to the commercial court of first instance at the place of the company’s registered office within ten (10) days of the refusal, or within a reasonable period in other cases. The court may order that the information be provided outside the general assembly and may determine the manner of such disclosure in its decision. The court’s decision is final.
Right to Request a Special Audit
Each shareholder may, if necessary for the exercise of shareholder rights and provided that the right to obtain information or inspection has previously been exercised, request from the general assembly—even if not on the agenda—that certain events be clarified by way of a special audit. Accordingly, the right to request a special audit is exercised during the general assembly meeting and does not require the matter to be placed on the agenda.
The general assembly decides to approve or reject the request by a simple majority of those present. If the general assembly approves the request, the company or any shareholder may, within thirty (30) days, apply to the commercial court of first instance at the place of the company’s registered office for the appointment of a special auditor. In such a case, any shareholder may apply to the court even if they did not themselves make the request at the general assembly. The costs of appointing the special auditor are borne by the company.
Right to Apply to Court for Appointment of a Special Auditor
If the general assembly rejects the request for a special audit, shareholders representing at least one-tenth (1/10) of the share capital (or one-twentieth (1/20) in publicly-held joint-stock companies) or shareholders whose shares have an aggregate nominal value of at least TRY 1,000,000 may, within three (3) months, apply to the commercial court of first instance at the place of the company’s registered office for the appointment of a special auditor.
Before minority shareholders apply to the court for appointment of a special auditor, they must first have exercised the right to obtain information and inspection and must have requested a special audit during the general assembly.
For the court to grant the request, it must be convincingly demonstrated that the law or the articles of association have been breached, resulting in loss to the company or to the shareholders.
If the court finds the request well-founded, it will determine the scope of the examination in line with the request and appoint one or more independent experts as special auditor(s). The court’s decision is final.
The special auditor, subject to confidentiality obligations and without unnecessarily disrupting the company’s business, must prepare the report within a reasonable period. The board of directors is obliged to permit the examination of the company’s books, writings including correspondence, and assets—most notably cash, negotiable instruments and goods—within the scope of the audit. The founders, corporate bodies, attorneys/authorised representatives, employees, trustees and liquidators are obliged to provide the special auditor with information on material facts. In disputes concerning the sharing of information and documents, the court renders a final decision.
The special auditor submits the report to the court while preserving the company’s trade secrets. The court serves the report on the company and decides, having assessed whether disclosure would harm the company’s interests, on the request to provide the report to the applicant shareholders. The court also affords the company and the applicant shareholders the opportunity to comment on the report and to raise further questions.
The board of directors must present the report and any related comments to the next general assembly. Each shareholder may, within one (1) year following that general assembly, request from the company a copy of the report and of the board of directors’ opinion thereon.
If the court grants the request for appointment of a special auditor, it will specify the advance and expenses payable by the company. Where justified by special circumstances, expenses may be partially or wholly charged to the applicants.
