Postponement of General Assembly Meetings in Joint Stock Companies in the Wake of COVID-19 Pandemic

Among other measures taken by various authorities in order to contend with Covid-19 pandemic throughout Turkey, the Ministry of Commerce of the Republic of Turkey (“Ministry”) has announced precautions regarding general assembly meetings aiming to help prevent spread of the disease on March 20, 2020.

Time of Ordinary General Assembly Meetings

The Turkish Commercial Code numbered 6102 (“TCC”) and the Regulation on the Procedures and Principles of General Assembly Meetings of Joint Stock Companies and Representatives of Ministry of Customs and Trade to be Present at These Meetings (“Regulation”) stipulates that joint stock companies must hold ordinary general assembly meetings within three months following the end of each financial year. As financial year is generally determined as calendar year, most companies convene ordinary general assembly meetings until end of March, pursuant to the legislation.

Circumstances for Postponement

For postponement of a general assembly meeting, the meeting must first be convened, then pushed to a definite or indefinite date. In case the general assembly meeting cannot be convened for any reason, then the general assembly would not be deemed postponed.[1]

Article 28 of the Regulation determines the circumstances for a joint stock company’s general assembly meeting to be postponed. Accordingly, general assembly meetings may be postponed in case (i) failure to meet meeting or decision quorums; (ii) a general assembly decision is taken prior to discussion of the agenda commences; (iii) postponement of discussion of financial statements is requested by minority shareholders; (iv) necessitated by security reasons; (v) concerning companies that have implemented electronic general assembly system, the conditions stipulated under the Regulation on Electronic General Assemblies to be Held in Joint Stock Companies are not met.

In order to postpone a general assembly meeting based on security reasons, opinion of law-enforcement and the Ministry representative (if applicable) must be taken. As this provision of article 28 of the Regulation regulates security reasons in relation to public order and the remaining circumstances specified require the shareholders to assemble in the first place, article 28 of the Regulation is not applicable for postponement of general assembly meetings with regard to an epidemic.[2]

As per article 21 of the Regulation, the general assembly meeting held after postponement is deemed as continuation of the postponed meeting, provided that the agenda is the same with the postponed meeting.

Measures taken by the Ministry of Commerce of the Republic of Turkey

With the announcement of precautions regarding general assembly meetings aiming to help prevent spread of the infection on March 20, 2020, the Ministry has allowed joint stock and limited liability companies to cancel ordinary general assembly meetings for which the shareholders have been invited in accordance with the articles of association and Article 410 et seq. of the TCC, without waiting for the general assembly meeting to be held. Board of Directors (“BoD”) in joint stock companies and board of managers in limited liability companies are authorized to cancel ordinary general assembly meeting that has already been announced with a resolution. Subsequently, the resolution mailed to the Turkish Trade Registry Gazette Directory will be published in the Trade Registry Gazette and payments can be made via online banking.

In addition, the Ministry has advised the companies that have implemented electronic general assembly system pursuant to article 1527 of the TCC and wish to hold general assembly meeting, to hold their general assembly meetings electronically in order to keep the physical attendance of shareholders at a minimum, aiming to prevent spread of the disease.

With this regard, for companies whose articles of association does not consist of provisions permitting meetings to be held electronically, the Ministry has taken measures to permit such companies to hold meetings through the “Electronic General Assembly Meeting System” and “Electronic Board of Directors System”. It has been announced that such companies may hold meetings planned electronically, provided that they benefit from services of Merkezi Kayıt Kuruluşu A.Ş. (“MKK”), official registry system for securities issued in Turkey,  and provide the right holders the opportunity to attend meetings electronically. Additionally, the articles of association must be amended to permit meetings to be held electronically during the first general assembly meeting held thereafter.

It is possible to say that joint stock and limited liability companies with a single shareholder are not subject to the measures announced by the Ministry, considering the purpose of the said measures.

Consequences of Not Convening Ordinary General Assembly Meeting in a Timely Manner

The TCC or the Regulation do not impose any sanction for not convening ordinary general assembly meeting within three months following the end of a financial year. Accordingly, companies may hold ordinary general assembly meetings after said three months period, and the general assembly decision taken during such meeting would be valid. However, pursuant to article 553 of the TCC, founders, BoD members, managers and liquidators are liable in case they fail to fulfil their obligations arising from the law or the articles of association unless they prove that they are not at fault. Therefore, if a BoD member has caused the general assembly meeting not to convene, in case of any loss, depending on the circumstances, the company, shareholders and creditors may file a lawsuit and the BoD member may have to indemnify.[3]

In light of the above explanations, pursuant to the announcement of the Ministry, ordinary general assembly meetings can be convened at a later date. In this context, BoD members would not be liable for not calling the shareholders for general assembly meeting as they are not at fault of the current conditions; postponement may even be deemed a necessity as the Ministry has announced abovementioned measures regarding postponement of general assembly meetings.

Author: Simge Kılıç