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RIGHT TO EQUALIZATION WITHIN THE SCOPE OF TRANSFER OF AGENCY CONTRACT

The transfer of agency contract is the agency's transfer of all its contractual rights and liabilities to a third person with the client's approval. With the transfer agreement, the agency is replaced by a third person in the contract, and the agency's contractual relationship with the client is terminated.

According to the German Code of Commerce, Article 89b/III/3, the agency may not make an equalization claim in case of transfer of agency contract. Since the agency, as the party leaving the contract, has identified its contractual rights in the transfer contract and transferred them to the new agency, it does not have the right to claim the same from the client for a second time. If the leaving agency has not set out the matters subject to an equalization claim in the transfer agreement or if it fails to obtain its rights arising out of the transfer agreement, it may not claim such rights from the client.

Turkish Code of Commerce does not include a regulation regarding the transfer of contract. As per the Turkish Code of Commerce, Article 122/III, if the agency has terminated the contract without an act of the client that may justify such termination or if the contract was rightfully terminated by the client, the agency may not claim equalization. The law has not expressed the transfer of contract among the reasons that terminate the agency's equalization claim.

Kaya and Karasu states that even if there is no concrete provision on this matter, Article 122/I-c) of Turkish Code of Commerce contains the condition of equity, and if the agency transfers its contractual rights and liabilities to a third person without gaining any benefit, it may claim for equalization as a matter of equity. Ayan's opinion is also parallel, stating that if the agency transfers the contract in return for a benefit, it may not claim an equalization.

This view considers the benefit gained by the agency when transferring the agency contract as the presumption of the fact that it is the price of the equalization claim. In cases where the right to claim an equalization is not set out, however, a price was determined in return for the other items transferred, the transferring agent's losing its right to claim an equalization will not accord with equity. For this reason, if the right to claim equalization was not set out explicitly in the transfer contract, it will be appropriate to assume that this right of the transferring agency continues. Otherwise, while trying to prevent the agency from making an equalization claim twice, it may result in the agency's not being able to exercise such a right at all.

 

 

 

 

RIGHTS OF SHAREHOLDERS IN PRINCIPAL CAPITAL INCREASE IN INCORPORATIONS

The capital increase is of vital importance in the growth and restructuring processes of joint stock companies (incorporations). Thanks to the capital increase, the incorporations improve their competitive strength, and enjoy a financial relief due to the high credibility provided. In parallel with this change and growth in the company, the shareholders should also take their share from this growth at the same ratio. The study examines the rights of shareholders during the capital increase process.

Other than for these reasons, as a rule, the principal capital increase may be carried out in incorporations at any time. The principal capital increase is not an arrangement designed as a consequence of occurrence of a reason, but rather a right stated in the law by the lawmaker and does not require finding a valid ground. The lack of requirement of showing a justification means that this decision may not be canceled only for this reason. However, the lack of requirement of showing a justification does not remove the obligation that the decision to be taken by the company must comply with the principle of honesty as specified in Article 445 of Turkish Code of Commerce. Shareholders have the burden of proof to prove that the general assembly resolution regarding the principal capital increase is against the principle of honesty, and there is an intentional act aimed at damaging the shareholders.

As no valid ground is required for the company's principal capital increase, the existing amount of the principal capital does not constitute a vested right for the shareholder as well. For this reason, the shareholders may not object to the capital increase based on a legal ground that their shares in the company will decrease if they do not participate in the principal capital increase, and if even they do object, this is not protected by the legal order. On the other hand, the shareholders do not have an obligation to participate in the principal capital increase. Such an obligation may not be decided in the articles of association either. Article 480/I of Turkish Code of Commerce regulates this matter by saying that the shareholder may not be encumbered with any debt other than performance of the premium that exceeds the share price or nominal price of the share. The following can be listed as the prerequisites for capital increase.

I. Fulfillment of all share commitments
II. Lack of funds allowed by the legislation to be added to capital in the balance sheet

 

 

 

 

WITHDRAWAL AND DISMISSAL FROM PARTNERSHIP

The situations where a shareholder is dismissed from partnership conditionally in incorporations are specified in Turkish Code of Commerce. Below, the situations where a dismissal from partnership will be allowed are summarized under relevant titles.

I. Dismissal:
The dismissal is governed by the provisions of Article 482 of Turkish Code of Commerce. Dismissal of a shareholder from partnership through dismissal requires failure of that shareholder to pay to the company its debt arising out of its participation in the capital, within the procedures stipulated in the law. In case of the shareholder's default to pay its debt to invest capital, the company management may decide to dismiss that shareholder from the company. The company's board of directors is authorized to take the decision on this matter.

II. Termination for Cause:
Article 531 of Turkish Code of Commerce governs the termination for cause. Under this provision, the shareholders who represent at least one-tenth of the capital, one-twentieth in publicly held companies, may demand from the court to rule for the termination of the company. Thanks to this regulation, the minority will be able to put pressure on the majority, and ensure execution of the minority rights in the most efficient way. Instead of termination, the court may decide dismissal of the plaintiff shareholders from the company by paying them the value of their minority shares.

III. Equalization Claim:
Within a group of companies, the holding company may not exercise its dominance so as to cause loss of a subsidiary company. If the holding company causes such a damage, the loss should be equalized within that year of operation or how and when the loss will be equalized should be defined, giving the subsidiary company a right to make a claim at an equal worth no later than the end of that year (Turkish Code of Commerce, Article 202/I/a).

According to Article 202/I/b of Turkish Code of Commerce, if the equalization claim of the subsidiary who got damages that way is not actually fulfilled within the year of operation or it is not granted a right to make an equal claim within the allowed period, any shareholder of the subsidiary may ask from the holding company and the members of its board who caused the loss, to compensate for the company's loss. If it will be appropriate in terms of the principle of equity in the concrete event, the court may, upon request or ex officio, decide purchasing of the shares of the defendant shareholders by the holding company. Each shareholder in the subsidiary company is entitled to file an equalization suit. The law has not stipulated a share percentage for filing an equalization suit.

IV. Asymmetrical Division:
In the symmetrical division where the ratio is preserved, the partners keep their share percentages in the divided company. In the asymmetrical division where the ratio is not preserved, the partners of the divided company are given shares in the transferee or newly-established companies by changing their current share percentages. The law has extensively regulated the types of divisions that preserve and do not preserve the ratios, granting the involved companies and partners a wide range and possibility of maneuver in shaping the division. This flexibility will provide great convenience in restructuring of companies. Thanks to this flexibility, the partners of divided companies may become shareholders in the new companies by keeping or not keeping their percentages, withdraw from the divided company completely, and participate or not participate in some or all of the transferee or newly-established companies, or increase their shares in the divided company.

In the division, where the ratio is not preserved, the division decision will disarrange the order between partners, and a new order based on inequality will be established. For this reason, the lawmaker has tried to prevent an inequality not consented by the majority by requiring a high quorum. According to Article 173/3 of Turkish Code of Commerce, in the asymmetrical division, the decision of approval required at least ninety percent of the partners entitled to vote in the transferor company. The majority shareholders who achieved this ratio are entitled to dismiss the minority from the company after a division where the ratio is not preserved.

V. Dismissal From Partnership as Specified in the Draft Capital Markets Law:
According to Article 26 of Draft Capital Markets Law, if the shares or voting rights ensuring management control in publicly-held partnerships are acquired, one must make an offer to purchase the shares of other partners. Having more than fifty percent of the voting rights in a partnership, directly or indirectly, by himself or with those acting together, is assumed as taking the management control. Not being able to take the control due to privileged shares is an exception. Obtaining the privileged shares that entitles you to select the majority of the number of members of the board or to nominate candidates for the said number membership positions, is also considered as taking the management control.

According to Article 27 of the draft, if the shares purchased as a result of a takeover bid or otherwise, and the voting rights of the public partnership reach or exceed the ratio determined by the Board, those who placed the takeover bid are entitled to dismiss from partnership. As of the date of announcement of the takeover bidding results to the public, within the period determined by the Board and in return for a fair price, these persons may request cancellation of the shares of minority partners, and that the shares to be issued anew be given to them.