General Board in Limited Companies

General Board in Limited Companies

The General Board in a limited company is the decision-making body formed by the presence of all the partners. In limited companies with one partner, this partner has all the powers of the General Board.

The General Board convenes once or more than once a year and takes decisions on matters authorized by law. The rules regarding the relevant meetings are stipulated  in the relevant articles of the Turkish Commercial Code.

General Meetings have various types such as ordinary general meetings, extraordinary general meetings, called and non-called general meetings. In this bulletin, the duties and powers of the General Board in a limited company, the types of General Meetings and their differences are explained.

1)    Duties and Powers of the Limited Company General Board

The powers of the General Board of limited companies are discussed in two different ways in the Turkish Commercial Code: ” inalienable” powers and ” powers gaining inalienable status”. According to the law, the duties and powers that require necessarily a General Board resolution and cannot be delegated to another body of the company are as follows;

• Amendment to the company’s contract.
• Appointment and discharging of directors,
• Appointment and dismissal of auditors,
• Approval of the group’s year-end financial statements and annual reports.
• Approval of the year-end financial statements and the annual report, making a decision on the dividend, determining the profit shares.
• Determination and remuneration of directors’ wages.
• Approval of capital share transfers.
• Requesting the court to dismiss a partner from the company.
• Authorization of the director to acquire the company’s own shares or approval of such an acquisition.
• Dissolution of the company.
• Making decisions on matters that the General Board is authorized by law or company agreement or that the directors present to the General Board.

In addition to the ones stated as inalienable in the Law, there are also duties and powers that will become inalienable by writing in the Articles of Association. It should be noted that it is sufficient to write only the duty and power in the Articles of Association, and there is no need to specify that it is an inalienable power. It is sufficient to include it in the Articles of Association in an effort to become inalienable duty and power. These duties and powers are listed in the Law as follows;

• The cases where the Approval of the General Board is sought in accordance with the Articles of Association and the approval of the activities of the managers.
• Making a decision on the use of the right to be offered, pre-emptive, repurchase and purchase.
• Approval for the establishment of a mortgage on the capital shares,
• Issuing internal directives about ancillary performance obligations,
• Granting the necessary permission for the approval of the managers and partners to engage in activities inconsistent with the obligation of loyalty to the company or the prohibition of competition, in case the shareholders do not find the approval of the shareholders adequate pursuant to the fourth paragraph of article 613 of the Articles of Association of the company.
• Dismissal of a partner from the company for the reasons stipulated in the company’s contract.

2)    When Does the General Assembly Convene?

General Meetings are held in two ways: ordinary and extraordinary General Meetings. Ordinary General Meetings must be held every year within 3 months following the end of the accounting period and at least once a year. Extraordinary general assembly meetings do not have a specific time to be held. It is possible to do it at any time according to the Articles of Association or if necessary.

3)    How is the General  Meeting in Limited Companies with One Partner?

In limited companies with one partner, this partner has all the powers of the General Board. All of the inalienable powers stipulated in the law are exercised by this partner alone. However, the Law stipulates that the decisions to be taken by this partner shall be made in writing in order to be valid. Therefore, it is obligatory for the relevant partner to take a decision in written form, and a verbal decision will be null and void.

4)    Call for General Meeting in Limited Companies: Called and Non-Called General Meetings

As a rule, a General Board is convened in limited companies after a call. By whom, when and how the call will be made is regulated in the Law. The General Meeting held without following the calling procedure is called the non-called General Meeting. If none of the partners of the limited company object to the meeting being held without a call, the meeting can be held with the participation of all the partners without following the calling procedure.

4.1) Called General Meeting and Calling Procedure

How the limited company General Board will be called to Meeting should be specified in its  Articles of Association. In accordance with this procedure;

• The meeting call must be made through the announcement to be made on the company’s website and in the Turkish Trade Registry Gazette.
• In addition, the meeting date and the agenda must be sent to the partners in the stock register of the newspapers where the announcement will be made or will be published, via certified letter with return receipt requested.
• A call is also required for companies that use the electronic methods to attend the Meeting.

The General Board must be called to the meeting at least 15 days prior to the day of the meeting. In the Articles of Association, this period may be longer or it can be shortened up to ten days. However, it is not possible to determine a period shorter than 10 days. Meeting and announcement days will not be taken into account in the calculation of these periods.

The following issues should be included in the meeting call;

• Date and time of the meeting
• Place of the meeting
• Agenda items
• If there is a contract amendment on the agenda, the old and new versions of the amended articles
• Who made the call
• If the first meeting has been postponed, the meeting quorum to be sought in the new meeting due to the postponement
• In the announcement of the Ordinary General Meetings; the presence of the partners at the specified company headquarters and branch addresses for the purpose of examining the financial statements, consolidated financial statements, the annual report of the board of directors or the director, the audit report and the apportionment proposal.

4.2) Who Can Call the General Board to the Meeting?

The principal authority to call the General Meeting belongs to the director or, if more than one, to the Board of Directors. However, according to the Law, the following persons also have the right to call a meeting;

• Partners on certain terms
• Minority shareholders
• Trustee
• Liquidation board in companies in liquidation

The authority of the persons listed to call the General Meeting is of secondary nature. For example, a single company partner may convene the General Board alone only if the Board of Directors cannot convene continuously or the meeting quorum cannot be met, or there is no company director. A single company partner shall call the General Board to the Meeting by applying to the court. The partner can exerise this authority only if the court gives permission to the company partner to call the General Meeting.

Minority shareholders (partners holding 1/10 of the capital) also may call a meeting in a limited company. If it is specified in the Articles of Association, the partners with fewer shares can also call the General Meeting. However, if there is no such specification, the shareholders constituting at least one-tenth (1/10) of the company’s capital may call the General Meeting by stating the compelling reasons and meeting agenda in writing. Minority shareholders shall make this request through a notary public.

5)    Agenda in  the General Meeting

In the General Board of the limited company, the agenda is determined by the people who will call the meeting. As a rule, in the General Meeting, issues other than the agenda specified in the call cannot be discussed and decisions cannot be taken.

• Opening and forming the meeting chairmanship.
• Reading and negotiating the annual report prepared by the Board of Directors.
• Reading the auditor’s reports.
• Reading, negotiation and approval of financial statements.
• Acquittance of the members of the board of directors.
• Determining the usage of the profit, the profit and gain margin ratios to be distributed.
• Determining the remunerations of the members of the Board of Directors and the rights such as attendance fees, bonuses and premiums.
• The approval of the appointment by the General Board if there has been a decrease in the membership of the Board of Directors during the activity year and the Board of Directors has appointed a new member.
• Election of the members of the Board of Directors whose incumbencies have expired, and appointing their incumbencies if they are not specified in the Articles of Association.
• Election of the auditor.

Apart from these, it is possible to add any subject to be discussed at the meeting, which is within the authority of the General Board, to the agenda. Minority shareholders also have the right to add items to the agenda.

6)     Decision Quorums in the General Board

No number has been set for the General Meeting in the law. However, the decision quorum has been regulated in detail. According to Article 620 of the Turkish Commercial Code, all General Board resolutions are taken with the absolute majority of the votes represented at the meeting, unless the law or the company’s Articles of Association states otherwise. However, in order to take some important decisions, a greater majority is required in the General Board.

In order to take the following resolutions, more than half of the entire share capital, which has the right to vote, must be present in an effort to have the meeting quorum in the General Board. At least two-thirds of the votes represented at the meeting must vote for the resolution;

• Changing the business’ field of operation.
• Envisagement of privileged capital shares in voting.
• Limiting, prohibiting or facilitating the transfer of capital shares.
• Increasing the capital.
• Limitation or annulation of the right of preference.
• Changing the company’s headquarters.
• Approval by the General Board for the directors and partners to act contrary to the duty of loyalty or the prohibition of competition.
• Applying to the court for the expulsion of a partner from the company for justifiable reasons and expulsion of a partner from the company for the reason envisaged in the Articles of Association.
• Dissolution of the company

In addition to these, there are some issues in the Law where special decision quorums are sought in order to take decisions in the General Board. These are;

Company’s division, merger and type change; In limited companies, division, merger and type changes can be made with the decision of three-quarters of the partners, provided that they own at least three-quarters of the capital.

Reduction of capital; It is possible after ensuring the affirmative votes of the shareholders or their representatives who constitute at least 75% of the capital.

In contract changes that bring additional or ancillary performance obligations or increase such obligations; If all relevant partners approve, the General Board may take such resolutions.

Conclusion

The rules regarding the convening of the General Board in limited companies and taking resolutions at the meeting are specified in the Turkish Commercial Code, and  in some matters, it is just stated that the provisions regarding joint-stock companies shall also be applied to limited companies. We have tried to give you a summary on this subject. For detailed information, you can see the other contents on our website, and you can contact the Solmaz Law and Consultancy team for detailed information and consultancy.

References

ALTAŞ, Soner, (2016), Türk Ticaret Kanununa Göre Limited Şirketler, Seçkin Yayıncılık, Ankara.

ERDOĞAN, Abdullah, (2013), “6102 Sayılı Türk Ticaret Kanunu’nun Limited Şirket Genel Kuruluna İlişkin Hükümlerinin Değerlendirilmesi”, Gazi Üniversitesi Hukuk Fakültesi Dergisi, C. XVII, p. 3.

SOLMAZ, Burcu, (2020), “Limited Şirketlerde Genel Kurulu Toplantıya Kimler Çağırabilir?”, erişim: mondaq.com

Turkish Code of Commerce