WHO CAN CONVENE GENERAL ASSEMBLY IN LIMITED LIABILITY COMPANIES?

 

In limited liability companies, one of the most important tasks of the General Assembly as a company body, is to make resolutions on behalf of the company. However, the rights and powers, and the convening of the General Assembly, which is the most important body of the company, are also determined by law and related legislation. In this article, the principles of convening the General Assembly in limited liability companies will be examined.

Key Words : convening of the General Assembly, managers’ convocation, minority’s convocation, partners’ convocation, General Assembly’s convocation, convocation procedure, GA meeting with and without convocation

As defined in Article 573 of the Turkish Commercial Code, a limited liability company is a company, incorporated by one or more real persons or legal entities under a trade name, with a definite basic capital and consist of the sum of basic capital shares. A limited liability company has a legal personality and as a result has a separate legal entity from its partners. The most important body of the limited liability company is the General Assembly. According to Article 616 of the Turkish Commercial Code, No. 6102 the General Assembly has non-delegable powers. For this reason, convening of the General Assembly is as important as the resolutions to be taken.

In limited liability companies, the General Assembly is the body that decides on the issues legitimized to it by the law formed with the participation of its partners. A general assembly is not a body that serves continuously throughout the year, such as a manager or board of managers, but a company body that, under ordinary circumstances, must meet once a year within three months after the end of the accounting period. Concerning the convening General Assembly, the managers are authorized by law for convocation, and in addition, it is stated that the provisions related to the right of convening the joint stock companies will be applied in comparison. Accordingly, those who are authorized to convene the General Assembly can be counted as managers, partners, minority, liquidators in case of liquidation of the court (trustee).

1- MANAGERS’ CONVOCATION

By law, the manager and the board of managers are authorized to convene the General Assembly to an ordinary or extraordinary meeting. Managers are determined by the articles of association or by the resolution of the General Assembly. According to the law, the manager or board of managers whose term of appointment is expired, may convene the General Assembly. In this context, the authority to convene General Assembly has been given to the managers or board of managers in limited liability companies and to the board of directors in joint stock companies. Managers will be under liability if they do not make the necessary convocation while the factual and legal conditions have been established. 

In terms of joint stock companies, according to the Commercial Law, Article 410 “The GA shall be convened by the board of directors even if the term of appointment is expired. Liquidators may also convene the General Assembly for issues related to their duties.”  Given this article, it also seems possible that in limited liability companies, managers or the board of managers may convene even if the term of appointment is expired. 

In both types of companies, the call for the meeting can be made with or without a convocation. 

It is not possible to transfer this convocation authority granted to managers; to third parties.

The most common issues in practice are as follows: if the company is managed by a single manager, the convocation must be made by him personally. The other problem is the question of what happens if there are more than one manager. When there is more than one manager, the chairman of the board of managers makes the convocation. But what happens if there are two managers, they have equal votes, and if there is no chairman between? In this case, the Chamber of Commerce does not accept the convocation as valid and does not approve the resolution taken at the General Assembly. There will be an obligation to ask the court for authority. 

 2- CONVOCATION OF THE GENERAL ASSEMBLY BY THE COURT OR TRUSTEE

According to the current legal status of the company, the company may also be managed by a trustee instead of a manager. In this case, the rules applied from the point of view of the manager and the board of managers will also apply to the trustees. However, the issue of appointing a trustee instead of managers also differs depending on the type of trustee appointed. In other words, if a trustee is appointed, the type of trustee appointed will determine whether the managers have the authority to convene the General Assembly to a meeting. In the decision of 11. Civil Chamber of the Court of Cassation (Court Merits No. 2014/12983, Decision No.  2014/20169 of 22.12.2014) 

A trustee(representation) was appointed to the partnership for the meeting of the General Assembly and determined the day of the meeting. However, before the announced meeting, the General Assembly was convened, with an appropriate convocation by the managers which is the governing body of the partnership. In this case, the Court of Cassation decided that the appointed trustee was not a “trustee of management” and that it was not illegal for the managers to convene the General Assembly by appropriate convocation and take resolutions.

 In this context, the Court of Cassation has concluded that the main purpose is the convocation to the meeting and that the appointed (representation) trustee is not the trustee of management. In other words, if the appointed trustee had been appointed to the management, and the board of managers had made a convocation earlier, this time the Court of Cassation may not have approved the decision, due to excess of power. In summary, the convocation authorities of the managers continue while a trustee with the authority of representation exists, and the authority of the trustee ceases while the trustee of management is in duty.

3- CONVOCATION OF THE GENERAL ASSEMBLY BY THE PARTNERS

According to Article 410 of the Turkish Commercial Code; in case of a situation such as the inability of managers to convene continuously; with the permission of the court, the partners may also convene the General Assembly.  This article of the law applied in comparison can find application if there is more than one manager, according to the Prof. Dr. Oruç Hami Şener. It is expressed as; “Because, failure of managers to meet continuously or to create a sufficient number of meetings  requires that there are more than one managers.” The decision of permission or refusal received by any of the partners from the court is final and the decision cannot be appealed. The section stated on the certainty of the decision by 11. Chamber of Court of Cassations (Court Merits No. 2014/12405, Decision No. 2014/19708 of 15.12.2014).

The plaintiff has filed this case with a request for permission and an injunction to convene the General Assembly, and the court has decided to dismiss the case on written grounds. In accordance with Article 410/2 of the Turkish Commercial Code, No. 6102, since the decision made on the request for permission to convocation of the partner was final, and as according to the decision of joint chambers (Court Merits No. 2013/1, Decision No. 2014/1 of 21.02.2014) it is not possible to appeal such decisions with respect to the request for an injunction, it was necessary to decide on the rejection of the request for an appeal of the plaintiff’s attorney.

4- CONVOCATION OF THE GENERAL ASSEMBLY BY THE LIQUIDATORS 

 In a limited liability company that is in liquidation, officers may call a General Assembly meeting related to their duties. The legislator limited this authority of liquidators to their positions.

5- CONVOCATION OF THE GENERAL ASSEMBLY BY THE MINORITY 

Shareholders who make up at least 10% of the company’s capital may ask the manager or the board of managers to convene the General Assembly, provided that the reasons for the delay and the agenda are stated in writing.

Commercial Code Article 411 – (1) Shareholders who make up at least one tenth of the capital and one twentieth of the publicly traded companies may ask the board of directors to convene the General Assembly, specifying the necessary reasons and agenda in writing; or to put the issues they want to be decided about on the agenda, if the General Assembly is already meeting. Under the articles of association, the right to convene can be recognized to shareholders with a smaller number of shares.

If the request for a call made by the minority is accepted by the company’s manager or board of managers, the General Assembly shall be convened to a meeting held within at least 45 days. According to Soner Altaş, by adding an article to the basic capital, the right to convene the General Assembly can also be granted for partners who have at least 5% of the basic capital.

If the managers do not hold a meeting according to the duly received applications or respond negatively within 7 days, the question arises. In this case, the convocation of the General Assembly is carried out by minority partners through application to the court. In other words, the minority will have to litigate. 

Article 412-If the shareholders’ requests for a convocation or an item on the agenda are rejected by the board of directors or if the request is not answered positively within seven working days, the commercial court of first instance may decide to convene the General Assembly at the location of the company’s headquarters upon the application of the same shareholders.

However, according to Oruç Hami Şener, it would be more accurate to make arrangements in the form of requesting a trustee from the court, since this would create a conflict between the minority and the managers. Except these cases, the minority does not have the right to make a convocation directly.

11. Civil Chamber of the Court of Cassation (Court Merits No. 2016/2371, Decision No. 2017/1397 of 9.3.2017)

“… In Article 617/3 of the Turkish Commercial Code, No. 6102 which regulates the procedure of the convocation of the General Assembly in limited liability companies determined that “Provisions regarding joint stock companies on convocation, minorities’ right to convene and propose, agenda, proposals, GA meeting without convocation, preparatory measures, minutes and unauthorized attendance, excluding those regarding the Ministry delegate, shall be applied by analogy.” In Article 411 of the Turkish Commercial Code it is regulated that shareholders who make up at least one tenth of the capital and one twentieth of the publicly traded companies may ask the board of directors to convene the General Assembly, specifying the necessary reasons and agenda in writing; or to put on the agenda the issues they want to be decided about, if the General Assembly is already meeting and that in accordance with the articles of association, it is arranged that the right to convene can be recognized to shareholders with a smaller number of shares, if the board of directors accepts the convocation, the General Assembly shall be convened to a meeting held within at least 45 days, otherwise the call will be made by the owners of requests. As to Article 412 of the Turkish Commercial Code, it is regulated that if the shareholders’ requests for a convocation or an item on the agenda are rejected by the board of directors or if the request is not answered positively within seven working days, the commercial court of first instance may decide to convene the General Assembly at the location of the company’s headquarters upon the application of the same shareholders.

In the concrete case, other partners in the company were invited by the Atty. … of the plaintiff …, to an extraordinary General Assembly meeting, dated 12.05.2014 through a notary public on 05.05.2014 and an extraordinary General Assembly meeting of the company was held upon this invitation.

In light of the articles specified above, the decision to dismiss the case on written grounds was not correct, regardless of whether the defendant … had the right to convene the shareholders of the company directly to an extraordinary GA meeting without fulfilling the procedure specified in the law, whether in person or through his attorney, and the decisions taken at the GA meeting held on this call were disabled by nullity, the judgement had to be reversed for the benefit of the appellant plaintiff…”

If the request made by the minority to the manager or board of managers for the GA meeting is inconclusive, the requesting partners may apply to the commercial court of first instance at the location of the company’s headquarters and request a decision in this direction from the court. The court decides on minority’s request after investigating whether they constitute the majority and the existence of a duly reasoned application to the managers. This decision is final and cannot be appealed.

CONCLUSION : In order for the General Assembly to be convened in limited liability companies, an application must be made by the above-mentioned persons and in accordance with the relevant procedure, otherwise the convocation is considered invalid, and the decisions taken/will be taken may also result in invalidity.

BURCU SOLMAZ

ATTORNEY AT LAW,L.LM

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