Shareholders’ Agreement (SHA)

Also known as: SHA, Shareholders Agreement, Partnership Agreement, Pay Sahipleri Sözleşmesi

In short

An agreement alongside the articles of association that governs the shareholders' relations on management, share transfers, financing and exit, and binds only its parties.

A shareholders’ agreement governs the relations between a company’s shareholders on management, share transfers, new financing and exit. In funding rounds and joint ventures, it is the key document balancing the interests of investors and founders.

Nature under Turkish Law

Under the Turkish Commercial Code, the articles of association of a joint stock company may deviate from the Code only where the Code expressly permits it (TCC Art. 340). Because of this “mandatory rules” principle, many provisions written into the articles in foreign practice can only be regulated in Turkish joint stock companies through a contract under the law of obligations between the shareholders.

A shareholders’ agreement binds only its parties. The company, its board of directors and shareholders who are not parties are not bound by it. As a rule, a vote cast in breach of the agreement is also valid. In practice, therefore:

Provisions that can be included are also written into the articles of association,
Contractual penalties are provided for breaches,
Shareholders undertake to vote in a certain way on certain decisions (voting agreement),
Third parties acquiring shares are required to accede to the agreement.

Typical Provisions

Management: Board structure, nomination rights, veto rights over key decisions,
Share transfers: Right of first refusal, tag-along, drag-along, lock-up periods,
Economic rights: Liquidation preference, anti-dilution protection, pre-emptive rights,
Founders: Vesting, leaver provisions, non-compete,
Information: Investor information rights and reporting,
Exit and deadlock: Exit routes, deadlock resolution mechanisms, dispute resolution.

Some tools can be included in the articles of association: in a joint stock company, preferred shares, board representation of certain share classes (TCC Art. 360) and restrictions on the transfer of registered shares (TCC Art. 493); in a limited liability company, rights of first refusal and purchase rights (TCC Art. 577).

Frequently Asked Questions

Is a general assembly resolution adopted in breach of the shareholders' agreement invalid?

As a rule, no. A shareholders' agreement does not bind the company or its organs; a resolution adopted by votes cast in breach of the agreement is valid if it complies with the law and the articles of association. The consequence of the breach is the breaching shareholder's liability for damages or a contractual penalty.

Should the shareholders' agreement be written into the articles of association?

Provisions that can be included in the articles should also be written there, because the articles bind the company and future shareholders. However, the articles of a joint stock company may only deviate from the Turkish Commercial Code where the Code expressly permits it, so some provisions remain only in the shareholders' agreement.

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