We would like to share with you our recommendations on alternative solutions to avoid disrupting the general assembly meetings, board of directors’ meetings and board of managers’ meetings of companies in Turkey considering the precautions to ensure the social distancing to the extent possible within the scope of the preventative measures against spreading COVID-19 (novel coronavirus).
During this season when the general assembly meetings are heavily conducted, Minister of Trade, Ruhsar Pekcan, stated on March 20, 2020, that they are taking certain measures on how to proceed with these meetings; in this regard, she presented that the previously announced but as of yet not held general assembly meetings can be cancelled to be held at a future date, and that it will be allowed to hold general assembly meetings electronically, despite no specific provision for electronic meetings under companies’ articles of association.
Furthermore, the Ministry of Trade also published an announcement (“Announcement”) on its official website reiterating Minister of Trade, Ruhsar Pekcan’s statements. We will closely follow the process with all the consequences and provide you with updates as they occur.
1.Adopting board of directors’ resolutions without holding a physical meeting
Pursuant to Article 390/4 of the Turkish Commercial Code numbered 6102 (“TCC“), if no member of the board of directors in joint stock companies requests to hold a physical meeting, the board of directors’ resolution can be adopted by circulating the resolution text among the members of the board of directors. Accordingly, without prejudice to the special decision quorum requirements defined under the companies’ articles of association, board of directors’ resolutions can be adopted without the need of a physical meeting provided that the written approval of at least the majority of the members is obtained.
There is no restriction on the members of the board of directors to convene via video conference or similar platforms to conduct a preliminary assessment on the relevant subject before adopting a board of directors’ resolution in accordance with this method.
In addition, it is sufficient to circulate the resolution text prepared by one of the members of the board of directors or any other relevant person to all of the members of the board of directors via email, have each member sign their copies of the text, and to deliver the signed resolution copies to the relevant person via courier. The process of adopting a resolution by circulating the resolution text among the members is completed when all of the signed copies are attached to the board of directors’ resolution book. Thus, this will avoid any delay and difficulty in procuring all of the members’ signatures in a single copy.
2.Holding board of directors’ meetings electronically
In addition to the abovementioned method of circulating the resolution among the members, Article 1527 of the TCC allows that board of directors’ and board of managers’ meetings can be held electronically if the companies’ articles of association have a provision in this regard. Within this scope, the technical requirements defined under the provisions of the Communiqué on General Assembly Meetings of Commercial Companies to be Conducted Electronically Except for the General Assembly Meetings of Joint Stock Companies published in the Official Gazette dated August 29, 2012 (“Communiqué“) must be met.
Minister of Trade, Ruhsar Pekcan stated that even if companies’ articles of association do not contain this specific provision, companies can still hold board of directors’ and board of managers’ meetings electronically. In addition, the Announcement indicates that the companies can make the necessary amendments in their articles of associations allowing to hold the meetings electronically in their first coming general assembly meeting. As of now, a new arrangement has not yet been introduced to facilitate the process to electronically hold the board of directors’ and board of managers’ meetings and to minimize the procedural requirements. In this regard, the requirement to have the technical infrastructure stipulated under the Communiqué is still applied.
3.Facilitating processes on adopting general assembly resolutions in joint stock companies
- Is it possible to postpone general assembly meetings that have set dates or that were previously planned?
Even if the date of the general assembly was already set and the necessary meeting invitation in this regard was made, it is already technically possible to postpone a general assembly meeting if the shareholders or their representatives cannot attend the meeting and the required quorum cannot be met.
The Announcement further indicates that it is possible to cancel these meetings in advance by way of a board of directors’ resolution; and, accordingly, there is no need to wait the contemplated meeting date to first determine the missing quorum. The template text for the cancellation of meeting invitation has been published.
Similarly, for annual general assembly meetings that were planned but have no set date, we are of the opinion that, the legal obligation for companies to hold annual general assembly meeting until the end of March -for companies having the calendar year as their fiscal year- should be evaluated with more flexibility given the current force majeure event.
- Is it possible to hold the general assembly meeting via video conference instead of postponing the meeting?
Except for electronic general assembly meetings, it is mandatory to hold a physical general assembly meeting. Therefore, it is not possible to hold a general assembly meeting through video conference until a specific regulation on this issue is published.
- What is the way to decrease the number of attendees of the general assembly meetings that must be conducted physically for compulsory reasons?
In situations where general assembly meetings cannot be postponed or must be held due to immediate issues (e.g. situations where the members of the board of directors must be elected to avoid the lack of management body), our recommendation is at least to decrease the number of meeting attendees to the extent possible.
In principle, shareholders must attend the general assembly meeting in person or by proxy. In addition, a meeting presidency must be formed to conduct general assembly meetings consisting of a chairman, clerk and vote collector, if necessary.
It is possible to decrease the number of meeting attendees to the extent possible by having the shareholders issue a power of attorney for the same person to attend the meeting with limitations on such power of attorneys to certain subjects and shareholders’ instructions. Together with this recommended method and the practice of “Entrusting Representative” defined under Article 429 of the TCC, it is possible to appoint the same proxy for all of the shareholders and provide the proxy with separate instructions on how to act in the general assembly meeting. The relevant proxy can only conduct limited transactions with the authority they are specifically granted, thus resolutions, which are undesirable for the shareholders, can also be avoided.
- Application of the electronic general assembly system as a long-term measure
In principle, within the scope of Article 1527 of the TCC and the provisions under the Regulation on General Assembly Meetings of Joint Stock Companies to be Conducted Electronically published in the Official Gazette dated August 28, 2012 (“Regulation“), non-publicly held companies can also conduct their general assembly meetings electronically through the electronic general assembly system, if their articles of association contain the necessary provisions.
Minister of Trade, Ruhsar Pekcan indicated that even if companies’ articles of association do not contain this specific provision, companies can still hold meetings through the electronic general assembly system. The Announcement also confirms this statement and further indicates that the companies can make the necessary amendments in their articles of associations allowing to hold the meetings electronically in their first coming general assembly meeting.
As of now, a new arrangement has not yet been introduced to facilitate the procedures of electronically holding the general assembly meetings and to minimize the procedural requirements under the Regulation. In this regard, the requirement to endow the shareholders with the opportunity to electronically attend the meeting by way of procuring the supporting services from Merkezi Kayıt Kuruluşu Anonim Şirketi is still applied.
4.Facilitating processes to adopt general assembly resolutions in limited liability companies
As per Article 617/4 of the TCC, limited liability companies can adopt general assembly resolutions by circulating the resolution among the shareholders if no shareholder requests to hold a physical meeting. It is also possible for limited liability companies to hold general assembly meetings electronically.
We believe that, until the extraordinary circumstances due to the COVID-19 pandemic are overcome, the companies’ management bodies and shareholders should consider implementing the suggested alternatives for adopting resolutions to ensure corporate compliance and sustainability. We will provide you with regular updates and share recent practical developments with you.