New Developments
With its decision dated 25 December 2025, File No. 2025/128, Decision No. 2025/273, published in the Official Gazette dated 17 March 2026 and numbered 33199 (“Decision”), the Constitutional Court (“Court”) annulled, for limited liability companies with two shareholders, the phrase “filing a lawsuit before the court for the squeeze out of a shareholder from the company on justified grounds…” set out in Article 616/1.(h) and Article 621/1.(h) of the Turkish Commercial Code numbered 6102 (“TCC”), on the grounds that these provisions are unconstitutional. Please find the relevant Decision here.
Overview: Statutory Framework on Squezee Out in Limited Liability Companies
The procedure for the squeeze-out of shareholders in limited liability companies is regulated under Article 640 of the TCC. Pursuant to this provision, two alternative squeeze-out mechanisms are regulated as follows:
- Squeeze-out by general assembly resolution based on grounds stipulated in the articles of association: The articles of association may expressly stipulate the grounds that may give rise to the squeeze-out of a shareholder. If such grounds occur, the general assembly may resolve on the squeeze-out of the relevant shareholder. A shareholder subject to a squeeze-out resolution is entitled to file an annulment action within three months following the notification of the resolution.
- Squeeze-out by court decision upon the company’s request based on just cause: In addition to squeeze-out based on grounds stipulated in the articles of association, the company may apply to the court for the squeeze-out of a shareholder if a just cause exists.
For both squeeze-out mechanisms outlined above, a general assembly resolution is required. Such resolution qualifies as a “significant general assembly resolution” pursuant to Article 621/1.(h) of the TCC. In this context, TCC requires a qualified quorum for such resolution and affirmative votes representing at least two-thirds of the votes represented at the general assembly and the absolute majority of the share capital carrying voting rights are required.
Provision Introduced by the Constitutional Court Ruling
As explained above, both squeeze-out mechanisms applicable to limited liability companies require a general assembly resolution adopted with a qualified quorum. That said, this qualified majority which requires “affirmative votes representing at least two-thirds of the votes represented at the general assembly and the absolute majority of the share capital carrying voting rights” could not be practically satisfy in limited liability companies with two shareholders, by calculating it based on the number of shareholders and this creates a risk of deadlock within the company.
Furthermore, filing an application to the court through this judicial route was constituting one of the non-transferable powers of the general assembly under Article 616(1)(h) of the TCC.
In its earlier case law, the Court of Cassation acknowledged that a squeeze-out action could not be filed in two-shareholder limited liability companies due to the inability to meet the required quorum.
The Constitutional Court’s decision precisely addresses this structural deadlock in two‑shareholder limited liability companies. By ruling that the qualified quorum will not be required in cases where a shareholder is squeezed out by way of a court decision upon the company’s request based on just cause (as explained above under item (ii)), and by stipulating that the general assembly resolution to be adopted in such cases does not fall within the non-transferable powers of general assembly; the Decision aims to eliminate the breakdown of cooperation and to enable the company to maintain its legal existence within limited liability companies with two shareholders.
The Constitutional Court’s Reasoning
In the case examined by the Constitutional Court, the Court addressed the problem that the regulations governing the squeeze‑out of shareholders in limited liability companies effectively render the squeeze‑out of a shareholder impossible in limited liability companies with two shareholders. It was determined that, in limited liability companies with two shareholders, a shareholder whose actions disrupt the company’s activities or whose conduct gives rise to just cause requiring a squeeze-out cannot have its relationship with the company be terminated, thereby preventing the company to continue its activities in line with its corporate purpose.
According to the Constitutional Court, this situation renders the squeeze-out mechanism envisaged by the legislator becoming dysfunctional for limited liability companies with two shareholders. The inability of the other shareholder to access an effective judicial remedy, either directly or through the general assembly, against a shareholder who prevents the continuation of the company’s activities or renders the maintenance of the shareholder relationship impossible is incompatible with the State’s positive obligations under the freedom of enterprise.
The Constitutional Court further emphasized that this structural deadlock experienced in limited liability companies with two shareholders cannot be effectively remedied by filing an action for dissolution based on just cause pursuant to Article 636/3 of the TCC. Although, within the scope of an action, the court may, depending on the circumstances of the specific case, rule that the claimant shareholder be squeezed out of the company through payment of the real value of its shares instead of ordering the dissolution of the company, this authority lies entirely within the court’s discretion. Accordingly, there remains a possibility that the court may instead decide on the dissolution of the company or grant another remedy it deems appropriate. As a result, while this mechanism may theoretically allow for the squeeze‑out of a shareholder, it does not provide a definitive or predictable solution to deadlock situations in limited liability companies with two shareholders.
Conclusion
The Decision constitutes a significant jurisprudential development with respect to deadlock situations in limited liability companies with two shareholders and offers a long-standing solution to a persistent practical problem. Pursuant to the decision, a resolution to apply to the court for the squeeze-out of a shareholder based on just cause no longer falls within the non-delegable powers of the general assembly in limited liability companies with two shareholders, and the qualified quorum requirement no longer applies for this resolution.
Since the Decision does not contain any provision regarding the effective date of the annulment, the annulment provision entered into force upon its publication in the Official Gazette dated 17 March 2026. Accordingly, the Decision enables the squeeze-out mechanisms envisaged under the TCC to operate effectively in practice also for limited liability companies with two shareholders.
