Shareholders' Agreements in Turkish Joint Ventures

A joint venture in Türkiye is usually built on two documents that work in tandem: the company’s articles of association and a separate shareholders’ agreement (SHA) signed by the partners. Understanding how these two instruments differ, and where each one reaches its limits, is often the difference between a governance arrangement that holds under pressure and one that collapses at the first dispute. This article sets out the core distinction, the clauses partners typically negotiate, the points at which an SHA meets the boundaries of the Turkish Commercial Code No. 6102 (TCC), the mechanisms available to make it enforceable, and the additional questions that arise when a foreign partner is involved.

The shareholders’ agreement and the articles of association

The articles of association are the company’s constitutional document. They are registered with the trade registry, and they bind the company, its organs and third parties. Their effect is corporate: what they contain shapes how the company is governed toward everyone who deals with it.

A shareholders’ agreement is different in nature. It is a contract concluded among the shareholders under the Turkish Code of Obligations (TCO), relying on freedom of contract. Its effect is relative: it creates obligations only between its signatories and produces no direct effect on the company or on third parties who are not parties to it.

A clause that lives only in the shareholders’ agreement generally cannot be asserted against the company or against third parties. If an arrangement must bind the company itself, it has to be carried into the articles of association.

This distinction drives much of the drafting work. A partner may, for example, promise in the SHA to vote for a particular board candidate. That promise binds the partner contractually, but if the company registry and the articles say nothing about it, an outsider dealing with the company is not affected by it. Where the two documents conflict, the articles of association prevail as against the company, because only they carry corporate effect.

Core clauses partners negotiate

Most Turkish shareholders’ agreements gather a recognisable set of clauses. Their function is to allocate control, regulate exit and manage the relationship over time.

Clause	Purpose
Drag-along	Allows a selling majority to require the minority to sell on the same terms
Tag-along	Lets a minority join a sale by the majority on equal terms
Pre-emption	Gives existing shareholders first refusal on shares before an outside sale
Veto / reserved matters	Lists important decisions that need enhanced or unanimous approval
Board representation	Sets how each partner appoints or nominates directors
Deadlock resolution	Provides a route out of a governance stalemate
Non-compete	Restrains partners from competing with the venture
Put / call options	Gives a party the right to sell or buy shares on defined triggers
Liquidation preference	Ranks how proceeds are distributed on an exit

These clauses are largely a matter of freedom of contract, but they do not operate in a vacuum. Several of them touch directly on mandatory company law, and that is where care is needed.

Where the agreement meets the Turkish Commercial Code

An SHA can arrange a great deal, but it cannot override the mandatory framework of the TCC. Three areas deserve particular attention.

Share transfer restrictions

Pre-emption, lock-up and drag-along or tag-along arrangements all restrict how shares move. In a joint stock company, any restriction on the transfer of registered shares must remain within Articles 491 to 493 of the TCC, which set out when and how such transfers may be limited. In a limited company, the picture is different: under Article 595 of the TCC, the transfer of shares is as a rule subject to the approval of the general assembly. A transfer restriction that appears only in the SHA binds the signatories as a matter of contract, but it does not, on its own, restrict the company or bind a purchaser who is not a party.

Voting arrangements and equal treatment

Voting agreements are in principle valid as contractual undertakings. Their outer limit is the set of mandatory rules of the TCC, including the principle of equal treatment of shareholders under Article 357. A voting arrangement that tried to defeat that principle would be vulnerable. A shareholder who votes contrary to an agreed voting undertaking may be liable to the other parties, but the vote generally remains valid at the corporate level.

Exit and squeeze-out

Where a majority wishes to remove a minority, the mechanism cannot simply be invented in the SHA. Turkish law addresses the squeeze-out of minority shareholders through Article 208 of the TCC in the context of group companies. Exit arrangements in the SHA, such as put and call options, are useful and enforceable between the parties, but they should be drafted so as to sit consistently alongside these statutory routes rather than pretend to replace them.

Making the agreement enforceable

Because the SHA takes effect at the level of contract, its practical strength depends on how breach is sanctioned. Specific performance of the kind that would force a reluctant partner to actually cast a vote or transfer a share is limited in practice. The more reliable tool is a liquidated damages clause under the TCO, which fixes in advance the financial consequence of breach. A carefully calibrated penalty makes non-compliance predictable and costly, which is often enough to secure compliance in the first place.

Parties frequently reinforce this with security, escrow or step-in rights. And where an arrangement genuinely needs to bind the company, the cleaner solution is to reflect it in the articles of association as well, so that it carries corporate effect and does not depend solely on a claim for damages.

Cross-border points for a foreign partner

When one of the partners is foreign, two drafting decisions come to the front. The first is the governing law of the shareholders’ agreement. Because the SHA is a contract, the parties have room to choose the law that governs it, and that choice should be made deliberately rather than left to default rules.

The second is dispute resolution. Foreign partners frequently prefer arbitration, and an arbitration clause, with a defined seat and rules, is a standard feature of cross-border SHAs in Türkiye. Even with a foreign governing law and arbitration, the transfer restrictions, veto rights and exit mechanics still have to be coherent with the TCC, because the company itself is Turkish and its articles operate under Turkish company law. The recurring theme, once again, is coordination: the shareholders’ agreement and the articles of association must be drafted together, each doing the work it is capable of doing.