Every joint venture eventually produces the same conversation. One partner has bought out the others, or accumulated their stakes over years, and now holds almost everything. The remaining fraction — a former founder’s estate, a financial investor that never exited, an employee who was once given shares — is small in economic terms and large in procedural ones. It must be notified of every general assembly, it can challenge resolutions, it can demand information, and its consent is needed for the handful of decisions that require unanimity. The controlling shareholder wants to buy it out. The minority either refuses, or names a price.
Turkish law answers this situation with three separate mechanisms, and the first mistake foreign investors make is to assume they are variations of one rule. They are not. The purchase right in Article 208 of the Commercial Code (Türk Ticaret Kanunu, TCC No. 6102) belongs to group law and is conditioned on the minority’s behaviour. The merger paid entirely in cash under Articles 141 and 151 belongs to restructuring law and is conditioned on a supermajority vote. The squeeze-out in Article 27 of the Capital Markets Law (Sermaye Piyasası Kanunu, SerPK No. 6362) belongs to securities regulation, applies only to publicly held companies, and expressly excludes Article 208. Each has its own threshold, its own price definition and its own forum. This guide sets out all three, the minority’s mirror-image rights, and the questions a foreign controlling or minority shareholder should ask before choosing — or resisting — a route.
1. Three Doors, Not One: Mapping the Turkish Squeeze-Out Routes
| Route | Legal basis | Who may use it | Threshold | Condition | Price |
|---|---|---|---|---|---|
| Controlling company’s purchase right | TCC 208 | A controlling company over a capital company | 90 per cent of shares and voting rights, direct or indirect | Minority obstructs operations, acts against good faith, creates noticeable difficulty or behaves recklessly | Exchange value; otherwise the TCC 202(2) value |
| Merger with cash-only exit payment | TCC 141(2), 151(5) | The merging companies | 90 per cent of the voting rights existing in the transferring capital company | Merger agreement providing only for an exit payment; merger report explaining why | Exit payment equal to the real value of the shares |
| Public-company squeeze-out | SerPK 27(1); Communiqué II-27.3 | Controlling shareholder of a publicly held company | Threshold set by the Board — 98 per cent of voting rights | Reached by tender offer or otherwise, including acting in concert | Determined under SerPK 24 through a valuation report |
| Public-company sell-out | SerPK 27(2); Communiqué II-27.3 | Minority of a publicly held company | Same event | Two-month preclusive period | Fair price per the valuation report |
The table makes one point immediately visible. The two private-company routes share the number 90 but measure different things: Article 208 looks at what the controlling company holds, Article 151(5) at what votes in favour of a particular merger agreement. A 90 per cent shareholder satisfies both counts, but a coalition of shareholders who together reach 90 per cent of the votes satisfies only the second, because Article 208 is written for a single controlling company and its indirect holdings, not for a voting alliance.
2. The Group-Law Route: TCC Article 208
Article 208 sits in the chapter on groups of companies and reads as a single sentence with four moving parts. Where a controlling company holds, directly or indirectly, at least ninety per cent of the shares and voting rights of a capital company, and the minority obstructs the company’s operations, acts contrary to the rule of good faith, creates noticeable difficulty or behaves recklessly, the controlling company may purchase the minority’s shares at the exchange value if there is one and otherwise at the value determined in the manner set out in Article 202(2).
Each part carries a limit that practice tends to forget.
The holder must be a company. The provision speaks of a controlling company (hâkim şirket). It is drafted for corporate groups: a parent holding a subsidiary. The threshold is measured on the parent’s direct and indirect holdings, so shares held through an intermediate company count. What the wording does not do is extend the right to every majority holder as such; a controlling shareholder that is not itself a company, or several shareholders who are collectively dominant, must look to the merger route or to a negotiated purchase.
The target must be a capital company. Joint stock companies and limited liability companies are covered; the provision refers to a sermaye şirketi generally.
Both counts must be met. Ninety per cent of the shares and ninety per cent of the voting rights. Where privileged shares or non-voting shares exist, the two figures diverge, and a group that comfortably clears one count may fall short on the other.
The conduct condition is real. This is the feature that distinguishes Turkish law from squeeze-out regimes that operate on threshold alone. The minority must be doing something: obstructing the company’s work, acting in bad faith, creating a difficulty that is noticeable, or behaving recklessly. Refusing to sell is not obstruction. Voting against a resolution is not bad faith. The typical fact patterns that meet the condition involve serial, unsuccessful challenges to general assembly resolutions, abusive use of information rights to extract concessions, or blocking decisions that require unanimity for reasons unconnected with the company’s interest. Because the condition is fact-sensitive, a controlling company that intends to rely on Article 208 should build the record before it acts: minutes, correspondence, the pattern of challenges and their outcomes.
Because the minority will rarely agree to sell, the right is in practice exercised through the commercial court, which examines the threshold and the conduct condition and fixes the price by the Article 202(2) standard. The decision transfers the shares against payment; it is not a resolution the controlling company can pass at a general assembly it dominates.
3. What “Real Value” Means: The Article 202(2) Standard
Article 208 does not contain its own valuation rule. It borrows the one in Article 202(2), and reading that provision explains both the price and the reference date.
Article 202(2) is itself a minority remedy. Where a controlling undertaking uses its control to bring about a merger, division, conversion, dissolution, issue of securities or important amendment of the articles that has no clearly identifiable justified reason from the dependent company’s perspective, shareholders who voted against the resolution and had their dissent recorded, or who objected in writing to the board’s decision, may ask the court either for compensation or for the purchase of their shares. The purchase is at least at the exchange value where one exists, and where there is no exchange value or the exchange value is not equitable, at the real value or at a value determined according to a generally accepted method. The court bases the value on the data nearest to the date of its decision. The claim is time-barred two years from the general assembly resolution or the announcement of the board decision.
Three consequences follow for Article 208.
First, “real value” is a going-concern figure. It is not the nominal value, not the book value, and not a liquidation value. Where the company is unlisted — the normal case — the court will take expert evidence on the valuation method, and “generally accepted method” leaves room for discounted cash flow, comparable transactions or net asset approaches depending on the business.
Second, the reference date is the court’s decision, not the controlling company’s application. A squeeze-out that takes two years to litigate is priced on the company as it stands at the end, which cuts both ways: a business that has grown in the meantime costs more to buy out, and one that has declined costs less.
Third, Article 202(3) protects the claimant’s remedy with a security mechanism: once an Article 202(2) action is filed, the court orders that a sum covering the claimants’ probable damages or the purchase value of their shares be deposited as security, in the court’s name, with a bank it designates, and no transaction under the challenged general assembly or board resolution may be carried out until that security is in place. The same paragraph guards against abuse in the other direction — where an action under paragraphs 1 or 2 is brought in bad faith, the defendant may claim joint compensation for its loss and ask the court to order security from the claimants.
4. The Merger Route: Cash-Only Exit Payments Under TCC 141 and the 90 Per Cent Vote
The second private-company route does not require any misconduct by the minority. It requires a restructuring.
Under Article 136(3) of the TCC, a merger is effected by the shareholders of the transferring company acquiring shares of the acquiring company according to an exchange ratio, and the merger agreement may also provide for an exit payment within the meaning of Article 141(2). Article 141 then gives two options. Under paragraph 1, the merging companies may give the shareholders a choice between shares in the acquiring company and an exit payment (ayrılma akçesi) corresponding to the real value of their shares. Under paragraph 2, they may provide that only an exit payment will be given. The second option is the squeeze-out: the transferring company’s shareholders do not become shareholders of the acquiring company at all; they receive cash and leave.
The Code balances that power with three requirements.
A supermajority. Article 151(5) provides that where the merger agreement provides for an exit payment, it must be approved — where the transferring company is a capital company — by ninety per cent of the voting rights existing in that company. This is stricter than the general merger quorum in Article 151(1)(a), which for joint stock companies requires three quarters of the votes present at a meeting representing a majority of the capital. The 90 per cent figure is calculated on all existing voting rights, not on those represented at the meeting.
A reasoned report. Article 147(2)(d) requires the merger report to explain, where relevant, the amount of the exit payment and the reasons for giving an exit payment instead of shares and participation rights. A report that records the amount without explaining why cash rather than shares is being offered does not meet the requirement.
A real-value price. Article 141(1) defines the exit payment as one corresponding to the real value of the shares to be acquired. Article 140(2) separately caps the equalisation payment that may accompany an exchange of shares at one tenth of the real value of the shares allotted — a figure that applies to the ordinary share-for-share merger, not to the cash-only exit, but which shows the Code’s general reluctance to let cash displace shares beyond a narrow margin unless the 90 per cent vote is obtained.
For a foreign controlling shareholder the attraction of the merger route is that it does not depend on proving the minority’s misconduct; for a foreign minority holder, the protection is the 90 per cent vote and the valuation, and Article 202(2) remains available where the merger was imposed by a controlling undertaking without a justified reason from the dependent company’s perspective.
5. Public Companies: SerPK Article 27 and the 98 Per Cent Communiqué
For publicly held companies the Commercial Code’s route is switched off. Article 27(3) of the Capital Markets Law states in terms that Article 208 of the Commercial Code does not apply to publicly held companies. In its place, Article 27(1) provides that where shares held as a result of a tender offer or in any other way, including acting in concert, reach or exceed the proportion of the company’s voting rights determined by the Capital Markets Board, those shareholders acquire the right to squeeze out the remaining minority: they may, within the period set by the Board, request the company to cancel the minority’s shares and to sell them the new shares issued in their place, at a price determined under Article 24. Article 27(2) gives the minority the mirror-image sell-out right on the same event.
The Board’s Communiqué on Squeeze-Out and Sell-Out Rights (II-27.3) supplies the numbers and the sequence.
Threshold. Under Article 4 of the communiqué, the rights arise when the voting rights attached to shares held — through a tender offer or in any other way, including acting in concert — reach 98 per cent of the company’s voting rights, or when a shareholder already in that position acquires further shares. Direct and indirect holdings are aggregated; privileges in voting rights are disregarded; shares acquired through bonus issues or capital increases in which pre-emptive rights were not restricted, through inheritance, through share buy-backs or through the freezing of voting rights do not trigger the rights. Persons under common management control are deemed to act in concert.
Sequence. Article 5 lays down a timetable measured in days. The controlling shareholder discloses the position. Within one month of that disclosure the company has a valuation report prepared and publishes its summary. From the publication of the summary a two-month preclusive period runs during which other shareholders may exercise the sell-out right at the report price, in writing to the company; the controlling shareholder may not acquire additional shares during that period except through sell-out exercises, and the sell-out continues even if the controlling position is lost in the meantime. Within three business days after the two-month period ends, the controlling shareholder applies to the company to exercise the squeeze-out for all remaining shares, privileged or not, lodging a bank letter of guarantee or evidence of blocked cash for the total price. The board resolves within five business days to cancel the minority’s shares and issue new ones, applies to the Board within ten business days for approval of the issue document, and — for listed companies — applies simultaneously for delisting. The controlling shareholder pays the total price into the company’s account within three business days of the Board’s approval, and the shares are deemed cancelled on registration of the issue document with the trade registry. Amounts due to shareholders who cannot be traced are held in a blocked account for three years.
Consequences. Under Article 5(13), a company delisted following a squeeze-out ceases to be subject to the Capital Markets Law. Under Article 5(14), where the squeeze-out and sell-out rights arise at the same time as management control is obtained, no mandatory tender offer obligation arises — a point that matters for structuring the final acquisition.
6. The Minority’s Side: Sell-Out Rights, Buy-Out Claims and Valuation Challenges
Turkish law does not treat the minority as a passive object of these procedures. Each route has a corresponding right or defence.
In a public company, the sell-out right in SerPK 27(2) is the minority’s main protection: once the 98 per cent event occurs, any minority holder may require the controlling shareholder to buy its shares at the report price within the two-month window, whether or not the controlling shareholder ever intends to squeeze out. The valuation report is prepared under the Board’s rules and its summary is public, which gives the minority the means to contest it.
In a private company facing Article 208, the minority contests the conduct condition — the controlling company must show obstruction, bad faith, noticeable difficulty or recklessness, not merely disagreement — and the valuation, which the court fixes under Article 202(2).
Against a merger or other structural decision, Article 202(2) itself is the remedy: a shareholder who voted against and had the dissent recorded may, within two years, demand compensation or purchase of its shares at real value where the controlling undertaking had no clearly identifiable justified reason from the dependent company’s perspective. Article 202(4) preserves the other rights granted to shareholders in mergers, divisions and conversions, so the Article 202(2) claim is in addition to, not instead of, the general merger protections.
7. A Foreign Investor’s Checklist
If you are the controlling shareholder. Establish first which regime applies: publicly held or not. If not, measure both counts under Article 208 — shares and votes, direct and indirect — and assess honestly whether the minority’s conduct meets the statutory condition; if it does not, the merger route with a cash-only exit payment and a 90 per cent vote is the lawful alternative, and the merger report must explain the choice of cash. Commission the valuation early; under every route the price is a real-value figure that the other side can contest. If the company is public, plan the communiqué timetable backwards from the day the 98 per cent position will be disclosed, and reserve the cash or guarantee for the entire minority.
If you are the minority. Do not assume that a 90 per cent holder can remove you at will; Article 208 requires conduct, and a merger requires 90 per cent of the votes and a reasoned report. Record every dissent in the minutes, because the Article 202(2) claim is available only to shareholders who voted against and had the objection recorded or objected in writing. Diarise the two-year limit in Article 202(2) and, in a public company, the two-month sell-out window. And obtain your own valuation before responding to any offer, since the statutory standard in every route is the real value of the shares, not the figure first proposed.
The Turkish squeeze-out is neither the automatic threshold mechanism of some jurisdictions nor an impossibility. It is three procedures, each with a threshold, a condition and a price rule, and the outcome for both sides is decided largely by which of the three is chosen and how carefully its conditions are documented.
