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Legal ReviewTHE SHAREHOLDERS RIGHT TO GET INFORMATION IN A JOINT STOCK COMPANY

February 24, 20150

In Turkish law companies are divided into two as capital companies and private companies. Joint stock companies are capital companies and constitute the most appropriate and flexible structure for gaining real and legal entities savings into the economy. In joint stock companies, the company’s management, inspection and representation is executed by the management and inspection organs which are the organs of the legal entity. The shareholders may only be effective in the management and inspection indirectly by attending the general assembly and using their rights to vote, give suggestions, get information and make inspections.

As a rule the majority must make decisions by keeping in mind the company’s best interests and also during this the unwritten principles of company law (Honesty rule, equality rule, the rule of using rights cautiously) must be preserved. Even through this, it is constantly seen that the ones who held the majority in their hands usually choose their own interests over the interests of the company. In order to prevent this right to get information and make inspections has been given to the shareholders.

The objectives which this right seeks to accomplish are:

1- Enlighten the economic situation which the company is in 2- Indirect supervision of the organs 3- The rights of shareholders to be used appropriately 4- Assurance that the organs make functional and right decisions 5- To protect and prevent the potential danger the shareholder may be faced with in respect to the power of the majority and power of the management. 6- In the situation where the interests of the shareholder have not been kept the compensation and reparation of the damages which they have been faced with.

The right to get information is generally a proportionally acquired, indispensible, independent and individual right. Because of its proportionally mandatory nature it may not be eliminated with a main contract or with the decisions or the organs. However contract regulations or General Assembly decisions which expand the minimum conditions shown in the law or which make them easier are valid. In the Turkish Commercial Codes 362nd and 363rd articles under the headline of “The Right to Acquire Knowledge” in respect to it active and passive sides the shareholders right to acquire information has been regulated. Information may be acquired by the authoritative organ or people on request or it may also be acquired individually by the shareholders by inspecting the commercial books of the company themselves.

The TTK’s (Turkish Commercial Codes) 362nd article has regulated the Right to Acquire Passive Information as enlightening (explaining) the financial tables and reports relating the company and making these available for the shareholders to inspect. Therefore the right to acquire information in this respect is tightly related with the principle of enlightening the public and in practice is accepted as enlightening the inner public. This right has four different types; giving information periodically (The authoritative organ must make the company’s financial statements, reports made by the board of directors and inspectors and the offers of how the profits of the company are going to be distributed, ready for the inspection of the shareholders at least 15 days before the General Assembly is held. Giving information continuously (the financial statements, profit-loss calculations and reports of the board of directors must be left ready for inspection by the shareholders for one year after the General Assembly is held.) Giving information on request (Before the General Assembly is held the shareholders may request that the copies of the Profit-Loss calculations and the financial statements be given to them with the cost of these to be given by the company) and Notification (Post) ( The Profit-Loss calculation, Financial statement, reports of the board of directors and inspectors and the suggestions on how the profits will be distributed will be announced to the owners of bearer share certificates according to the company’s main contract regulations relating announcements, and should also be announced to owners of registered share certificates by post). The usage of the passive right to acquire information is not limited to just ordinary general meetings. According to court practises of the Supreme Court in order for the shareholders to use their voting rights accordingly for the matters which are on the agenda the necessary information tools must be offered to them.

The TTK’s 363rd article on the other hand has regulated the right to acquire active information. They are the situations in which the shareholders are active in the matter of acquiring information such as when; the shareholders request information by asking questions which are inside the duties of the board of directors or the inspectors, request permission from the board of directors or general assembly to directly (personally) make inspections, where the minority shareholders request that a special inspector is chosen or the right to complain to the inspectors. Generally the right actively acquire information is gathered under three headlines. 1- The right to acquire information based on questions which will be directed to them 2- The right to inspect the company’s commercial books and their correspondence 3- On refusal with no appropriate (right) reason of the request to acquire information and inspect it having the right to acquire such information by means of court.

The owners of the right to acquire information are the shareholders of the joint stock company. The shareholder without being bound to the conditions of having a certain amount of shares or owning the shares for a certain amount of time, without observing the restrictions on voting, without needing a minority or majority decision or permission may use their rights personally or by means of representation. Third persons which do not have the title of shareholder even if related to the company or a share may not use this right. In using this right the equal procedure principle must definitely be abided.

The responsible organs for giving information are the inspectors and the board of directors.

1-Inspectors: When the TTK’s 363/1 and TTK 256/1 are considered it is openly seen that the shareholders request to acquire information should firstly be made to the inspectors. This obligation of the inspectors is only in the frame of acquiring information by means of asking questions they are not obliged to respond to inspection requests. Conclusively because the right to acquire information will be used in the general assembly meeting it is mandatory that the inspectors must personally be present at this meeting. By this way the inspectors will fulfil their obligation to give the shareholders information and enlighten them. In order for the inspectors to fulfil their obligations put on them by law and to do the necessary inspections which need to be made in depth after they request that the board of directors give them the necessary books and documents and require these they are obligated to make the necessary explanations for all information and accounts including the evaluation methods. In other words the inspectors in order to execute their duties have the right to request that the board of directors gives them the necessary information and inspect it. The board of directors may not refuse this request with reasons such as the interest of the company and company secrets which need to be protected.

2-The Board of Directors: When the regulations in the law are observed it may easily be seen that the board of directors is responsible for the requests of actively getting information. In the TTK under the headline of “the right to acquire information” it is understood that the right to gain information actively by asking questions is made against the inspectors whereas the request for the right of inspection is made to the board of directors or the general assembly. It is certain that the inspectors have the right to acquire information, observe the procedures and inspect the activities of the board of directors. However it is a fact that the inspectors may not continuously and in the first degree be close and aware of the company’s activities. For this reason it is natural that the board of directors which has first degree knowledge of the activities of the company and on the management of its assets as well as being the one which is accountable for all of these to be the first organ obliged to give information. Whether in court decisions or in practise it is seen that the request to acquire information should first made to the board of directors, it is accepted that in these companies the obligated organ to give information is the board of directors which does someone else’s business, manages someone else’s assets and represents them. It shall be concluded that the organ which will give the shareholder the best answers to their questions and give these answers with necessary documents is the board of directors and not the inspectors since they know the situation and activities of the company better than the inspectors do. Along with this the board of directors has the obligation to be ready at the generally assembly meeting and give information.

It is not possible to put a limit on the right to acquire information. Since the main addressee of the request to acquire information is the board of directors, for every subject which can be put as the company’s activity and which is in the duty of the board of directors the request to acquire information may be asked from them. For this reason making a restriction subject wise on the right to acquire information creates a contradiction to the rights independent nature. The inspectors on matters which are in the frame of their duties are obligated to give information as long as it does not contradict to the company’s best interests. Therefore the obligation of the inspectors to keep secrets is not a rule which limits the right to acquire information (subject-wise). In the widest sense the right to acquire information includes, how the economic situation of which the company is in has come to pass, in this frame reasons of why profits have decreased, The financial reports and its items as well as the problematic hidden reserves. In short it includes every activity of the company. In other words every matter which seems to be suspicious as long as they are related to the board of directors or the inspectors’ duties may become the subject of the questions which shall be asked by the shareholders.

THE SCOPE OF ACQUIRING INFORMATION:

According to the TTK’s 363/1 article, the shareholders have the authority to request the necessary explanation on every point which they see as suspicious from the board of directors and the inspectors. It is not very clear on what is meant by suspicious points; the lawmaker has intentionally left open spaces in the regulation.

In this situation the shareholders have the right to acquire information from the board of directors and the inspectors in the widest sense of the general assembly or beyond the general assembly made accordingly to the goal of the right in which it was created for. The shareholder may not use this right high headedly. If it is necessary to be able to use their information rights accordingly on the matters at hand then they the shareholder may use this right. In the scope of the right to acquire information all the jobs and procedures of the company are included. The examples for the procedures of the company in the doctrine are as follows; the activities of the company made for the future and the costs of these along with the fees for the plans, reports prepared by official authorities, company consultants, financial inspectors, special inspectors, rights of peace or hidden contingency reserves (themselves or their place of disbursement). Here the decisive point is that the procedures must be those of which are made in order to fulfil the goals of the joint stock company and which are needed to be done according to the law or to the contract. Finally it must be remembered that during the stage of establishing joint stock company’s since a simple partnership relation will not be created between the founders the right to acquire information and inspection will be used in the scope of the rules which regulate simple partnerships.

THE LIMITS OF ACQUIRING INFORMATION:

Apart from the subjective request reason of the shareholder the most important limit in order to use the right to acquire and information and inspection is the “company (partnership) secret” or “company (partnership) interest”. The board of director’s duty to enlighten the partners is limited to the board of directors’ loyalty obligation and the protection of the company’s common interests (which is a part of loyalty obligation). Here the goal is to conserve the matters in which the shareholder has learned which are accepted as secret. Also it is not possible for the shareholder to personally be in competition with the company.

The board of directors may not give information by ignoring the greater interest of the company. The shareholders right to acquire information is only available as long as it does not violate company secrets or in the same meaning the company’s interests. The board of directors and inspectors will give information as long as it does not expose company secrets. As a rule when the company’s interests contradict with the shareholders right to acquire information if no other solution other than the right of acquiring information is to protect the company’s interest may be found then only then may this right be protected.

The subjective limit for the right to acquire information is the prohibition of using a right abusively. The company may not be forced in any way or by any law to give information which will be harmful to them. Joint stock companies have an economical secrecy area. The conservation of this secrecy area must be preserved. The interest in keeping the company’s secrets a secret is not only for third persons but personally for the company shareholders as well. If by any chance the shareholder is requesting information in order to just create competition, just to use this right abusively, if the request to acquire information and inspection is made in order to steal company secrets or in the same way to damage the company then this will mean that a request contradicting to the reason this rule is made. If the request to acquire information and inspection is used for intentions which are not consistent to the reason the rule was created then because this has the character of misusing (abusing) a right the burden of proof is on the company.

THE REFUSAL OF THE REQUEST TO ACQUIRE INFORMATION AND INSPECTION:

If the shareholders request to acquire information and inspection will conclude in exposing the company’s secrets or if consequent to giving information it may be seen that an actual interest of the company will be damaged then the authoritative and obligated organ must avoid giving information or permission about this. While the board of directors and the inspectors may only give information which does not expose the company’s secrets the judge may also only make a judgement to force the organs to give information in respect to this limitation. Also apart from these, for continuous or temporary objective impossibility reasons giving information may be avoided. There is no certain criterion about the situations in which the request may be refused and it is evaluated according to each event separately. In practise the accepted criterions are these: 1- Situations where the company’s interests are involved 2- The company’s financial and legal status and also the time period the request to acquire information was made must be taken into account 3- The interest about keeping a secret hidden must be based on rightful and concrete grounds which in respect to the company are open and substantial. 4- The request to acquire information may not be refused arbitrarily 5- Company may not be damaged by means of giving information. 6- The right to avoid giving information does not give the right to give untrue information.

Resource:
Doç. Dr. Arslan KAYA Anonim Sirketlerde Pay Sahibinin Bilgi Alma Hakki /2001
Prof. Dr. Mehmet BAHTIYAR Ortakliklar Hukuku / 2007
Unal TEKINALP Halka acik anonim ortaklarda yonetime katilma sorunu /1978
Oguz IMREGUN Anonim Ortakliklar / 1989

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