In joint stock companies, the relationship between shareholders is primarily governed by the Turkish Commercial Code No. 6102 and the company’s articles of association. However, in practice, especially in structures involving investors, founders, and strategic partners, many critical aspects of the partnership are not regulated within the articles of association but rather through shareholders’ agreements.
Unlike the articles of association, which define the corporate structure of the company, shareholders’ agreements regulate the internal relationship between shareholders and create binding contractual obligations only among the parties.
Under the principle of freedom of contract recognized by the Turkish Code of Obligations No. 6098, parties are free to structure their legal relationships as they wish, provided that they do not violate mandatory legal provisions, public order, or fundamental rights. This flexibility allows shareholders to design their relationship beyond the rigid framework of the Turkish Commercial Code. However, this does not mean that a shareholders’ agreement can function as a “shadow constitution” replacing the articles of association.
This distinction is critical.
In this article, we explain the key provisions that can be validly included in a shareholders’ agreement but cannot be incorporated into the articles of association under Turkish law.
Key Differences Between Shareholders’ Agreements and Articles of Association
A shareholders’ agreement is a contractual arrangement governed by private law, producing relative effects only between its parties. It is not registered with the trade registry and does not bind third parties or company organs directly.
In contrast, the articles of association constitute the constitutional document of the company, regulating its structure, governance, and decision-making mechanisms. Once registered and announced, they produce legal effects not only internally but also externally.
The fundamental limitation arises from Article 340 of the Turkish Commercial Code, which establishes that statutory provisions regarding joint stock companies are mandatory unless explicitly stated otherwise. Therefore, shareholders cannot freely modify corporate rules at the level of the articles of association beyond what the law permits.
This is precisely where shareholders’ agreements become a strategic tool.
Provisions Allowed in Shareholders’ Agreements but Not in Articles of Association
1-Voting Agreements and Voting Commitments
Voting rights are strictly linked to share ownership and are considered a fundamental shareholder right. For this reason, imposing binding voting obligations within the articles of association is generally not permitted, as it would undermine the free will of the general assembly.
However, shareholders may enter into voting agreements within a shareholders’ agreement, committing to vote in a certain way on specific matters.
It is important to note that voting rights are not transferred. Only a contractual obligation regarding how to vote is created. A breach does not invalidate the general assembly resolution, and remedies are limited to contractual claims such as damages or penalties.
2-Share Transfer Restrictions and Option Mechanisms
While the Turkish Commercial Code allows certain transfer restrictions for registered shares, these must comply strictly with statutory limits and are generally regulated within the articles of association.
However, more sophisticated mechanisms such as pre-emption rights, call and put options, tag-along and drag-along rights are contractual in nature and impose personal obligations on shareholders. Including such provisions in the articles of association may lead to invalidity or rejection by the trade registry.
Therefore, these mechanisms are more appropriately structured within shareholders’ agreements.
3-Indirect Control and Veto Arrangements Over the Board
The board of directors has non-transferable and exclusive powers under Turkish law. Any attempt to directly restrict these powers through the articles of association may violate mandatory provisions.
However, shareholders may agree among themselves to coordinate their voting behavior or require mutual consent before certain decisions. These arrangements do not legally bind the board but create indirect influence through shareholder coordination.
Such mechanisms are valid only at the contractual level.
4-Non-Compete, Confidentiality, and Personal Obligations
According to Turkish law, shareholders cannot be subjected to obligations beyond capital contribution through the articles of association.
Therefore, provisions such as non-compete obligations, confidentiality clauses, lock-up commitments, and mandatory exit obligations cannot be validly included in the articles of association.
These are personal obligations and must be regulated exclusively within shareholders’ agreements.
5-Financing and Exit Mechanisms
Provisions requiring shareholders to participate in future capital increases, provide additional funding, or exit under predefined conditions are contractual in nature and impose personal liabilities.
As such, they cannot be enforced through the articles of association and must be structured within shareholders’ agreements to maintain economic balance among shareholders.
Legal Risk: The “Shadow Articles” Problem
A common mistake in practice is attempting to use shareholders’ agreements as a substitute for the articles of association.
This approach creates legal risk because mandatory provisions of the Turkish Commercial Code cannot be bypassed, certain arrangements may become unenforceable, and conflicts between documents may arise.
A shareholders’ agreement must complement, not replace, the corporate framework.
Conclusion
Shareholders’ agreements are powerful tools that provide flexibility in structuring internal shareholder relations in joint stock companies. However, their scope is limited to contractual obligations and cannot override the mandatory framework of Turkish corporate law.
While the articles of association define the company’s public and structural framework, shareholders’ agreements regulate the private and economic balance between shareholders.
Properly distinguishing between these two instruments is essential to avoid legal invalidity and ensure enforceability.
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