In Turkey, the process of expelling a shareholder from a limited liability company (LLC) is governed by the Turkish Commercial Code (TCC) and can occur in two primary ways:
1. Through the Articles of Association:
Contractual Right: The articles of association, which act as the company's rulebook, can stipulate specific situations or actions that constitute grounds for expulsion. These situations can be tailored to the specific needs and goals of the LLC.
Following Due Process: If a member's actions or circumstances meet the pre-defined expulsion criteria outlined in the articles, the company must follow proper procedures for expulsion. This typically involves:
Notification: The shareholder must be formally notified in writing about the potential expulsion and the reasons behind it. In case the general assembly of partners decides on the expulsion of a shareholder from the company for reasons specified in the company agreement, this decision must be notified to the shareholder concerned in accordance with TCC Article 640/II, and this notification should be made through a notary. The legislator has not made a distinction regarding whether the partner subject to the expulsion decision is present or absent at the general assembly meeting where the expulsion decision is made. Therefore, the notification of the expulsion decision through a notary will be required in any case. The expelled shareholder may request the annulment of the shareholders' general assembly decision from the court within 3 months from the notification of the decision through a notary.
General Assembly Meeting: A general assembly meeting of the LLC members needs to be convened, and a vote must be taken on the expulsion proposal. This decision can be taken in accordance with TCC Article 621, provided that at least two-thirds of the represented votes and the full majority of the voting capital are present together.
2. Through Court Order:
Just Cause: Even if the articles are silent on expulsion, a member can be expelled through a court order if there exists a "just cause." The TCC doesn't explicitly define "just cause," but some examples include:
Disloyalty: Engaging in actions that harm the company's interests, such as fraudulent activities or competition with the LLC.
Breach of Fiduciary Duty: Failing to act in the best interests of the company or violating the trust placed in them by other members.
Insolvency or Inability to Contribute: If a member becomes bankrupt or is unable to fulfill their financial obligations to the company.
Legal Proceedings: The remaining members or the company itself can initiate legal proceedings seeking the member's expulsion from the court. The court will then assess the presented evidence and determine whether "just cause" exists for expulsion.
Turkish Commercial Code - Article 640:
The articles of association may lay down the grounds on which a member is expelled from the company by a resolution of the members' general assembly.
An expelled shareholder may file a lawsuit for annulment of the expulsion resolution within three months from notification of the resolution via notary.
Notwithstanding the foregoing, the company may, at any time, apply to the court for the expulsion of a shareholder from the company due to just causes.
It's important to note that the process of expulsion can be complex and involve legal nuances. If you're considering expelling a member from your LLC in Turkey, it's strongly recommended to consult with a Turkish lawyer who can advise you on the specific details and ensure compliance with the TCC and your company's articles of association.
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