able of Contents Preface III Abbreviations XIII Introduction 1 Chapter 1 Importance of Information Gathering Effort 7 A. Director Right to Access Corporate Information 7 1. General 7 2. Statutory Director Right to Information and Inspection 10 2.1 During a Formal Board Meeting 10 2.2 Outside a Board Meeting 11 2.3 By way of a Court Order 15 2.4 Conclusion and Tips 16 B. Shareholder Right to Access Corporate Information 17 1. General 17 2. Statutory Shareholder Right to Receive Information and Inspection 17 2.1 Before a Shareholders Meeting 17 2.2 During a Shareholders Meeting 18 2.3 After a Shareholders Meeting 21 2.4 Denial Based on Corporate Secrecy and Benefit 22 2.5 By way of a Court Order 24 2.6 Conclusion and Tips 24 Chapter 2 Shareholders Meeting Phase 27 A. Benefits of a Formal Shareholders Meeting 27 1. Information Gathering 27 2. Right to Defer Discussions on Financial Statements 27 3. Special Audit Request 30 4. Moving to Replace Directors 39 4.1 An Exclusive Shareholder Right 39 4.2 Implied Agenda Item for Removal of Directors 41 4.3 Removal Based on Just Cause 42 4.4 Removal Based on Contractual Condition 42 5. Release of Directors from Liability 43 5.1 Explicit and Implicit Release Decision; Exception 43 5.2 Consequence of a Release Decision 46 5.3 A Specific Form of Release; Incorporation and Capital Increase 48 5.4 Leaping Over an Existing Release Decision 48 6. Decision to Initiate Liability Law Suit Against Directors 50 7. Right to Approve Material Asset Sales 51 B. How to Convene a Formal Shareholders Meeting 53 1. Board of Directors 54 2. Minority Shareholder 55 3. Any Shareholder 57 4. Custodian 58 5. Shareholders Meeting 58 C. Appointment of a Custodian to the Company 59 1. General 59 2. Part of a Minority Right 59 3. Lack of Administrative Corporate Bodies 60 3.1 General Rule under Turkish Civil Code 60 3.2 In the Case of Management Deadlock 63 3.3 As a Form of Injunctive Relief 65 3.4 Under Threat of Forced Liquidation 66 4. Analysis 68 Chapter 3 Statutory Director Duties and Obligations 73 A. Statutory Obligations 73 1. Perform Managerial Duties in Person 74 2. Duty of Care and Loyalty 75 2.1 Duty of Care 75 2.2 Duty of Loyalty 81 (i) A Special Case; Combination of Shareholder and Director Roles 82 3. Equal Treatment 83 4. Prohibition on Transacting with the Company 85 5. Prohibition on Incurrence of Indebtedness 87 6. Non Competition 88 7. Respecting Corporate Secrecy 94 7.1 Insider Trading Rules 94 7.2 Corporate Secrecy 96 8. Insolvency Related Obligations 100 8.1 First Tier; Excessive Loss of More than 1/2 of the Capital 101 8.2 Second Tier; Excessive Loss of More than 2/3 of the Capital 101 8.3 Third Tier; Insolvency 103 8.4 Last Resort Before Bankruptcy 105 (i) Subordination 106 (ii) Capital Injection 107 (iii) Merger 108 (iv) Bankruptcy Deferral 109 (a) Judicially Required Features of a Restructuring Plan 111 8.5 Criminal Liability of Directors 114 8.6 Two Special Cases of Claw Back of Payments 115 (i) Shareholders and Director Obligation to Return Paid Dividends 115 (ii) Creditors Right to Claim Back Excessive Director Remuneration 116 Chapter 4 Legal Action Phase 119 A. Liability Law Suits 119 1. Director/Management Liability 119 1.1 Element of Breach of Duty 120 1.2 Element of Loss; Direct Loss vs. Indirect Loss 120 (i) Claiming Direct Loss 120 (ii) Shareholders Right to Claim Indirect Loss 124 (iii) Creditors Right to Claim Indirect Loss 125 (iv) Litigation Costs 126 1.3 Element of Causation 127 1.4 Relief from Potential Liability 127 (i) Delegation 127 (a) Procedure for a Due Delegation 128 (b) Non Transferrable Director Duties 129 (c) Effect of a Due Delegation 131 (ii) Release 137 (iii) Negligence and Burden of Proof 137 1.5 Statue of Limitations 140 1.6 Interim Measures 142 1.7 Joint Liability of Directors 142 2. Director Liability In Case of Group Company Structures 144 2.1 Liability of Controlled Subsidiary’s Directors 144 2.2 Liability of Controlling Shareholder’s Directors 147 3. Shareholder Liability 148 3.1 Based on Breach of a Shareholders Agreement 148 3.2 In the Absence of a Written Shareholders Agreement; Does a General Shareholder Duty of Loyalty Exist? 150 3.3 Duty of Loyalty Between Partners in an Equity Joint Venture 155 3.4 Interim Analysis 160 (i) Evidentiary Issues 165 3.5 Statute of Limitations 167 4. Controlling Shareholders Liability in a Company Group Structure 173 4.1 General; Definition of a Group Structure 173 4.2 Introduction to Two Different Causes of Action 175 4.3 Element of Control 176 4.4 Use of Control in an Unlawful Manner 180 4.5 Element of Inflicting a Loss upon the Controlled Company 182 4.6 Counter Balancing/Equalization by the Controlling Shareholder 186 4.7 Cause of Action Available to Shareholder/Creditor of the Controlled Subsidiary 190 (i) Due to Abusive Actions 190 (ii) Due to Material Transactions (Structural Corporate Decisions) 193 4.8 Defendants Shield Against Liability Claim 196 4.9 Statute of Limitations 198 5. Law Suit Arising From False Representations and Documents 199 6. Other Sources of Statutory Liability 201 6.1 Inaccurate Declarations Regarding Payment Status of the Capital 201 6.2 Accepting Subscription Undertaking from Parties with Known Payment Incapability 202 6.3 Fraud in Valuation of Asset Contributions 202 6.4 Unauthorized Public Offering 203 B. Minority’s Right to Exit 203 1. Law Suit Requesting Company Dissolution 203 1.1 Just Reasons 204 (i) General Principles 204 (ii) Types and Forms of Just Reasons 208 (iii) Last Resort Relief 214 1.2 Court’s Discretion to Order an Alternative Solution 220 1.3 Interim Measures 224 C. Squeezing Out Minority 224 1. Law Suit For Forced Exit of Minority 224 1.1 Conditions 225 D. Invalidation of Board/Shareholder Decisions 228 1. Law Suit For Declaring Board Decisions as Unlawful 229 1.1 Grounds for Declaration of Unlawfulness of a Board Decision 231 (i) Decisions Breachin