Shareholders’ Agreement for Turkish Startups: Key Clauses Explained

A shareholders’ agreement is one of the most important legal documents for a startup that has more than one shareholder or expects to receive external investment.

In Turkey, startup founders often establish a company, divide the shares and begin operating without defining how major decisions will be taken, how shares can be transferred, what rights investors will have or what will happen if one shareholder wants to exit.

This may not create an immediate problem during the early stages of the business. However, as the startup grows, raises investment, hires employees and becomes more valuable, disagreements between shareholders can become significantly more complicated.

A professionally prepared Shareholders’ Agreement, commonly referred to as an SHA, can establish clear rules concerning the relationship between founders, investors and other shareholders.

For Turkish startups, a Shareholders’ Agreement may regulate issues such as:

• management rights,
• board representation,
• voting,
• reserved matters,
• information rights,
• share transfers,
• pre-emption rights,
• right of first refusal,
• drag-along rights,
• tag-along rights,
• anti-dilution protection,
• liquidation preference,
• founder vesting,
• good leaver and bad leaver provisions,
• future financing rounds,
• employee stock options,
• confidentiality,
• non-compete obligations,
• deadlock mechanisms, and
• exit transactions.

The agreement must, however, be carefully coordinated with the Turkish Commercial Code, the company’s articles of association and mandatory corporate law principles.

This article explains the most important clauses commonly included in shareholders’ agreements for startups in Turkey.

What Is a Shareholders’ Agreement?

A Shareholders’ Agreement is a private contract entered into between some or all shareholders of a company.

Its purpose is to regulate how the shareholders will exercise their rights and how they will behave in relation to the company and one another.

Unlike the articles of association, which form part of the company’s constitutional framework, a Shareholders’ Agreement operates primarily as a contractual arrangement between its parties.

This distinction is particularly important under Turkish law.

A contractual provision may be binding between the shareholders but may not automatically have the same corporate effect as a provision validly included in the articles of association.

Therefore, a properly structured startup investment usually requires coordination between:

• the Shareholders’ Agreement,
• the articles of association,
• investment agreement,
• subscription agreement,
• share transfer agreements,
• board resolutions,
• general assembly resolutions, and
• other closing documents.

Is a Shareholders’ Agreement Mandatory in Turkey?

No.

A Shareholders’ Agreement is generally not mandatory merely because a company has more than one shareholder.

A joint stock company or limited liability company may legally operate without one.

However, startups with:

• multiple founders,
• angel investors,
• venture capital funds,
• strategic investors, or
• minority shareholders

should seriously consider entering into an SHA.

The absence of clear contractual rules may create uncertainty concerning matters that standard articles of association do not address in sufficient detail.

Founders’ Agreement vs. Shareholders’ Agreement

These two documents are related but not identical.

A Founders’ Agreement is generally entered into between the individuals who establish the startup.

It often focuses on:

• founder roles,
• founder equity,
• commitment,
• vesting,
• intellectual property,
• founder salaries,
• founder departure, and
• early-stage decision-making.

A Shareholders’ Agreement usually becomes more important when investors enter the company.

It may regulate a broader corporate relationship involving:

• founders,
• angel investors,
• venture capital funds,
• strategic investors,
• employee shareholders, and
• other equity holders.

In many investment transactions, the original Founders’ Agreement is replaced or supplemented by a more comprehensive Shareholders’ Agreement.

Articles of Association vs. Shareholders’ Agreement

One of the most important legal issues in Turkish startup transactions is understanding the difference between the SHA and the articles of association.

The articles of association regulate the company itself.

The Shareholders’ Agreement regulates contractual obligations between the parties.

For example, shareholders may contractually agree that a particular investor must approve certain transactions.

However, whether this right can also operate directly within the company’s corporate decision-making structure depends on Turkish corporate law and how the arrangement is implemented.

For this reason, investment rights should not simply be written into an SHA and left there.

Where legally possible, relevant protections may also need to be reflected in:

• articles of association,
• board structure,
• representation rules,
• voting arrangements, and
• corporate resolutions.

1. Share Capital and Ownership Structure

The Shareholders’ Agreement should clearly identify the company’s ownership structure.

For example:

• Founder A: 40%
• Founder B: 30%
• Seed Investor: 20%
• Employee Option Pool: 10%

The agreement should distinguish between:

• issued shares,
• fully diluted ownership,
• option pools,
• convertible instruments, and
• shares reserved for future issuance.

This is particularly important because startup ownership percentages may appear different depending on whether employee options or convertible investments are included.

A clean cap table should therefore accompany the investment documentation.

2. Share Classes and Privileges

Startup investors may request different economic or governance rights from ordinary founder shares.

These may include:

• voting privileges,
• dividend privileges,
• board appointment rights,
• liquidation preference,
• conversion rights, or
• other preferential rights.

Turkish joint stock companies may create privileged share groups within the limits permitted by law.

These rights should be structured carefully.

Simply labeling shares as “preferred shares” does not automatically create the same rights that would exist under Delaware or English company law.

The rights must be translated into mechanisms recognized under Turkish corporate law.

3. Board Composition

Board representation is one of the most common investor rights.

For example, after a venture capital investment, the board may be structured as:

• two founder representatives,
• one investor representative, and
• one independent member.

The SHA may regulate:

• number of board members,
• nomination rights,
• removal rights,
• chairman appointment,
• meeting frequency,
• quorum, and
• voting requirements.

For an A.Ş., board structure is particularly important because the board is responsible for management and representation of the company.

4. Investor Board Appointment Rights

An investor may request the right to appoint one or more board members.

For example:

The Investor shall have the right to nominate one member to the Board for so long as it holds at least 10% of the Company’s shares.

This type of clause protects the investor’s ability to participate in strategic decision-making.

However, the contractual nomination right must be coordinated with Turkish corporate law and the company’s constitutional documents.

5. Board Observer Rights

Some investors do not request formal board membership but instead seek observer rights.

A board observer may attend board meetings and receive information but normally does not have formal voting rights as a board member.

This can allow investors to monitor the company without assuming the same governance position as a director.

The agreement should specify:

• whether observers may attend all meetings,
• what information they receive,
• confidentiality obligations, and
• situations where access may be restricted.

6. Reserved Matters

Reserved matters are one of the most important sections of an SHA.

These are decisions that cannot be taken without the approval of a specified shareholder or percentage of shareholders.

Reserved matters commonly include:

• issuing new shares,
• increasing or decreasing capital,
• changing the articles of association,
• taking substantial debt,
• selling major assets,
• changing the business model,
• entering a merger,
• acquiring another company,
• approving an exit,
• appointing senior management,
• changing founder salaries,
• entering related-party transactions,
• selling intellectual property, and
• winding up the company.

Investors frequently request consent rights over these matters.

7. Founder Control vs. Investor Protection

Reserved matters must be negotiated carefully.

If too many everyday decisions require investor approval, management may become inefficient.

If investors have almost no protection, they may be exposed to decisions that significantly affect their investment.

The objective should therefore be to distinguish between:

• ordinary business decisions, and
• fundamental corporate decisions.

Daily management should normally remain with the founders or executive team.

Major structural decisions may require investor consent.

8. Shareholder Voting

The agreement may establish voting arrangements for particular matters.

For example:

• simple majority,
• 75% qualified majority,
• unanimous approval, or
• investor consent.

However, contractual voting obligations must be considered together with mandatory corporate rules.

Not every contractual voting arrangement automatically changes statutory voting thresholds.

The agreement should therefore create obligations between shareholders while ensuring that corporate procedures remain legally valid.

9. Information Rights

Investors frequently require detailed information rights.

These may include access to:

• monthly management accounts,
• quarterly financial statements,
• annual budgets,
• cash flow reports,
• KPIs,
• sales reports,
• customer statistics,
• employee information, and
• audited financial statements.

The investor may also request the right to inspect certain company records.

Information rights help investors monitor the company without becoming involved in daily operations.

10. Budget Approval

Venture-backed startups often prepare annual budgets.

The SHA may require:

• board approval,
• investor approval, or
• qualified shareholder approval

for the annual budget.

The agreement may also regulate how far management can deviate from the approved budget without further consent.

For example, management may have freedom to operate within a 10% variance, while larger deviations require board approval.

11. Founder Vesting

Investors frequently require founder shares to be subject to vesting.

Even if founders already own their shares, an investor may request a reverse vesting arrangement as a condition of investment.

For example:

• four-year vesting,
• one-year cliff,
• monthly vesting thereafter.

The investor wants to ensure that the founders remain committed after receiving investment.

A founder who leaves shortly after closing should not necessarily retain the same ownership as a founder who stays and builds the company for several years.

12. Good Leaver Provisions

A good leaver may include a founder who leaves because of circumstances such as:

• death,
• permanent disability,
• serious illness,
• termination without cause, or
• mutually agreed departure.

A good leaver may be entitled to retain vested shares or receive fair market value for shares transferred.

The exact consequences depend on the negotiated structure.

13. Bad Leaver Provisions

A bad leaver may include a founder who:

• commits fraud,
• breaches fiduciary obligations,
• steals company property,
• seriously violates confidentiality,
• competes unlawfully with the company,
• resigns in violation of agreed commitments, or
• engages in serious misconduct.

The SHA may provide different consequences for bad leavers.

However, punitive and disproportionate clauses may create enforceability issues.

The mechanism should therefore be carefully drafted.

14. Share Transfer Restrictions

Startups generally do not want shareholders to freely sell shares to unknown third parties.

The SHA may therefore impose restrictions such as:

• lock-up periods,
• pre-emption rights,
• rights of first refusal,
• investor consent,
• permitted transfer rules,
• prohibited transferee provisions, and
• founder transfer restrictions.

These mechanisms help maintain control over the cap table.

15. Founder Lock-Up

A founder lock-up may prevent founders from selling shares for a defined period.

For example:

Founders shall not transfer any shares for three years following the investment closing, except for permitted transfers or an approved exit.

This ensures that founders remain economically committed to the startup.

Investors generally do not want founders to sell a substantial portion of their shares immediately after receiving investment.

16. Permitted Transfers

Not every share transfer needs to be prohibited.

The agreement may allow transfers to:

• wholly owned holding companies,
• family trusts where legally applicable,
• certain relatives,
• affiliated companies, or
• other approved entities.

Such transfers may be subject to the condition that the transferee agrees to become bound by the SHA.

17. Pre-Emption Rights on Share Transfers

A pre-emption mechanism may require a shareholder intending to sell shares to first offer them to existing shareholders.

For example:

Founder A wants to sell 10% to a third-party investor.

Before completing the sale, Founder A may need to offer the same shares to existing shareholders on equivalent terms.

This protects existing shareholders from unwanted third-party ownership.

18. Right of First Refusal

A right of first refusal, or ROFR, operates similarly but may arise after a shareholder receives a bona fide third-party offer.

The selling shareholder must allow the right holder to match the third-party terms.

This clause can protect investors and founders against unexpected changes in ownership.

19. Right of First Offer

A right of first offer, or ROFO, may require a selling shareholder to first invite existing shareholders to make an offer before approaching third parties.

ROFO and ROFR structures are different and should not be confused.

The appropriate mechanism depends on how much transfer flexibility the parties want.

20. Tag-Along Rights

Tag-along rights protect minority shareholders.

Suppose founders holding 70% of the company agree to sell their shares to a strategic purchaser.

An investor holding 20% may not want to remain in a company controlled by the new buyer.

A tag-along clause may allow the investor to participate in the sale.

The investor may be entitled to sell:

• all shares, or
• a proportional number of shares

on terms equivalent to those offered to the founders.

21. Why Tag-Along Rights Matter

Without tag-along rights, a majority shareholder may receive an attractive exit while leaving minority shareholders behind.

The new controlling shareholder may have a completely different business strategy.

Minority shareholders therefore commonly require the right to participate in a change-of-control transaction.

22. Drag-Along Rights

Drag-along rights operate in the opposite direction.

They protect shareholders who want to sell the company.

Suppose a buyer offers USD 50 million to acquire 100% of a startup.

Shareholders holding 90% agree.

A shareholder holding 10% refuses.

If the buyer requires complete ownership, the transaction may fail.

A drag-along clause may allow the qualifying majority to require the minority shareholder to sell on the same terms.

23. Drag-Along Thresholds

The SHA should define who may trigger drag-along rights.

Possible thresholds include:

• 50%,
• 66.67%,
• 75%,
• 80%, or
• another negotiated percentage.

Investors may also require their consent before drag-along rights can be exercised.

The threshold should balance:

• the ability to complete an exit, and
• protection against forced sales.

24. Pre-Emption Rights on New Share Issues

Pre-emption rights are also relevant to capital increases.

When the company issues new shares, existing shareholders may have rights to participate and maintain their ownership percentage.

For example:

Founder: 60%
Investor: 40%

If a new investor purchases newly issued shares, both percentages may decrease.

Pre-emption rights can give existing shareholders the opportunity to invest additional capital.

25. Dilution

Dilution occurs when a shareholder’s percentage ownership decreases because new equity is issued.

Dilution is a normal part of startup financing.

For example:

Before Series A

Founders: 80%
Seed Investor: 20%

After Series A

Founders: 60%
Seed Investor: 15%
Series A Investor: 25%

The original shareholders own smaller percentages, but the company may now be significantly more valuable.

The key issue is understanding the economic effect of dilution before approving the financing.

26. Anti-Dilution Protection

Anti-dilution clauses protect investors in a down round.

Suppose an investor purchases shares based on a USD 20 million valuation.

The next financing round occurs at a USD 10 million valuation.

The original investor may request protection against the lower issue price.

Common international mechanisms include:

• full ratchet, and
• weighted average anti-dilution.

These mechanisms can have significant economic consequences for founders.

27. Full Ratchet Anti-Dilution

Full ratchet protection is particularly investor-friendly.

It may effectively adjust the original investor’s conversion or economic position as if the investor had invested at the lower price used in the subsequent round.

This can result in substantial dilution for founders.

Founders should therefore understand the effect before agreeing to such a clause.

28. Weighted Average Anti-Dilution

Weighted average protection is generally less aggressive.

The adjustment considers factors such as:

• number of new shares issued,
• previous capitalization, and
• new issue price.

This can distribute the economic effect of the down round more proportionately.

The exact formula should be clearly specified.

29. Liquidation Preference

Liquidation preference is one of the most important economic provisions in venture capital transactions.

It determines how exit proceeds are distributed.

Suppose:

Investor invests USD 3 million.

The company later sells for USD 5 million.

If the investor has a 1x liquidation preference, the investor may be entitled to receive USD 3 million before the remaining amount is distributed, depending on the agreed structure.

This may dramatically affect founder returns.

30. Non-Participating Liquidation Preference

Under a non-participating preference, the investor generally chooses between:

• receiving the liquidation preference amount, or
• participating as an ordinary shareholder.

For example:

Investor owns 20% and has a 1x preference on a USD 2 million investment.

If the company sells for USD 5 million, 20% would equal USD 1 million.

The investor may therefore prefer the USD 2 million preference.

If the company sells for USD 50 million, 20% equals USD 10 million.

The investor would likely choose the ordinary share participation instead.

31. Participating Liquidation Preference

Participating preference is more favorable to the investor.

The investor may first receive the preference amount and then participate in the remaining proceeds according to ownership percentage.

This is sometimes described as “double dipping.”

Founders should analyze the exit waterfall carefully before accepting participating preference.

32. Multiple Liquidation Preference

Some investors may request:

• 1.5x,
• 2x, or
• higher liquidation preferences.

For example, a 2x preference on a USD 5 million investment could entitle the investor to receive USD 10 million before other shareholders participate, subject to the negotiated structure.

This can significantly reduce founder proceeds in low- or medium-value exits.

33. Exit Waterfall

An exit waterfall illustrates how sale proceeds are distributed among shareholders.

Founders should request calculations for different exit scenarios.

For example:

• USD 5 million exit,
• USD 10 million exit,
• USD 25 million exit,
• USD 100 million exit.

This can reveal the practical effect of:

• liquidation preference,
• option pools,
• dilution,
• participation rights, and
• convertible investments.

Headline valuation alone does not explain what founders will receive during an exit.

34. Founder Representations and Warranties

Investors typically require founders and the company to provide representations and warranties.

These may concern:

• valid incorporation,
• share ownership,
• intellectual property,
• employment,
• litigation,
• taxation,
• contracts,
• data protection,
• regulatory compliance, and
• financial information.

If a representation is false, the investor may have contractual remedies.

Founders should therefore avoid providing warranties without confirming the underlying facts.

35. Intellectual Property Warranties

For technology startups, investors often request strong warranties concerning IP ownership.

The company may be required to confirm that:

• it owns or validly licenses its core technology,
• founders have assigned relevant IP,
• employees have signed appropriate agreements,
• freelancers have transferred required rights,
• there are no known infringement claims, and
• open-source software has been used in accordance with applicable licenses.

Failure to establish clean IP ownership can delay investment.

36. Data Protection Warranties

Modern investors increasingly examine privacy compliance.

The company may be asked to confirm compliance concerning:

• personal data processing,
• privacy notices,
• international data transfers,
• data security,
• customer information,
• employee data, and
• data breaches.

For SaaS, fintech, healthtech and AI startups, privacy issues may be material to valuation.

37. Founder Covenants

The SHA may impose ongoing obligations on founders.

These may include:

• working full-time,
• complying with approved budgets,
• protecting IP,
• maintaining confidentiality,
• avoiding competing businesses,
• reporting material events, and
• assisting with future financing.

Founder obligations should be sufficiently clear to be enforceable but should not create unnecessary operational restrictions.

38. Non-Compete Clauses

Investors often require founders not to compete with the startup.

A founder with detailed knowledge of:

• technology,
• customers,
• pricing,
• employees, and
• strategy

could seriously damage the company by immediately establishing a competing business.

However, non-compete provisions must remain within legally defensible limits.

Overly broad restrictions may be vulnerable to challenge.

39. Non-Solicitation Clauses

The SHA may also prevent founders from soliciting:

• employees,
• customers,
• suppliers, or
• key commercial partners

for a defined period after leaving.

This may be particularly important where the startup’s value depends on a small engineering or sales team.

40. Confidentiality

Investors and shareholders often receive highly sensitive company information.

The SHA should impose confidentiality obligations concerning:

• financial information,
• investor discussions,
• source code,
• product roadmaps,
• pricing,
• customers,
• business strategies, and
• transaction terms.

Certain disclosures may nevertheless be permitted to:

• lawyers,
• accountants,
• regulators,
• affiliated funds, or
• potential financing sources

subject to appropriate safeguards.

41. Future Financing Rounds

The agreement should address how future financing will be approved.

Questions include:

• What shareholder approval is required?
• Do current investors have participation rights?
• Can the company issue convertible instruments?
• Who determines valuation?
• Can a new investor receive superior rights?

These issues become increasingly important as the startup moves from seed to Series A and later rounds.

42. Pro Rata Investment Rights

An investor may request the right to participate in future rounds to maintain its ownership percentage.

For example:

An investor owns 15%.

The next round would dilute the investor to 10%.

A pro rata right may allow the investor to invest additional money and remain at 15%.

Institutional investors frequently consider these rights valuable.

43. Super Pro Rata Rights

Some investors request the right to purchase more than their pro rata entitlement.

This allows the investor to increase ownership in future rounds.

Founders should consider whether such rights may make it more difficult to allocate shares to new investors.

44. Most Favored Nation Clauses

Convertible investment agreements sometimes include a most favored nation, or MFN, provision.

This may allow an earlier investor to benefit from more favorable terms granted to a later investor.

The exact wording is important.

A broad MFN provision may create unexpected consequences during future fundraising.

45. Employee Stock Option Pool

Investors frequently require the creation or expansion of an employee option pool.

For example:

Before investment:

Founders: 90%
Existing Investors: 10%

The new investor may require a 10% ESOP pool before closing.

This option pool may dilute the founders before the investor’s ownership is calculated.

Founders should therefore understand whether the investment valuation is calculated on a:

• pre-option pool basis, or
• post-option pool basis.

This can have a significant economic effect.

46. Founder Secondary Sales

Sometimes investors allow founders to sell a small number of existing shares during an investment round.

This is known as a secondary transaction.

For example:

The investor invests USD 5 million into the company and separately purchases USD 500,000 worth of shares from a founder.

Secondary sales may allow founders to obtain some liquidity.

However, investors may be concerned if founders sell too much too early.

The SHA may therefore limit future founder secondary sales.

47. Related-Party Transactions

The agreement may require special approval for transactions between the company and:

• founders,
• directors,
• shareholders,
• related companies, or
• family members.

For example, a founder should not be able to cause the startup to purchase expensive consulting services from another company owned by that founder without appropriate approval.

These provisions help prevent conflicts of interest.

48. Founder Salaries

Investor approval may be required for major changes to founder compensation.

An investor may agree to:

• specified founder salaries,
• annual adjustment limits, and
• board approval for bonuses.

This prevents founders from extracting excessive value through salaries after accepting equity investment.

49. Debt Restrictions

The SHA may restrict the company from taking substantial debt without investor approval.

For example:

The Company shall not incur indebtedness exceeding USD 250,000 without Investor Consent.

The objective is to prevent management from materially changing the startup’s financial risk profile.

50. Sale of Intellectual Property

A technology startup’s IP may represent most of its value.

The SHA may therefore classify the sale, transfer or exclusive licensing of material IP as a reserved matter.

Founders should not be able to transfer core technology without appropriate shareholder approval.

51. Change of Business

Investors invest based on a specific business model.

The SHA may therefore require approval before the company fundamentally changes its business.

For example, investors in a B2B SaaS startup may not want founders to use company capital to enter an unrelated real estate business.

52. Deadlock

Deadlock may arise where required shareholder or board approval cannot be obtained.

This is particularly dangerous where:

• ownership is 50/50,
• founders and investors have equal board representation, or
• reserved matters require unanimous approval.

The SHA should establish a mechanism for resolving prolonged deadlock.

53. Deadlock Escalation

A simple first stage may require the dispute to be escalated to:

• founders,
• senior investor representatives, or
• designated decision-makers.

The parties may then be given a defined period to negotiate in good faith.

This can resolve commercial disagreements without triggering more aggressive remedies.

54. Mediation

The agreement may provide for mediation after negotiations fail.

Mediation can be useful where shareholders wish to preserve the company while resolving the dispute.

However, mediation may not solve a structural deadlock if neither side is willing to compromise.

55. Buy-Sell Mechanisms

More advanced deadlock clauses may include buy-sell procedures.

Examples include:

• Russian roulette,
• Texas shoot-out,
• sealed bids, or
• third-party valuation followed by a buyout.

These mechanisms can end a deadlock by causing one shareholder to buy the other’s shares.

However, they may favor the shareholder with greater financial resources.

They should therefore be used cautiously.

56. Exit Rights

The SHA should regulate possible exit scenarios.

An exit may occur through:

• sale of all shares,
• strategic acquisition,
• merger,
• secondary sale,
• public offering, or
• another liquidity transaction.

Investors may also seek rights that encourage the company to pursue an exit after a certain period.

57. Investor Exit Expectations

Venture capital investors generally invest with the expectation of eventually realizing a return.

They may therefore seek contractual mechanisms allowing them to achieve liquidity within a target period.

This does not necessarily mean founders are forced to sell the company.

However, exit expectations should be discussed openly.

58. Initial Public Offering

If the startup eventually becomes suitable for a public offering, the SHA may contain provisions concerning:

• IPO cooperation,
• share conversion,
• lock-up periods,
• underwriter requirements, and
• termination of certain investor rights.

Many contractual investor rights cannot continue indefinitely after a company becomes public.

59. Termination of the Shareholders’ Agreement

The SHA should specify when it terminates.

Possible events include:

• IPO,
• sale of the entire company,
• dissolution,
• one shareholder acquiring 100%,
• written agreement of the parties, or
• another defined event.

Certain provisions may survive termination.

These may include:

• confidentiality,
• dispute resolution,
• liability, and
• accrued rights.

60. Governing Law

The parties should determine the governing law of the SHA.

For a Turkish company, even where a foreign governing law is selected for contractual matters, mandatory Turkish corporate law may continue to govern important corporate issues.

Foreign startup templates should therefore not be used without adaptation.

The fact that an agreement is governed by English or another foreign law does not automatically override the legal rules governing a Turkish A.Ş. or Ltd. Şti.

61. Turkish Courts or Arbitration?

The SHA should include a dispute resolution mechanism.

The parties may choose:

• competent Turkish courts,
• arbitration, or
• a multi-stage process.

Arbitration may be attractive where the startup has:

• foreign founders,
• foreign institutional investors,
• substantial investment value, or
• cross-border operations.

Potential advantages include:

• confidentiality,
• neutrality,
• specialist arbitrators,
• procedural flexibility, and
• international enforceability.

However, arbitration may also be more expensive than ordinary litigation.

62. Accession to the Shareholders’ Agreement

When new shareholders enter the company, they may be required to become parties to the existing SHA.

This is often implemented through a deed of adherence or accession agreement.

Without such a mechanism, a new shareholder may own shares without being contractually bound by transfer restrictions, confidentiality or exit provisions.

The agreement should therefore regulate accession clearly.

63. What Happens If a Shareholder Breaches the SHA?

The agreement may provide remedies such as:

• damages,
• contractual penalties where legally appropriate,
• specific performance,
• share transfer obligations,
• suspension of certain contractual rights, or
• dispute resolution proceedings.

However, remedies must be drafted in accordance with applicable mandatory law.

Not every aggressive remedy used in international templates will necessarily be enforceable in the same way under Turkish law.

64. Common Mistakes in Turkish Startup Shareholders’ Agreements

Copying a Delaware Template

Terms such as preferred shares, SAFE conversion, liquidation preference and vesting must be adapted to Turkish corporate law.

Ignoring the Articles of Association

Important investor rights may need corporate implementation.

Too Many Reserved Matters

If the investor must approve every business decision, management may become dysfunctional.

No Exit Mechanism

A startup may become trapped in permanent shareholder conflict.

Undefined Liquidation Preference

The economic consequences may be completely different from what founders expected.

Unclear Anti-Dilution Formula

The parties may later disagree on how adjustments should be calculated.

No Employee Pool Treatment

Founders may discover that the ESOP dilutes them more than anticipated.

Informal Share Promises

Advisor and employee promises may distort the cap table.

Weak IP Warranties

Investors may later discover that the company does not own its technology.

No Accession Mechanism

Future shareholders may not be bound by the agreement.

65. Shareholders’ Agreement Checklist for Turkish Startups

A comprehensive SHA may address:

• capitalization,
• share classes,
• board composition,
• board appointment rights,
• observers,
• voting,
• reserved matters,
• budgets,
• information rights,
• founder vesting,
• good leaver provisions,
• bad leaver provisions,
• transfer restrictions,
• lock-up,
• permitted transfers,
• pre-emption rights,
• ROFR,
• ROFO,
• drag-along,
• tag-along,
• dilution,
• anti-dilution,
• liquidation preference,
• representations and warranties,
• founder commitments,
• confidentiality,
• non-compete,
• non-solicitation,
• future financing,
• pro rata rights,
• option pools,
• founder secondary transactions,
• related-party transactions,
• debt restrictions,
• deadlock,
• exit rights,
• IPO,
• governing law,
• dispute resolution,
• accession, and
• termination.

The exact structure should depend on the startup’s stage and investment profile.

Practical Example

Assume a Turkish SaaS startup is established by two founders.

Before investment:

Founder A: 60%
Founder B: 40%

A venture capital fund agrees to invest USD 2 million.

Following the investment and creation of an employee option pool, the fully diluted ownership becomes:

Founder A: 42%
Founder B: 28%
VC Fund: 20%
ESOP Pool: 10%

The SHA provides that:

• the board consists of three members,
• founders appoint two members,
• the investor appoints one member,
• specified reserved matters require investor consent,
• founders are subject to reverse vesting,
• founders cannot transfer shares for three years,
• the investor has tag-along rights,
• shareholders holding at least 75% may exercise drag-along rights,
• the investor has a 1x non-participating liquidation preference,
• the investor has pro rata rights in future rounds,
• new shareholders must join the SHA, and
• disputes are subject to the agreed dispute resolution mechanism.

These provisions create a legal framework for the relationship after investment.

Without an SHA, each of these matters could later become a separate negotiation or dispute.

Why Investors Require Shareholders’ Agreements

An investor is not simply purchasing a percentage of the company.

The investor is also investing into an existing governance structure controlled by founders.

The investor therefore needs protection against risks such as:

• uncontrolled dilution,
• founders leaving,
• founders selling shares,
• excessive debt,
• related-party transactions,
• unauthorized IP transfers,
• changes in business strategy, and
• inability to participate in an exit.

The SHA provides a contractual framework for managing these risks.

Why Founders Also Need Protection

Shareholders’ agreements are not only designed for investors.

Founders also need protection.

A properly negotiated SHA can prevent an investor from:

• obtaining disproportionate control,
• blocking ordinary operations,
• forcing an unreasonable exit,
• excessively diluting founders,
• imposing unlimited warranties, or
• controlling every management decision.

Founders should therefore negotiate investment terms based on both capital needs and long-term governance.

Receiving investment at a high valuation does not necessarily mean the investment terms are founder-friendly.

Valuation Is Not the Only Important Investment Term

Founders often focus almost entirely on valuation.

For example:

“Investor A offered a USD 10 million valuation while Investor B offered USD 8 million.”

However, Investor B may offer significantly better terms concerning:

• liquidation preference,
• anti-dilution,
• board control,
• founder vesting,
• veto rights,
• option pool dilution, and
• exit rights.

A lower valuation with balanced rights may sometimes be economically superior to a higher valuation with aggressive investor protections.

Every investment should therefore be analyzed as an entire package.

Conclusion

A Shareholders’ Agreement is one of the central legal documents in a Turkish startup investment transaction.

It defines how founders and investors will operate together after capital enters the company.

A comprehensive SHA may address:

• governance,
• board rights,
• reserved matters,
• shareholder voting,
• information rights,
• founder vesting,
• transfer restrictions,
• tag-along rights,
• drag-along rights,
• pre-emption,
• anti-dilution,
• liquidation preference,
• future financing,
• employee options,
• deadlock, and
• exit transactions.

However, startup shareholders should not treat the SHA as an isolated contract.

Under Turkish law, the agreement must be coordinated carefully with:

• the company’s legal form,
• Turkish Commercial Code,
• articles of association,
• share structure,
• corporate resolutions, and
• mandatory legal provisions.

A poorly adapted international startup template may contain sophisticated terminology while failing to produce the intended legal result in Turkey.

The objective should therefore not merely be to sign a long Shareholders’ Agreement.

The objective should be to establish a governance and investment structure that works legally, commercially and economically throughout the startup’s growth.

For founders, this means maintaining sufficient ability to manage and build the business.

For investors, it means protecting the capital invested and ensuring meaningful participation in major corporate decisions.

When these interests are balanced correctly, a well-drafted Shareholders’ Agreement can provide the legal foundation for long-term cooperation between founders and investors.

Legal Disclaimer: This article is provided for general informational purposes only and does not constitute legal, tax or investment advice. Shareholders’ agreements must be prepared according to the company’s legal form, capital structure, investment terms and specific circumstances. Parties entering into a startup investment transaction in Turkey should obtain professional legal advice before signing binding documentation.