A foreign investor acquiring shares in a Turkish startup or establishing a joint venture with a Turkish business partner should not rely only on the percentage of shares shown on the cap table.

Owning 20%, 30% or even 50% of a company does not by itself answer the most important questions:

• Who appoints the board?
• Which decisions require investor approval?
• Can the founders issue new shares and dilute the investor?
• Can the majority shareholder sell the company without the investor?
• Can the investor sell its own shares?
• What happens if the founders stop working for the company?
• Can company funds be transferred to related parties?
• What happens if the shareholders reach a deadlock?
• How does the foreign investor eventually exit?

These issues are commonly regulated through a Shareholders’ Agreement, often abbreviated as an SHA.

Shareholders’ agreements are widely used in Turkish joint ventures and investment transactions. Türkiye’s official investment guidance specifically recognizes that shareholders’ agreements are commonly entered into to regulate the relationship between joint venture parties and the continuing operation of the venture.

However, there is a particularly important feature of Turkish law that foreign investors must understand:

A Shareholders’ Agreement and the company’s Articles of Association are not the same document and do not necessarily produce the same legal effects.

That distinction can determine whether an investor has a practically enforceable corporate right or merely a contractual claim against another shareholder.

This guide explains the principal issues foreign investors should address when negotiating a shareholders’ agreement for a Turkish company.

1. What Is a Shareholders’ Agreement?

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

Depending on the transaction, the company itself may also become a party to certain contractual arrangements, although this does not automatically convert every contractual provision into a corporate-law rule.

The agreement commonly regulates:

• ownership;
• governance;
• board representation;
• voting;
• reserved matters;
• financing;
• capital increases;
• dilution;
• transfer of shares;
• founder obligations;
• dividends;
• information rights;
• confidentiality;
• non-compete obligations;
• tag-along rights;
• drag-along rights;
• put and call options;
• deadlock;
• exit;
• and dispute resolution.

A well-drafted shareholders’ agreement essentially answers:

How will the shareholders live together while the investment continues, and how will they separate when the relationship ends?

2. Why Is a Shareholders’ Agreement Particularly Important for Foreign Investors?

A foreign investor will often be a minority shareholder.

For example:

Turkish Founders: 75%

Foreign Investor: 25%.

Commercially, the foreign investor may have contributed millions of euros.

Legally, however, ordinary majority voting principles may still leave control with the founders unless additional protections are negotiated.

The foreign investor may therefore require contractual rights relating to:

• board representation;
• access to financial information;
• veto rights;
• new financing;
• related-party transactions;
• changes to the business;
• significant borrowing;
• sale of assets;
• issuance of new shares;
• dividends;
• founder departures;
• and exit transactions.

Without these protections, the investor may own a valuable percentage of the company while having limited ability to influence how that value is managed.

3. Shareholders’ Agreement vs Articles of Association

This is arguably the most important legal issue.

The Articles of Association are the company’s constitutional corporate document.

They are registered within the Turkish corporate structure and operate under the Turkish Commercial Code.

A Shareholders’ Agreement, by contrast, is fundamentally contractual.

This distinction has been repeatedly recognized in Turkish court practice.

In a 2024 decision, the 11th Civil Chamber of the Court of Cassation considered an “Ortaklık Protokolü” constituting a shareholders’ agreement and emphasized that unless relevant provisions are incorporated into the Articles of Association, the agreement does not automatically bind the company, which is legally separate from its shareholders. The Court also referred to its earlier decisions following the same approach.

Similarly, Turkish commercial court jurisprudence describes shareholders’ agreements as contracts based on freedom of contract whose rights and obligations generally operate between the contractual parties rather than automatically against the corporate entity or its organs.

This creates a very important practical rule:

Do not assume that putting a right into the Shareholders’ Agreement automatically gives that right corporate effect.

4. Important Investor Rights May Need to Be Reflected in the Articles

Suppose the shareholders’ agreement states:

“Investor approval is required before the company issues any new shares.”

But the company’s Articles of Association do not properly reflect the intended governance structure.

If the corporate organs later adopt a resolution according to the Turkish Commercial Code and the Articles, the investor may discover that its remedy is primarily contractual against the party that breached the SHA rather than automatic invalidation of the corporate action.

This is why sophisticated Turkish investment transactions frequently require careful coordination between:

1. the Shareholders’ Agreement;
2. the Articles of Association;
3. general assembly resolutions;
4. board structure;
5. share classes;
6. and other corporate documents.

However, not every contractual provision can necessarily be copied into the Articles.

The provision must also be compatible with mandatory Turkish company law.

Official Turkish investment guidance expressly notes that provisions of joint venture/shareholder agreements may be incorporated into the Articles provided they do not conflict with applicable legislation.

5. Even the Articles of Association Are Not Always Immutable

Another common misconception is:

“If we put the provision into the Articles, it can never be changed without us.”

That is not automatically true.

The Turkish Commercial Code provides rules governing amendments to the Articles of Association.

The Court of Cassation’s 2024 decision discussed above is particularly instructive: it emphasized that a shareholders’ agreement does not itself prevent the company from adopting corporate resolutions inconsistent with that agreement and further considered the ability to amend Articles through the applicable statutory and corporate voting mechanisms.

Therefore, foreign investors should not merely ask:

“Is my right written in the Articles?”

They should also ask:

“Can the Articles containing my protection be changed without my consent?”

The protection may need to be reinforced through:

• privileged share classes;
• appropriate voting structures;
• contractual undertakings;
• reserved matters;
• board rights;
• and carefully structured amendment protections,

to the extent permitted under Turkish law.

6. Board Representation Should Be Clearly Defined

One of the first issues a foreign investor should negotiate is board representation.

For example:

Founders: right to appoint 3 directors

Investor: right to appoint 2 directors.

But merely agreeing on the number of board members may not be sufficient.

The Shareholders’ Agreement should also address:

• total board size;
• appointment rights;
• removal rights;
• replacement rights;
• chairman appointment;
• meeting quorum;
• voting quorum;
• frequency of meetings;
• information packages;
• remote participation;
• conflicts of interest;
• and what happens if an investor-appointed director does not attend.

The governance structure should then be coordinated with the company’s Articles and mandatory Turkish Commercial Code rules.

7. Reserved Matters Are One of the Most Important Minority Protections

A minority investor normally cannot control ordinary decisions through share percentage alone.

The investor may therefore negotiate a list of Reserved Matters.

Reserved matters are significant corporate actions that cannot be approved without the investor’s consent.

Typical examples include:

• changing the Articles;
• issuing new shares;
• increasing or reducing capital;
• issuing convertible securities;
• creating new share classes;
• taking major debt;
• granting guarantees;
• selling significant assets;
• acquiring another business;
• changing the company’s main activity;
• approving major related-party transactions;
• appointing or removing the CEO;
• approving annual budgets;
• changing auditors;
• declaring dividends;
• initiating liquidation;
• entering a merger;
• or selling the company.

For a foreign minority investor, reserved matters can be more important than the nominal ownership percentage.

A 20% investor with well-structured governance rights may have substantially greater protection than a 35% investor with no contractual controls.

8. Investor Veto Rights Can Trigger Competition-Law Consequences

Veto rights should not be drafted solely from a corporate-law perspective.

They can also have consequences under Turkish competition law.

The Turkish Competition Authority has treated certain veto rights over strategic decisions as capable of creating joint control.

For example, in a 2024 Competition Board decision concerning VRLab Academy Yazılım A.Ş., proposed veto rights for particular share classes regarding certain board decisions were evaluated as establishing joint control over the undertaking.

This is significant because joint control can potentially affect merger-control analysis.

An investor receiving extensive veto rights over strategic matters may therefore move from being a passive minority investor to having joint control for competition-law purposes.

The reserved-matters schedule should consequently be reviewed not only for investor protection but also for possible regulatory consequences.

9. Information Rights Are Essential for Foreign Investors

A foreign investor cannot protect its investment without reliable information.

The Shareholders’ Agreement should therefore regulate what financial and operational information must be delivered.

Common requirements include:

• monthly management accounts;
• quarterly financial statements;
• annual financial statements;
• annual budget;
• business plan;
• cash-flow statements;
• bank debt reports;
• tax liabilities;
• material litigation;
• regulatory correspondence;
• key customer changes;
• major employment disputes;
• and cybersecurity incidents.

The agreement should specify:

What must be provided?

In what format?

How frequently?

Within how many days?

For example:

“Quarterly management accounts shall be delivered within 30 days following each quarter.”

is substantially more useful than:

“The Investor shall receive financial information upon request.”

10. Inspection Rights May Also Be Necessary

Information rights should not always depend entirely on management voluntarily supplying documents.

Institutional investors may negotiate rights to:

• inspect corporate books;
• review accounting records;
• visit company facilities;
• speak with auditors;
• obtain compliance reports;
• or conduct reasonable audits.

These rights should be structured consistently with:

• Turkish corporate law;
• confidentiality;
• data-protection obligations;
• trade secrets;
• and the investor’s actual role.

11. Anti-Dilution Protection Should Be Negotiated Before the Next Funding Round

One of the most common problems in startup investing is dilution.

Suppose:

Foreign Investor initially owns 20%.

The startup later issues a large number of new shares to another investor.

Foreign Investor falls to:

10%.

Dilution is not necessarily improper.

Startups need additional capital.

But foreign investors normally want clear rules governing future issuances.

The Shareholders’ Agreement may therefore include:

• pre-emptive participation rights;
• pro rata investment rights;
• anti-dilution protection;
• investor consent for new issuances;
• restrictions on issuing shares below agreed valuations;
• or special treatment for employee option pools.

These rights should be coordinated with mandatory corporate capital rules.

12. Pre-Emption Rights Can Allow Investors to Maintain Their Percentage

A pro rata participation mechanism may allow an investor to purchase enough newly issued shares to preserve its ownership percentage.

Example:

Investor owns 20%.

Company plans to issue new shares.

Investor receives the right to subscribe for 20% of the new issuance.

If the investor participates, it can potentially maintain its existing percentage.

This protection is particularly important for investors who want to preserve:

• voting power;
• board appointment rights;
• veto thresholds;
• and economic ownership.

13. Economic Anti-Dilution Is Different From Ordinary Pre-Emption

Venture capital documentation may contain more sophisticated anti-dilution provisions where a later funding round occurs at a valuation lower than the investor’s original round.

This is often called a down round.

Common international mechanisms include:

• full-ratchet protection;
• weighted-average adjustments;
• conversion-price adjustments;
• or compensating issuances.

However, foreign venture-capital terms should not simply be imported into Turkish documents.

The intended economic effect must be tested against:

• Turkish capital rules;
• shareholder equality principles;
• share classes;
• nominal value requirements;
• and the Articles of Association.

The commercial concept may be familiar internationally while requiring different legal engineering in Türkiye.

14. Share Transfer Restrictions Must Be Carefully Structured

Foreign investors often want control over who can become their business partner.

The Shareholders’ Agreement may therefore restrict transfers.

Possible mechanisms include:

• lock-up periods;
• permitted transfers;
• founder transfer restrictions;
• investor transfer rights;
• Right of First Refusal;
• Right of First Offer;
• competitor restrictions;
• affiliate-transfer exceptions;
• tag-along;
• and drag-along rights.

However, the contractual mechanism must be distinguished from corporate share-transfer restrictions.

For Turkish joint stock companies, Articles 491-493 of the Turkish Commercial Code regulate circumstances in which transfers of registered shares may be restricted and when the company’s approval may be required.

A Turkish commercial court has also emphasized that restrictions that cannot validly be imposed through the Articles may potentially operate only as contractual obligations between shareholders.

This is another example of why contractual and corporate mechanisms must be coordinated carefully.

15. Right of First Refusal

A Right of First Refusal, or ROFR, may require a shareholder who receives a third-party offer to first give existing shareholders the opportunity to purchase on the same terms.

Example:

Founder receives:

EUR 10 million offer for its shares.

Before selling to Buyer X, the founder must offer those shares to the investor on equivalent terms.

This allows the investor to prevent an unwanted third party from entering the company.

However, an overly restrictive ROFR can reduce marketability.

Potential purchasers may not spend substantial time conducting due diligence if an existing shareholder can simply match their final offer.

The procedure should therefore include strict deadlines.

16. Right of First Offer

A Right of First Offer, or ROFO, works differently.

The shareholder wishing to sell must first approach the other shareholder and request an offer.

If no agreement is reached, the shares can then be marketed externally, subject to agreed conditions.

ROFO mechanisms can be more flexible than ROFR structures.

The agreement should specify:

• notification procedure;
• negotiation period;
• permitted external sale period;
• minimum third-party price;
• and whether the process must restart if the external sale does not occur.

17. Tag-Along Rights Protect Minority Foreign Investors

A tag-along right is one of the most important minority protections.

Consider:

Founder: 70%

Foreign Investor: 30%.

A strategic buyer offers to purchase the founder’s 70%.

Without tag-along protection, the investor could remain trapped as a minority shareholder under a new controlling owner.

A properly structured tag clause may permit the foreign investor to require the purchaser to also acquire the investor’s shares on the same or equivalent terms.

The agreement should clarify:

• what level of founder sale triggers tag rights;
• whether the investor can sell all or only a proportional amount;
• whether price terms must be identical;
• how non-cash consideration is treated;
• and whether the buyer must purchase investor shares as a condition to the founder’s sale.

18. Drag-Along Rights Facilitate a Full Company Sale

A drag-along right addresses the opposite problem.

Suppose a buyer offers EUR 100 million for 100% of a startup.

Shareholders representing 90% want to sell.

A shareholder owning 10% refuses.

The buyer will only proceed if it obtains 100%.

A drag-along clause can potentially require the minority shareholder to participate in the sale where agreed conditions are satisfied.

The agreement should specify:

• who can trigger drag;
• minimum percentage required;
• minimum valuation, if any;
• treatment of different share classes;
• warranties required from dragged shareholders;
• limitation of their liability;
• transaction expenses;
• and payment terms.

Drag rights should be drafted carefully because they become most important when substantial amounts of money are at stake.

19. Founder Lock-Up Can Protect the Investor

A foreign investor may invest because it believes in a particular founder.

Suppose the investor contributes EUR 5 million.

Three months later, the founder sells all shares and leaves.

The company may lose much of the value that justified the original investment.

A founder lock-up can restrict founders from transferring shares for a specified period, except for permitted transfers.

Lock-ups are often combined with:

• vesting;
• good-leaver provisions;
• bad-leaver provisions;
• founder employment obligations;
• and non-compete restrictions.

20. Founder Vesting Is Particularly Important in Early-Stage Startups

Suppose two founders each own 40% and an investor owns 20%.

One founder stops working six months after the investment but keeps the entire 40%.

The remaining founder and investor may now be building value for a person who no longer contributes.

Vesting provisions can mitigate this risk.

Founder shares may become economically or contractually earned over time.

A typical structure may involve:

• four-year vesting;
• one-year cliff;
• monthly or quarterly vesting thereafter;
• accelerated vesting upon exit;
• and different treatment for good and bad leavers.

The exact Turkish-law implementation requires careful structuring.

21. Good Leaver and Bad Leaver Rules Should Be Objective

A founder leaving the company can be treated differently depending on the circumstances.

A Good Leaver might include departure because of:

• death;
• permanent incapacity;
• termination without cause;
• or another agreed legitimate reason.

A Bad Leaver might include:

• fraud;
• serious misconduct;
• breach of confidentiality;
• competing with the company;
• or unjustified resignation within an agreed period.

Different pricing may apply to the founder’s unvested shares.

However, vague clauses such as:

“The Investor may classify any departing Founder as a Bad Leaver.”

can create substantial disputes.

Trigger events and valuation consequences should be objectively defined.

22. Related-Party Transactions Should Require Control

Foreign investors frequently encounter companies where founders conduct business with:

• companies they personally own;
• family members;
• affiliated businesses;
• or other related parties.

Without controls, value may be transferred out of the startup.

The SHA may therefore require investor approval for transactions involving:

• shareholder loans;
• consultancy fees;
• property leases;
• management fees;
• IP licenses;
• asset sales;
• guarantees;
• or contracts with founder-owned companies.

Thresholds may be included so ordinary small transactions do not require formal investor consent.

23. Investor Approval for Debt Can Prevent Excessive Leverage

Suppose the investor values a debt-free startup at EUR 15 million.

After the investment, the founders obtain EUR 20 million in bank financing without consulting the investor.

The economic risk has changed dramatically.

Reserved matters may therefore require investor approval before:

• borrowing above a threshold;
• granting security;
• issuing guarantees;
• factoring receivables;
• or entering major financial commitments.

The threshold should be proportionate to company size.

24. Annual Budget Approval Can Provide Meaningful Control

One of the most effective investor protections is often surprisingly simple:

annual budget approval.

The investor may agree that management prepares an annual business plan and budget requiring board approval, including the investor-appointed director’s vote.

Material deviations — for example, expenditure exceeding the budget by more than 15% — may require additional consent.

This can provide strategic oversight without requiring investor approval for every daily business expense.

25. Dividend Policy Should Be Addressed

A profitable Turkish company does not automatically distribute all profits.

Foreign investors seeking recurring cash returns should consider negotiating a dividend policy.

The agreement may address:

• minimum distribution percentages;
• minimum cash reserves;
• reinvestment needs;
• lender restrictions;
• capital expenditure;
• and circumstances permitting profits to be retained.

A startup focused on rapid growth may appropriately reinvest all profits.

A mature cash-generating company may justify a different policy.

The investment agreement should reflect the actual commercial model.

26. Future Funding Obligations Must Be Clear

The SHA should answer:

What happens if the company needs another EUR 10 million?

Possible structures include:

• shareholders contribute pro rata;
• participation is optional;
• failure to participate results in dilution;
• funding comes through shareholder loans;
• external investors are sought;
• or certain shareholders have funding commitments.

A foreign investor should avoid vague language suggesting unlimited future funding obligations.

The agreement should specify whether additional financing is:

a right or an obligation.

27. Deadlock Provisions Are Essential in 50/50 Joint Ventures

A 50/50 joint venture provides equal control but can create paralysis.

Consider:

Foreign Investor: 50%

Turkish Partner: 50%.

They disagree about:

• budget;
• CEO appointment;
• dividend distribution;
• new financing;
• acquisition strategy;
• or company sale.

Neither side can approve the decision.

This is a deadlock.

A Shareholders’ Agreement should define:

1. what constitutes deadlock;
2. how long negotiations continue;
3. whether the issue escalates to senior management;
4. whether mediation applies;
5. whether buy-sell rights arise;
6. whether put/call mechanisms apply;
7. or whether the company must ultimately be sold.

Official Turkish investment guidance specifically recognizes put and call option mechanisms as tools that may be used to address deadlock events in joint ventures.

28. Put Options Can Give Investors a Contractual Exit

A put option may allow the foreign investor to require another shareholder to purchase its shares following specified events.

Potential triggers include:

• material contractual breach;
• founder fraud;
• prolonged deadlock;
• failure to achieve an agreed exit;
• loss of regulatory authorization;
• unauthorized dilution;
• or prohibited change of control.

But the clause should answer:

Who buys?

At what price?

Within what period?

In what currency?

What security exists for payment?

A put right against an individual founder with no financial resources may be legally interesting but commercially worthless.

29. Call Options Can Protect Against Founder Misconduct

An investor may negotiate the right to purchase founder shares following events such as:

• fraud;
• material breach;
• competition;
• unauthorized transfer;
• departure;
• or another specified event.

The option price may differ depending on whether the founder qualifies as a Good Leaver or Bad Leaver.

Again, valuation methodology should be clearly defined.

30. Valuation Clauses Should Avoid “Fair Value” Without a Procedure

Many agreements say:

“Shares shall be transferred at fair market value.”

That sounds reasonable.

But who determines fair market value?

The investor?

The founder?

The company’s accountant?

An independent investment bank?

A court-appointed expert?

A robust valuation clause should specify:

• appointment of valuers;
• valuation date;
• methodology;
• EBITDA or revenue multiples;
• treatment of debt and cash;
• minority discount;
• control premium;
• timetable;
• and what happens if two valuations differ materially.

An undefined fair-value clause often postpones rather than solves the dispute.

31. Confidentiality Is Particularly Important in Technology Investments

A foreign investor may receive highly sensitive information during and after the investment.

The Shareholders’ Agreement should regulate confidentiality concerning:

• customer lists;
• financial information;
• source code;
• product plans;
• commercial terms;
• pricing;
• intellectual property;
• financing;
• and strategic plans.

However, institutional investors may need exceptions allowing disclosure to:

• affiliates;
• fund investors;
• professional advisers;
• auditors;
• regulators;
• and financing sources.

The provision should therefore protect the company without preventing legitimate investment operations.

32. Non-Compete Clauses Should Not Be Unlimited

Investors may request founders not to establish competing businesses.

But restrictive covenants should be proportionate.

The agreement should address:

• prohibited activity;
• duration;
• geographic area;
• prohibited customer solicitation;
• employee solicitation;
• and exceptions for passive investments.

Competition-law considerations may also arise.

The Turkish Competition Authority has examined shareholder agreements and their competitive restrictions, including whether contractual provisions fall within Article 4 of the Competition Law.

Accordingly, a global and perpetual non-compete clause should not simply be inserted without legal analysis.

33. Dispute Resolution Must Be Planned Before a Dispute Exists

A foreign investor may prefer international arbitration.

Potential reasons include:

• neutrality;
• confidentiality;
• English-language proceedings;
• specialist arbitrators;
• international enforceability;
• and procedural flexibility.

The SHA should specify, where arbitration is chosen:

• arbitration institution;
• seat of arbitration;
• number of arbitrators;
• language;
• governing law;
• appointment procedure;
• and interim relief.

A vague clause saying:

“Disputes will be resolved by international arbitration.”

is insufficient.

The arbitration mechanism should be complete.

34. Shareholder Disputes Are Generally Arbitrable When Properly Structured, but Corporate Claims Need Separate Analysis

Turkish courts recognize that disputes arising directly from a shareholders’ agreement may be subject to arbitration where a valid arbitration agreement exists and the dispute is arbitrable.

For example, İstanbul Regional Court of Appeal jurisprudence has expressly characterized a shareholder arrangement as a shareholders’ agreement and examined the arbitration clause contained in that agreement.

However, not every corporate-law dispute is automatically arbitrable simply because shareholders signed an arbitration clause.

Disputes concerning:

• validity of corporate resolutions;
• rights of third parties;
• mandatory corporate law;
• or matters producing effects beyond contractual parties

may require separate jurisdictional analysis.

The dispute-resolution clause should therefore be designed with the actual categories of potential disputes in mind.

35. Governing Law Should Be Chosen Carefully

A foreign investor may initially request:

English law Shareholders’ Agreement.

This may be commercially understandable.

However, the underlying company remains Turkish.

Mandatory Turkish law will continue to govern important matters such as:

• legal personality;
• corporate organs;
• Articles of Association;
• share capital;
• certain shareholder rights;
• validity of corporate resolutions;
• share-transfer mechanics;
• and statutory director duties.

Using foreign governing law does not turn a Turkish company into an English company.

The parties must therefore determine whether foreign governing law actually simplifies the transaction or instead creates an unnecessary separation between contractual and corporate rules.

36. The Company Should Not Automatically Be Made Responsible for Every Shareholder Obligation

The company and shareholders are separate legal persons.

Certain obligations properly belong to shareholders.

For example:

• founder share transfer obligations;
• tag-along;
• drag-along;
• ROFR;
• put options;
• and personal non-compete obligations.

Other obligations may involve the company.

Drafting should therefore identify precisely which party promises what.

Simply making “the Company” a party to every provision may create enforceability or corporate-law difficulties.

37. New Investors Must Be Required to Join the Agreement

Suppose the SHA is signed by:

Founder A

Founder B

Investor C.

Founder B later validly transfers shares to Investor D.

Investor D may not automatically become contractually bound by an agreement it never signed.

The SHA should therefore include an adherence mechanism.

A transferee may be required to execute:

• a Deed of Adherence;
• Accession Agreement;
• or Joinder Agreement

as a condition to a permitted share transfer.

This ensures that future shareholders join the existing governance framework.

38. The Shareholders’ Agreement Should Anticipate an Exit

A successful investment eventually ends.

The SHA should therefore regulate:

• strategic sale;
• secondary sale;
• IPO;
• merger;
• founder buyout;
• tag-along;
• drag-along;
• put/call rights;
• liquidation;
• and cooperation during an exit process.

It may also define an Exit Event.

For example:

• transfer of more than 50% of shares;
• sale of substantially all company assets;
• merger;
• IPO;
• or another change of control.

Clear exit mechanics can prevent minority shareholders from blocking a transaction or majority shareholders from leaving investors trapped.

39. The SHA Should Require Cooperation During a Company Sale

When a strategic buyer appears, due diligence may require substantial cooperation.

The Shareholders’ Agreement may require shareholders to:

• provide documents;
• cooperate with due diligence;
• execute transaction documents;
• participate in management presentations;
• obtain regulatory approvals;
• and take reasonable steps to complete a qualifying exit.

However, minority investors should not automatically be required to provide unlimited warranties concerning matters outside their knowledge or control.

Liability during a drag-along sale should therefore be carefully limited.

40. What Happens If the Shareholders’ Agreement Is Breached?

This is where the distinction between contract and corporate law becomes critical.

Possible contractual remedies may include:

• damages;
• contractual penalties;
• specific performance where legally available;
• option rights;
• termination rights;
• arbitration;
• or other agreed remedies.

But the investor should not automatically assume that a corporate resolution violating the SHA will therefore be invalid.

The Court of Cassation’s 2024 decision reinforces that a shareholders’ agreement not incorporated into the Articles does not automatically bind the company, and a general assembly may adopt a corporate resolution inconsistent with the agreement where corporate-law requirements are otherwise satisfied.

This is precisely why investor protections should be implemented through a combination of contractual and corporate mechanisms rather than relying on the SHA alone.

Common Mistakes Foreign Investors Make

Foreign investors frequently make the following mistakes:

1. Signing only the Shareholders’ Agreement and ignoring the Articles of Association.
2. Assuming every SHA provision automatically binds the company.
3. Failing to secure board representation.
4. Using vague reserved matters.
5. Receiving veto rights without analysing competition-law joint-control consequences.
6. Failing to protect against dilution.
7. Not controlling related-party transactions.
8. Ignoring future funding obligations.
9. Using international venture-capital templates without adapting them to Turkish law.
10. Failing to regulate founder departures.
11. Using vague Good Leaver / Bad Leaver definitions.
12. Failing to include tag-along protection.
13. Giving majority shareholders broad drag rights without investor safeguards.
14. Failing to define share valuation mechanics.
15. Using an unenforceable or impractical non-compete provision.
16. Not requiring new shareholders to join the SHA.
17. Using an incomplete arbitration clause.
18. Failing to coordinate the SHA with Turkish mandatory corporate law.
19. Ignoring what happens if the relationship reaches deadlock.
20. Negotiating exit rights only after the investor already wants to leave.

Practical Example: 25% Foreign Investor

Consider the following startup:

Founder A: 45%

Founder B: 30%

Foreign Investor: 25%.

The investor contributes:

EUR 5 million.

A weak transaction structure might simply provide:

“Investor receives 25% of the shares.”

A more sophisticated structure may additionally provide:

Governance

Investor appoints one board member.

Reserved Matters

Investor consent required for:

• new share issuance;
• debt above EUR 500,000;
• major asset sales;
• related-party transactions;
• amendment of Articles;
• company sale;
• and changes to the principal business.

Information

Monthly management accounts.

Quarterly board reports.

Annual audited financial statements.

Dilution Protection

Investor has pro rata participation rights in future financing rounds.

Founder Protection

Founders subject to vesting and transfer restrictions.

Transfer Rights

Investor receives:

• tag-along rights;
• ROFR;
• permitted affiliate-transfer rights.

Exit

Drag-along permitted only after specified conditions are met.

Investor receives a contractual exit mechanism after an agreed period.

Disputes

A detailed arbitration mechanism applies.

The difference between these two investment structures is enormous even though the investor owns 25% in both cases.

This demonstrates why headline ownership percentage alone tells only part of the story.

Frequently Asked Questions

Is a shareholders’ agreement legally recognized in Türkiye?

Yes.

Shareholders’ agreements are used extensively in Turkish joint ventures and investment transactions. Official investment guidance recognizes them as a common mechanism for regulating shareholder relationships.

Does a shareholders’ agreement automatically bind the Turkish company?

Not necessarily.

Turkish court practice distinguishes the contractual shareholders’ agreement from the company and its corporate organs. Unless relevant provisions receive appropriate corporate effect, rights under the SHA may generally remain contractual between the parties.

Should important investor rights also appear in the Articles of Association?

Potentially, yes.

Where legally permissible and appropriate, strategically important corporate rights should be coordinated with the Articles and other corporate documents.

Not every contractual provision can necessarily be incorporated into the Articles.

Can foreign investors have veto rights?

Yes, appropriate consent rights can be negotiated.

However, extensive veto rights concerning strategic decisions can potentially amount to joint control for Turkish competition-law purposes. The Competition Board has specifically evaluated veto structures in this context.

Can a shareholders’ agreement restrict share transfers?

Yes, contractual transfer restrictions may be agreed.

However, corporate-law restrictions on registered joint stock company shares must also comply with the Turkish Commercial Code, including Articles 491-493.

What is a tag-along right?

A tag-along right generally allows a minority shareholder to participate when another shareholder sells shares to a third-party purchaser.

It can prevent the minority investor from being left behind following a change in control.

What is a drag-along right?

A drag-along right can allow qualifying shareholders to require other shareholders to participate in a company sale.

It is commonly used to prevent a small minority shareholder from blocking a full exit.

Can a foreign investor prevent dilution?

Various contractual and corporate mechanisms can provide dilution protection, including pre-emptive participation rights and investor approval requirements.

The exact structure should comply with Turkish capital and corporate law.

Can shareholders use put and call options in Türkiye?

Yes, properly structured put and call mechanisms are used in Turkish investment and joint venture transactions. Türkiye’s official investment guidance expressly refers to put and call options as possible deadlock remedies.

Can the Shareholders’ Agreement provide for arbitration?

Yes, shareholder-contract disputes may potentially be referred to arbitration where a valid arbitration agreement exists and the dispute is arbitrable. Turkish appellate case law has considered arbitration provisions in agreements characterized as shareholders’ agreements.

Should the shareholders’ agreement be governed by Turkish law?

Not necessarily in every transaction, but foreign governing law does not displace mandatory Turkish corporate-law rules governing a Turkish company.

The governing-law and dispute-resolution structure should therefore be selected according to the transaction as a whole.

Conclusion

For a foreign investor, the most important question when entering a Turkish startup should not simply be:

“What percentage of the company will I own?”

The investor should also ask:

What decisions can be made without me?

Can my shareholding be diluted?

Who controls the board?

Can founders transfer their shares?

Can the company enter related-party transactions?

What information must be provided to me?

What happens if the founders leave?

What happens if we disagree?

Can I sell my shares?

Can the majority sell the company without me?

How will I ultimately exit?

A Shareholders’ Agreement is one of the main legal instruments used to answer these questions.

But under Turkish law, the SHA should not be treated as an isolated document.

The most effective investment structure usually requires careful coordination between:

Shareholders’ Agreement + Articles of Association + share classes + board structure + corporate resolutions + investment agreement + exit documents.

This is especially important because Turkish court practice recognizes that a shareholders’ agreement, by itself, generally creates contractual rights between its parties and does not automatically bind the separate corporate entity or invalidate corporate decisions that conflict with the agreement.

For foreign investors, the practical objective should therefore be to convert negotiated economic protections into the strongest legally effective structure available under Turkish law.

A well-drafted Shareholders’ Agreement does not guarantee that shareholders will never disagree.

Its purpose is to make sure that when they do disagree, everyone already knows the rules.

This article provides general information regarding Turkish corporate and investment law and does not constitute legal advice. Shareholders’ agreements should be structured according to the company’s legal form, ownership structure, Articles of Association, sector, investor rights, competition-law implications and the specific commercial objectives of the parties.