In order to protect the shareholders during the restructuring processes, several special cases are envisaged in the Turkish Commercial Code. The first of these cases is “The Inspection of Company Shares and Membership Rights” (hereafter referred as “Equalization Claim”). Equalization claim gives the shareholder the right to request A determination of payment if during the restructuring processes the company shares, and rights are not properly protected or the cash payment for withdrawals is not determined fairly.
Company share refers to “share with unit meaning in core capital”. Therefore, the concept of share here is different from the share or document in terms of membership rights. Membership rights are included in the scope of the Equalization claim. According to the law’s preamble, the rights of management, inspection, and review are included in this scope, but minority rights are excluded. The reason for the exclusion of minority rights is based on the reason that it is not possible to have the same membership rights in the transferee company due to principle of proportional equality (This principle is considered during the restructuring processes)
Determining the real value of the companies that are parties to the merger and the real value of the share are important issues in terms of the equalization claim. The proper protection of the company shares and membership rights or determination of the cash payment for withdrawals is primarily based on the determination of a fair share exchange rate. It is mandatory to specify the share exchange rate in the merger agreement. Determination of the share exchange rate is possible by determining the values of the companies which are parties to the merger. Each company has freedom in terms of the selection of methods for company valuation and the way the related method is performed. However, care must be taken in terms of the selection and implementation of the method in question.
One of the situations in which the equalization claim can be raised is when the cash payment for withdrawals is not properly determined. The cash payment for withdrawals, which constitutes an important exception to the principle of continuity of company shares and rights, is a payment that is given to the shareholder who does not consider the merger in its interest and does not give its consent. The cash payment for withdrawals is a payment corresponding to shareholders’ shares at their real value and as a result, they leave the company.
Cash payment for withdrawals is a mechanism that can be applied only in case of a merger, therefore, it is not possible to determine a cash payment for the withdrawal when the restructuring process is a demerger or change of the company type. The cash payment for withdrawals may be optional or mandatory. In the optional withdrawal payment, the shareholder is given a right of choice between acquiring the share and partnership rights in the transferee company and requesting a withdrawal payment. On the other hand, in the compulsory cash payment for withdrawals, the company has the right to remove the shareholder from the company. Regardless of whether it is optional or compulsory, Cash payment for withdrawals, which has not been determined appropriately, can also be the subject of the equalization claim.
In order to file an equalization claim, it is not required for the shareholder to give negative votes to the restructuring decision and to record his opposition in the minutes.
There is no regulation in the law that requires the title of the shareholder to continue until the end of the lawsuit in terms of equalization claim. If the title of the shareholder is lost during the case, it might be thought that the title of the case has been lost in terms of procedural law.
However, even if the share of the partnership was transferred to another person during the lawsuit, the plaintiff who substituted the case continues to benefit independently from the equalization. Moreover, the subject of the equalization claim is the company shares and rights which are not properly protected and not the existing ones. For this reason, the continuation of the title of the shareholder in terms of equalization claim is not required as a special requirement to file an action.
A two-month period of prescription has been set forth in terms of the equalization claim and this period starts from the announcement date of the restructuring decision. Each shareholder can file an equalization claim and thus have the title to be a plaintiff. This litigation right granted to shareholders is an individual right.
Whether or not beneficial owners can raise an equalization claim is controversial. Although beneficial owners only benefit from the assets, the wrong determination of the share rate of the shareholder will also indirectly affect the ownership rights of the beneficial owner. Furthermore, in order to ensure the functionality of the regulations envisaged in the law to protect beneficial owners, the equalization case should be substituted by the beneficial owners.
The burden of proof in the equalization claim belongs to the plaintiff. The plaintiff shareholder will prove that the share exchange rate or the withdrawal payment is not fairly determined in and/or their rights are not properly protected.
In the equalization case, the expenses of the case will belong to the company. However, if the special circumstances justify, the expenses may be partially or fully charged to the plaintiff.
All the shareholders of companies that are parties to the restructuring process could benefit from the court decision if they are in the same legal situation as the plaintiff. In this case, the court decision will also apply to these persons.
It should be noted that the substitution of the equalization case does not affect the validity of the restructuring decision. The annulment of this decision can only be achieved with the annulment action if the necessary conditions are met.