Expelling a Shareholder from a Turkish Limited Company: TCC Article 640, Just Cause and 3-Month Challenge

1. Article 640 creates two legally different exclusion mechanisms

Limited companies are relationship-intensive structures. Turkish law therefore permits the company to remove a shareholder where the company agreement has validly defined an exclusion event or where serious facts amount to just cause.

The first route is contractual and begins with the articles of association. The second route is judicial and is based directly on just cause.

A petition or resolution should identify the correct route because the decision-maker, procedure and defence are different.

2. The company agreement can define specific exclusion events

Article 640 permits the articles to state causes upon which a shareholder can be excluded by company decision. Examples can concern loss of a required professional licence, breach of a defined shareholder obligation, failure to maintain a qualification or another objectively described circumstance compatible with mandatory law.

An exclusion clause should be interpreted strictly because it removes a person from an ownership position. Vague language such as “loss of confidence” can create litigation if it gives the majority unlimited discretion.

The company should verify that the contractual trigger actually occurred and that the required corporate procedure was followed.

3. Contractual exclusion requires a valid company resolution

Where the articles contain an exclusion ground, the competent corporate body must decide according to the Commercial Code and articles. Meeting call, agenda, quorum, voting rights and conflict rules can affect validity.

A majority shareholder should not treat exclusion as a private notice sent personally to the minority. Corporate power must be exercised through a valid resolution.

The written resolution should state the factual and contractual basis clearly enough for judicial review.

4. Notarial notification is central to the challenge period

Article 640 links the shareholder’s challenge period to notification of the exclusion decision through a notary. The date of legally effective notification should therefore be preserved.

Email, messaging applications or an informal conversation can prove knowledge but should not replace the statutory notification step where the law requires notarial service.

The company and shareholder should keep the notarial notice, delivery record and full resolution.

5. The shareholder has three months to challenge the exclusion decision

A shareholder excluded under a company-agreement ground can seek judicial review within three months from notification. The period is materially important and should be calculated from the legally relevant service date.

Waiting for later negotiations does not automatically suspend the statutory period. A settlement process should therefore be conducted without allowing the challenge window to expire unintentionally.

The action can contest whether the contractual ground existed, whether the resolution was valid and whether mandatory law was respected.

6. The excluded shareholder is the direct claimant in the challenge action

The person whose membership is terminated by the exclusion resolution has the direct economic and membership interest in challenging it.

The defendant is the company, not merely the shareholder who voted for exclusion. Individual liability claims against managers or majority shareholders can be separate.

The share ledger, articles, resolution and service documents should be filed early.

7. The company can also sue for exclusion based on just cause

Article 640 gives the company a judicial route where serious circumstances make continued membership objectively unreasonable. This route does not depend on a pre-written exclusion clause.

The company must bring the action through its competent organs and representation structure. If the defendant shareholder controls management or representation, conflict and appointment issues can require procedural planning.

The court decides whether the facts rise to just cause.

8. Just cause must be serious enough to justify forced removal of ownership

Because exclusion is severe, ordinary business disagreement is insufficient. The claimant company should show conduct or circumstances that materially damage the corporate relationship or business and make continued membership unreasonable.

The court can consider duration, repetition, fault, consequences, the shareholder’s role and availability of less severe remedies.

A one-time disagreement over dividends or strategy is normally weaker than sustained obstruction or disloyal conduct.

9. Repeated shareholder-duty breaches can support exclusion

Limited-company shareholders can be subject to loyalty, confidentiality, additional-payment or ancillary-performance obligations arising from law or articles. Repeated material breach can undermine the corporate relationship.

The company should document warnings, requests for performance and the actual harm caused.

An exclusion action should not be used to punish a shareholder who lawfully exercised information, voting or litigation rights.

10. Competing against the company can be relevant where a duty exists

The existence of a non-compete duty depends on the shareholder’s role, articles and statutory framework. Managers are subject to specific duties; ordinary shareholders require a separate legal basis for broader restrictions.

If a valid duty exists and the shareholder deliberately diverts customers, confidential information or business opportunities, the facts can support a just-cause case.

The claimant should distinguish lawful independent activity from prohibited competition.

11. A shareholder who deliberately paralyses indispensable decisions can create a just-cause issue

Deadlock itself can arise without fault, especially in 50/50 companies. But a shareholder who uses veto power solely to damage the company, block legally necessary acts or extract improper private benefit can present a stronger exclusion case.

Minutes showing repeated failed decisions and their financial consequences are important evidence.

Shareholders’ agreements should be checked for deadlock mechanisms before litigation.

12. Objective company evidence is more persuasive than personal accusations

Useful evidence includes articles, resolutions, meeting minutes, notices, accounting records, customer correspondence, related-party contracts, expert reports and written shareholder communications.

The court should be shown a corporate chronology: obligation, breach, consequence, warning and continuation.

General allegations that a shareholder is “difficult” are not a substitute for legal just cause.

13. Interim measures can protect the company while litigation continues

Where the shareholder has management power, access to sensitive systems or ability to cause continuing damage, interim relief can be requested under general procedural rules where conditions exist.

The requested measure must be proportionate. A court should not be asked to impose the final exclusion result before trial without legal basis.

Preserving records and preventing asset dissipation can sometimes be more appropriate than suspending all membership rights.

14. Exclusion creates an exit-payment issue

An excluded shareholder does not simply lose the economic value of the participation. Articles 641–642 regulate the exit payment and its due date.

The amount is linked to the real value of the shareholder’s interest rather than merely nominal capital.

Valuation should begin early because it often becomes the second major dispute after exclusion itself.

15. Real value can require expert corporate valuation

Book equity can understate or overstate actual business value. Hidden reserves, goodwill, customer contracts, pending liabilities, group balances and asset values can all matter.

The company should not deliberately depress financial results before exclusion. Such transactions can be challenged and can affect valuation evidence.

Independent expert analysis can materially reduce settlement uncertainty.

16. Exclusion payment and share transfer can have tax consequences

A foreign shareholder receiving an exit payment can face Turkish and residence-country tax analysis depending on legal form and treaty rules.

The company’s accounting for the payment should also be reviewed.

Tax advice should be obtained before settlement documentation fixes the transaction characterization.

17. Foreign shareholders should prepare Turkish-use corporate documents

Overseas owners commonly need apostilled or legalised corporate resolutions, powers of attorney and identity documents. Translation consistency is especially important where names differ across passports and the Turkish share ledger.

Bakırcı & Keskin Hukuk Bürosu has physical offices in Istanbul and Mersin. Limited-company disputes throughout Türkiye can be coordinated from these offices subject to competent court and procedural rules.

Conclusion

TCC Article 640 gives Turkish limited companies a controlled mechanism to remove a shareholder, but forced exclusion requires procedural discipline. Contractual exclusion depends on the articles and a valid corporate resolution subject to a three-month judicial challenge after notarial notice; just-cause exclusion requires a company lawsuit and proof of serious facts. The economic exit-payment consequences should be planned together with the membership dispute.