Shareholders’ Agreement Anatomy: Articles or SHA under Turkish Law
A US term sheet is executed through four or five NVCA documents. In a Turkish joint-stock company (A.Ş.) the same deal lands in two places: the articles of association (esas sözleşme), which are registered, public and bind the company and every future shareholder but may only depart from the Turkish Commercial Code where the Code expressly allows it (TCC Art. 340), and the shareholders’ agreement (pay sahipleri sözleşmesi), a private contract that can say almost anything but binds only its signatories and is enforced through the Code of Obligations. Putting a clause in the wrong document is the most common structural error we see in Turkish rounds. The map below takes the 30 items of our Term Sheet Negotiation Checklist and shows where each one belongs, with the TCC anchor.
1. Valuation and economics (items 1–8)
| Term | Where it lives | Why, and the TCC anchor |
|---|---|---|
| 01 · Valuation and price per share | SHA + capital increase | The price is paid as share premium in a capital increase. Issuing shares above nominal value needs a basis in the articles or a general assembly resolution (TCC Art. 347); issuing below nominal is prohibited. The SHA records the pre/post-money maths; the subscription undertaking (Art. 459) executes it. |
| 02 · Option pool | BOTH | An employee pool is normally built on conditional capital under TCC Arts. 463–472, which must be in the articles. Pool size and who bears the dilution are negotiated in the SHA and the ESOP plan. See the ESOP Design Checklist. |
| 03 · Liquidation preference | ARTICLES | A preference on liquidation proceeds is a share privilege, and privileges exist only if the articles grant them (TCC Art. 478). The SHA can add a contractual waterfall for an exit that is technically a share sale rather than a liquidation. |
| 04 · Pro-rata rights | SHA (statutory base) | Every shareholder already has a statutory pre-emptive right in proportion to its holding (TCC Art. 461); it can be restricted only for just cause by a 60% capital majority (Art. 461/2). Super pro-rata or major-investor-only rights are SHA promises layered on top. |
| 05 · Anti-dilution | SHA | Turkish law has no automatic price adjustment for preferred shares. Weighted-average protection is drafted as a contractual obligation to transfer or issue additional shares to the investor after a down round, within the limits of Art. 347 (no below-par issuance). A full ratchet is a red flag in the checklist for the same reason it is hard to execute here. |
| 06 · Preferred dividend | BOTH | A dividend privilege is granted in the articles (Art. 478). Cumulation and payment mechanics are SHA matters, subject to the rule that dividends are paid only out of distributable profit (Art. 509). |
| 07 · Conversion mechanics | ARTICLES | A.Ş. shares do not “convert”; a privilege is removed or changed by amending the articles, and the holders of privileged shares must approve the amendment in their special assembly (TCC Art. 454). Draft the exit of the privilege into the articles from day one. |
| 08 · Drag-along | SHA | The Code has no drag-along for private companies. It is a contractual call option on the minority’s shares, backed by a penalty clause (Code of Obligations Arts. 179–182), endorsed share certificates in escrow and, ideally, a transfer-restriction clause in the articles so the company can refuse a transfer that breaches the SHA. |
2. Governance and control (items 9–16)
| Term | Where it lives | Why, and the TCC anchor |
|---|---|---|
| 09 · Board composition | BOTH | The articles may give specific share groups the right to be represented on the board, for up to half of the seats (TCC Art. 360). Who nominates whom and how votes are cast at the general assembly is a voting undertaking in the SHA. |
| 10 · Founder vote thresholds | ARTICLES | General assembly quorums can be raised by the articles (Art. 421/1). A threshold that exists only in the SHA does not stop a resolution from passing; it only creates a damages claim afterwards. |
| 11 · Protective provisions | BOTH | Shareholder-level vetoes: heightened quorums in the articles. Board-level reserved matters: the board’s internal directive and the SHA. Note the board’s non-delegable powers (Art. 375) cannot be transferred to shareholders. |
| 12 · Information rights | SHA (statutory base) | The statutory right (Art. 437) is exercised at the general assembly and can be refused for business-secret reasons. Monthly reporting, budgets and audit access are SHA covenants. |
| 13 · Board observer | SHA | No statutory concept; a contractual invitation right, mirrored in the board’s internal directive. |
| 14 · Founder vesting and cliff | SHA | Structured as a call option over the founder’s shares in favour of the other shareholders (or the company within the 10% buy-back limit of Art. 379). Because the company cannot simply cancel shares, the buyer, price formula and escrow of certificates must be fixed in the SHA. See good leaver / bad leaver. |
| 15 · ROFR and co-sale | BOTH | Registered shares can be made subject to a transfer restriction in the articles, allowing the company to refuse transfers for the important reasons listed there (Arts. 492–493). The ROFR procedure and the tag-along right themselves are SHA mechanics. |
| 16 · No-shop exclusivity | SHA (term sheet) | A pre-closing covenant in the term sheet or a short exclusivity letter; it has no place in the articles. |
3. Founder protection (items 17–24)
| Term | Where it lives | Why, and the TCC anchor |
|---|---|---|
| 17–18 · Acceleration on change of control or termination | SHA | Modifies the vesting call option above; single or double trigger is pure contract. |
| 19 · Founder employment terms | SEPARATE | An employment contract under Labour Law No. 4857, or a board-member service agreement. Shareholders cannot be given obligations beyond paying for their shares through the articles (TCC Art. 480), so service duties never belong there. |
| 20 · IP assignment | SEPARATE | Economic rights in works created by employees vest in the employer (Law No. 5846, Art. 18); employee inventions follow Law No. 6769, Arts. 113 et seq. Transfers of economic rights must be in writing (Law No. 5846, Art. 52). Founders’ pre-incorporation IP needs an express written assignment; the SHA usually only contains a warranty that it was done. |
| 21 · Non-compete and non-solicit | SHA | As a shareholder covenant it is enforceable by penalty. Where the founder is also an employee, the employment non-compete is capped at two years and must be limited in place and scope (Code of Obligations Arts. 444–447). |
| 22 · Transfer restrictions and lock-up | BOTH | Restriction in the articles (Arts. 492–493) so the company can refuse registration; lock-up periods and permitted-transferee carve-outs in the SHA. |
| 23 · Redemption rights | SHA (limited) | The company’s own buy-back is capped at 10% of capital and must be funded from free reserves (Art. 379), so an investor put is normally exercisable against the founders, not the company. The checklist’s advice stands: push back. |
| 24 · Dispute resolution and governing law | SHA | Arbitration (ISTAC or ICC) is standard in the SHA. Disputes about the validity of general assembly resolutions are not arbitrable and stay with the commercial courts, so the SHA should say what happens when the two tracks collide. |
4. Closing and mechanics (items 25–30)
| Term | Where it lives | Why, and the TCC anchor |
|---|---|---|
| 25 · Definitive documents | Mapping | NVCA Charter → amendment of the articles (general assembly + registration, Art. 455). NVCA SPA → subscription undertaking and capital increase (Arts. 456–462) or a share transfer agreement for secondaries. NVCA IRA, Voting Agreement and ROFR/Co-Sale → one Turkish SHA. |
| 26 · Conditions to closing | SHA / subscription | Contractual; registration of the capital increase is usually the last condition. |
| 27 · Representations and warranties | SHA / subscription | Given by founders and the company under the Code of Obligations; survival periods and disclosure schedules are contract terms. |
| 28 · Indemnification cap and basket | SHA | Contract terms; liquidated amounts are treated as penalty clauses (Arts. 179–182) and can be reduced by the court if excessive. |
| 29 · Expense reimbursement | SHA | Contractual. |
| 30 · MFN carve-out | SHA | Contractual, with the same economic-only, sunset-after-Series-B limits the checklist recommends. |
Reference documents
NVCA Investor Rights Agreement
The US source of information rights, registration rights and pre-emptive rights. Everything in it that is contractual maps to the Turkish SHA; nothing in it maps to the articles.
NVCA Voting Agreement
Board composition and drag-along in US form. Compare with TCC Art. 360 (board representation of share groups) to see which part must move into the articles in Türkiye.
NVCA Right of First Refusal and Co-Sale Agreement
ROFR and tag-along mechanics. In Türkiye the procedure stays in the SHA, while the company’s power to refuse a transfer must be anchored in the articles (Arts. 492–493).
UK Private Capital (BVCA) Model Shareholders’ Agreement
The February 2025 edition of the UK Series A set: Subscription and Shareholders’ Agreement, Articles and Summary of Terms. Structurally the closest foreign model to the Turkish articles-plus-SHA split. Free registration required.
Turkish Commercial Code No. 6102
The articles cited on this page: 340, 347, 360, 375, 379, 421, 437, 454–455, 456–472, 478–480, 492–493, 509. Official consolidated text (Turkish).
Term Sheet Negotiation Checklist
The 30 items this map is built on: valuation and economics, governance, founder protection, closing mechanics, with market positions and red flags.
This page explains where each term is enforceable under Turkish law; it is not a model shareholders’ agreement and it does not replace drafting for your cap table. Article numbers refer to the Turkish Commercial Code No. 6102 unless another law is named. Limited companies (Ltd. Şti.) follow different rules on transfers and privileges and are not covered here.
Statutes: Turkish Commercial Code No. 6102; Code of Obligations No. 6098; Law No. 5846; Law No. 6769; Labour Law No. 4857. NVCA and UK Private Capital documents belong to their publishers and are linked for reference only.