The family sees one thing: the founder is stepping back. The law sees another: two transactions, two timetables, two sets of documents. Handover conversations open with one sentence: “We will start passing things to the children.” Two separate decisions sit inside it — passing management and passing ownership — and the mistake is treating them as a single move. Passing management is a question of organs and authority: who signs, who sits on the board, what belongs to the executive. Passing ownership is a question of shares, succession and tax: who votes, who takes the dividend, where the shares go on a death.
The two decisions also run on different clocks. A founder ready to step back from management is not always ready to part with shares, and structures where the second generation runs the business without a single line in the share ledger (pay defteri) are common. So is the reverse: the shares moved years ago, yet the banks still want the founder’s signature and board decisions still take shape in his room. Neither is a completed handover. Each is one half of one.
The discussion breaks down at the same point every time. The family treats the handover as a matter of trust, while the law records it as a matter of authority and title. “The siblings will work it out” has no counterpart in the articles of association (esas sözleşme).
Passing management is not passing a single chair
In a joint stock company (anonim şirket) management authority sits with the board of directors (yönetim kurulu); the general assembly (genel kurul) elects the board, and the board distributes signature authority by resolution. A handover has to keep those layers apart: who sits on the board, whom the board leaves the daily business to, and whose signature binds the company. Discussed as one thing, they produce a second generation holding a board seat but unable to sign anything alone.
Separating the executive function from the board earns its keep here. The board keeps strategy, the budget, borrowing limits and senior appointments from outside the family; daily management passes to the executive under internal directives. Where that division is unwritten, both sides reasonably consider themselves in charge, and the first clash is felt as disloyalty rather than a dispute about authority.
Where the founder keeps trading with the company, a separate check is due. Leasing his factory building to the company, buying services from another company he owns, or sums drawn from the company may fall within the prohibition in TTK Article 395 on a board member transacting with the company or borrowing from it. Putting those arrangements to the general assembly for approval where required keeps them from becoming the most expensive item in a later dispute.
Can one branch of the family be guaranteed a board seat?
It can, but only in the right instrument. TTK Article 360 allows the articles of association to grant particular share groups a right of representation on the board. In a manufacturing company owned by three siblings, share groups A, B and C stop whichever branch holds the majority from shutting the others out. It is a durable way of carrying a family balance into the articles of association, which bind every shareholder, present and future.
Writing the same balance into a family constitution (aile anayasası) is a different exercise. A family constitution is not a company law instrument under the Turkish Commercial Code; it records what the family expects of itself, but does not on its own invalidate a general assembly resolution. A shareholders’ agreement goes further, since it binds the signatories — and nobody else. A spouse who joins later, or a grandchild who inherits shares, is not bound by a document they never signed.
The articles have their own limit. Under TTK Article 340 they may depart from the Code’s provisions on joint stock companies only where the Code expressly permits it. “We will write whatever we want” meets a wall at registration, or at the first dispute. The first question is always whether the clause the family wants falls inside the space the Code allows.
How far transfer restrictions protect ownership
The classic route to keeping shares inside the family is restricting the transfer of registered shares through the articles, which TTK Article 492 permits. Under TTK Article 493/1 the company may refuse approval by invoking an important ground set out in the articles, or by offering to acquire the shares at their real value. TTK Article 493/2 treats provisions of the articles on the composition of the shareholder circle, the company’s field of business or the economic independence of the undertaking as important grounds — the workhorse in family businesses.
The position in a limited liability company (limited şirket) is tighter: under TTK Article 595 the transfer of a capital share requires the approval of the general assembly. That looks like an advantage until one branch wants to turn its holding into cash, when the same mechanism becomes a lock. Where nobody has written down how the lock opens, one expensive route remains: dissolution for just cause under TTK Article 531 in a joint stock company, or TTK Article 636 in a limited one.
Restrictions therefore need an exit mechanism written beside them: a right of first refusal (önalım hakkı), call and put options, a valuation method and a payment schedule. Families that leave the valuation open argue about the value of the shares and about who decides it at once, and that delays a settlement by years.
Succession changes the rule
One assumption comes up at every table: “We put restrictions in the articles, so nobody from outside can become a shareholder.” Succession works differently. Under TTK Article 493/4, if shares have been acquired through inheritance, the distribution of an estate, the matrimonial property regime between spouses or enforcement proceedings, the company may refuse approval only if it offers to take them over at their real value. Saying no has a price, and the price is cash.
Practically: a company that does not want shares leaving the family on the founder’s death needs the funds to buy them at real value. Without the funds the right of refusal stays on paper and the shares pass to whoever inherits them. A right to block a change of shareholder (pay sahibi) is real only if there is a capacity to pay behind it. How that purchase would be funded belongs on the handover table; after the death it cannot be discussed at all.
Joint estate ownership and reserved shares: two quiet blockages
When an estate opens, the shares pass to the heirs in joint ownership (elbirliğiyle mülkiyet). The consequence inside the company is simple: no vote attached to those shares can be cast until the heirs appoint a representative. Where three heirs disagree, the largest block of shares falls silent and even routine business stalls. Settling in advance who represents the estate, and how, removes a lock that a few lines could have prevented.
The second quiet blockage is the reserved share (saklı pay). Transferring shares heavily to one branch during the founder’s lifetime may attract a claim for abatement (tenkis) if it cuts into the reserved shares of the other heirs. A will is unilateral and revocable at any time; it creates expectations without giving security. An inheritance agreement is more durable, because it carries the intention of the person in whose favour it is made. That choice belongs to succession law, but its consequences land in the share ledger.
Must the vote and the economic rights move together?
No, and in most families a staged handover is the better answer. At one end the economic rights go first: the incoming generation shares in dividends while the vote stays with the founder. At the other the vote goes first, and the economic return follows later. Which end suits a family depends on the risk it fears more — losing control too early, or raising a generation that draws an income without carrying responsibility.
A related structure separates usufruct (intifa hakkı) from bare ownership (çıplak mülkiyet): title moves to the incoming generation while the right to benefit from the shares stays with the founder for a time. Two questions need answers at the outset. Who exercises the vote at the general assembly, and how is that choice reflected in the articles and in the share ledger? Every detail left unwritten becomes an argument at the first general assembly.
The economic side carries its own expectation problem. Under TTK Article 507 every shareholder participates, in proportion to their shares, in the net profit resolved for distribution; before any such resolution TTK Article 519 requires the general legal reserve to be set aside. “You have your shares, so you will draw a dividend every year” is an incomplete sentence: there must be a distributable profit, the reserve obligation must be met, and the general assembly must resolve to distribute. Leaving those conditions unexplained means disappointment at the first year end, and often the first serious family row.
Keeping a handover plan off the shelf comes down to one last step: recording the decisions in the company’s own books as they are taken. On the management side, electing the new board, adopting the internal directives and redistributing signature authority. On the ownership side, company approval of the transfer, entry in the share ledger and, where needed, amendment of the articles on restrictions and share groups. A family office (aile ofisi) or advisory board helps keep the timetable on track, but does not replace the record. A handover plan not reflected in the share ledger and the articles at the same time is not a plan; it is a hope.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
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