Commercial LawShareholders’ Right to Obtain and Examine Information in Limited Liability Companies

Limited liability companies are the most preferred type of company in Turkey, especially by family businesses and SMEs. In these companies, the partners are usually both the owner and the manager of the company. However, in some cases, especially in structures where the number of partners increases or some partners do not actively participate in the management, an information asymmetry may occur between the company management and the partners. The Turkish Commercial Code (TCC) recognises the “right to obtain and review information” for each shareholder in order to eliminate this asymmetry and to enable shareholders to monitor their own investments and the progress of their companies. This right is one of the most fundamental and indispensable elements of shareholder rights and is the most important guarantee of minority shareholders against the majority or managers. In this article, we will examine in detail the legal scope of the limited liability company shareholder’s right to obtain and review information, how to exercise this right, the limits of this right and the legal remedies that may be applied in case of obstruction.

Legal Basis and Scope of the Right to Obtain and Examine Information (Art. 614 TCC): In limited liability companies, this right is explicitly regulated under Article 614 of the TCC:

As can be understood from this article, the main features of the right are as follows:

• It is an Individual Right: Each shareholder may exercise this right individually, without the need for the approval of other shareholders or a general assembly resolution.
• Inalienable and Intransferable: This right cannot be removed or limited by the articles of association or by any decision of any body. The shareholder cannot waive this right in advance.
• Broad Scope: The right covers “all affairs and accounts of the company”. This includes all kinds of issues such as the company’s financial status, ongoing projects, important contracts, personnel policies, debt and receivable relations.

How to Exercise the Right: The shareholder may exercise this right in two ways:

1. Right to Information: The shareholder may apply to the managers verbally or in writing and request information about the company’s affairs and accounts. This may be in the form of asking a question about a specific subject or requesting a report on a general situation.
2. Right to Inspection: This is a more advanced right than the right to obtain information. The shareholder may examine the company’s commercial books (journal, general ledger, inventory), contracts, correspondence, bank records and all other commercial documents personally or through an expert (lawyer, financial advisor). The right of inspection is usually limited to a specific subject and the shareholder must specify this subject in his/her request.

Limits of the Right: Trade Secrets and Company Interest The shareholder’s right to obtain and review information is not absolute and unlimited. Paragraph 3 of Article 614 of the TCC sets the only limit to this right. The directors may reject the shareholder’s request on the grounds that fulfilment of the request would “jeopardise the trade secrets or other interests of the company”.

• Trade Secret: Confidential information such as the company’s formulae, customer lists, pricing strategies, etc., which would harm the company if learnt by competitors.
• Other Company Interests: Situations that, if disclosed, would jeopardise an important interest of the company, such as an ongoing tender process, a confidential merger and acquisition negotiation. However, it cannot be arbitrary for the directors to reject the request on this ground. The grounds for refusal must be concrete, serious and credible. For example, the request of a shareholder who believes that the financial situation of the company is deteriorating cannot be easily rejected on the grounds of “trade secret”. The Court of Cassation meticulously examines whether the justifications put forward by the directors in the requests for the prevention of the exercise of this right are really justified.

Legal remedies to be applied in case of denial of the right: If the shareholder’s request for information or inspection is unjustly rejected or left unanswered by the managers, the shareholder may take legal remedies.

• Application to the Court: The shareholder may apply to the Commercial Court of First Instance in the place where the company’s head office is located with a petition and request a decision on the exercise of the right to obtain and review information.
• Judicial Procedure: This case shall be decided according to the simple judicial procedure and generally in a short time. The court evaluates whether the grounds for refusal put forward by the directors are justified or not. If necessary, it may order that the documents to be examined be examined by an expert witness in compliance with confidentiality rules and a report be submitted to the court.
• Court Decision: If the court finds the request justified, it shall issue a decision authorising the provision of certain information or the examination of certain documents. The court’s decision is final, i.e. it cannot be appealed against.

Abuse of Right: On the other hand, the shareholder is also obliged to use this right in accordance with the rule of honesty. If it is determined that the right is used for malicious purposes such as damaging the company, disrupting its operation or leaking the information obtained to competitors, the shareholder may be legally liable to the company.

In limited liability companies, the shareholder’s right to obtain and review information is a fundamental right that ensures transparency and accountability in company management and protects the balance of power among shareholders. Especially for shareholders who do not participate in the management or who are in the minority, this right plays a vital role in following the course of the company and protecting their interests. It is not possible for the managers to arbitrarily prevent the exercise of this right; the shareholder who is faced with an unjustified obstruction can effectively exercise this right by applying to the court. In order to manage this process correctly and to ensure that the right is exercised in accordance with its purpose without abuse, both shareholders and managers should seek advice from a commercial law expert, which will contribute to the constructive resolution of potential disputes.