Türkiye has adopted a unique approach whereby hybrid meetings were introduced back in 2012 for all publicly traded companies when the Central Registry Agency (Merkezi Kayıt Kuruluşu A.S.) (MKK) launched the Electronic General Meetings System (E-GEM) platform for conducting these meetings. This digital platform supports companies, investors, and custodians in all phases of general shareholder meetings, with the hybrid format as a legal requirement for publicly traded companies. Its use has helped increase retail and foreign shareholders’ attendance at shareholder meetings, supported the removal of share blocking, as well as achieved significant cost savings for companies, investors and custodians. Türkiye also stands out for having developed a comprehensive set of mandatory rules for conducting general shareholder meetings.
Shareholder Meetings and Corporate Governance
Abstract
This case study provides insights into Türkiye’s unique framework for conducting general shareholder meetings through a digital platform called the Electronic General Meetings System (E-GEM). The Central Registry Agency (Merkezi Kayıt Kurulusu A.S.) (MKK) runs this system, supporting companies, investors, and custodians in all phases of shareholder general meetings. Hybrid meetings were introduced in 2012 for all publicly traded companies when MKK launched the E-GEM platform, while virtual-only meetings are not allowed by law. Moreover, companies and investors use a Public Disclosure Platform (KAP) managed by the MKK. This platform facilitates mandatory public disclosure on an ongoing basis and allows companies to automatically send notifications to investors and be interconnected with the E-GEM system.
Shareholders can easily decide whether to participate in person or remotely. However, some differences remain in their possibility to engage and participate via audio and video. For instance, shareholders attending electronically can submit only written questions and opinions but cannot intervene live. Notwithstanding, shareholders and their representatives’ electronic participation and voting have the same legal consequences.
More than 500 listed companies operate through the E-GEM platform. Since 2012, over 5 300 shareholder meetings have been conducted on MKK’s system, according to official figures. In the last two years, the number of investors participating remotely in general meetings tripled the number of those participating in person.1 However, when counting attendance in terms of nominal share capital represented, more than 90% of the capital attended in person in 2023 and 2024.2
Since the inception of this system and its services, no major concerns have been raised by companies and investors. MKK set up the platform after consulting with the different interested parties, including market participants and public authorities. Local market participants interviewed for this report, such as representatives from listed companies, banks, and portfolio management companies, backed the MKK platform’s performance. They flagged that the previous system was complex and presented problems, especially concerning a share blocking period before the company meeting that has since been repealed, as well as concerning impediments to foreign investor voting.
Using a centralised agency-run platform whose regulations are determined by the government proves beneficial for Turkish market participants in terms of costs and reliability. This also serves shareholder voting, information access, and general meeting participation. Companies and custodians’ representatives suggested that the fees for companies to use the platform are reasonable and mentioned they undertake regular training.
Türkiye has a concentrated and large capital market, with a steady increase of listed companies in the past few years and a small but growing industry of institutional investors. According to the OECD Corporate Governance Factbook 2023, Türkiye had a market capitalisation of EUR 302.9 billion in 2022 (OECD, 2023[1]).3 Moreover, the market value of securities reached over 18 trillion Turkish Liras (TRY), equivalent to EUR 480 billion, and 35 million securities investors in 2024 (MKK, n.d.[2]).4
Türkiye’s capital market exhibits high ownership concentration, as 82% of companies are controlled by three or fewer shareholders owning more than 50% of shares. There is also considerable shareholding from private corporations (40%). Unlike global trends, institutional investors represent only 8% of the capital market shares, whereas free float shareholding was at 26% by the end of 2022 (OECD, 2023[1]). Regarding retail shareholders’ ownership, the number of individual investors has increased from less than two million in 2020 to above seven million as of June 2024.5 However, they are not currently grouped or represented by any well-known retail shareholder association.
In contrast with the global trend of de-listings experienced by many advanced economies (OECD, 2023[1]), in Türkiye the number of listed companies has increased. Between 2021 and 2023, 146 new joint stock companies joined BIST. A total of 562 publicly traded companies were listed on the stock exchange as of August 2024. Furthermore, the stock exchange launched several initial public offers (IPOs) in the past five years, increasing from 8 in 2020 to 52 in 2021, 40 in 2022, and 54 in 2023. The IPOs’ value also increased sharply during this period, reaching a high of EUR 1.92 billion in 2023. As of September 2024, 30 IPOs had been conducted, amounting to EUR 1.44 billion in total nominal value (Table 6.1). Further, the number of securities issued in BIST grew more than fivefold, from 557 million in 2018 to 2.911 billion in 2023 (MKK statistics, 2024[3]).
Source: MKK (September 2024).
The most recent increases follow specific policies enacted in the aftermath of the earthquake in 2023. MKK representatives explained that from the supply side, companies’ financing needs have increased, and capital markets have become more attractive for obtaining resources because the financial market is more accessible than traditional loan financing. From the demand perspective, investors have become more interested in listed companies and see the capital markets as a convenient investment alternative. Investment fund managers mentioned that this was further boosted by the government’s monetary policy of keeping interest rates low for a long time during and after COVID-19. They mentioned as other incentives for listing on BIST a discount on fees, a 2023 Communiqué on venture capital for companies with lower capital to be admitted to trading their shares with qualified investors,6 and IPOs’ higher returns compared to existing firms’ share prices.
The Capital Markets Board (CMB) is a public legal entity with administrative and financial autonomy responsible for implementing the Capital Markets Law (CML), drafting regulations and guidelines, and enforcing them (Article 117 CML). Moreover, the CMB allocates functions to the MKK and BIST and is the supervisory authority of both entities.
The MKK is the central securities depository and trade repository of Türkiye. It also offers in-house developed data and technology platforms, such as the E-GEM platform for general shareholder meetings (Article 81 CML).7 The BIST is formed as a joint stock company controlled by a state-owned wealth fund and established to carry out exchange activities such as listing, de-listing, granting trading authorisation, suspension of trading, executing discipline regulations or solving disputes (Article 67 CML).8 Its primary purpose and subject of activities is forming, establishing or developing markets, marketplaces, platforms and systems to ensure that capital market instruments are exchanged in compliance with the law.
The Commercial Court is responsible for solving disputes on matters regulated in the Turkish Commercial Code (TCC). Additionally, the CMB enforces capital markets legislation and regulations (Article 93 CML), and the Ministry of Trade enforces administrative regulations, such as the principles and procedures of general meetings (Article 17 RPP).
Joint Stock Companies’ board of directors must consist of at least one natural or legal person, following a one-tier system (Article 359 TCC). However, enterprises under the Communiqué on Corporate Governance scope, such as JSCs listed in the BIST’s Main Market, must appoint a board of at least five members (Article 4.3.1 CCG). Directors are elected based on a majority system, but the articles of association may consider exceptional representation of shareholder groups (Article 360 TCC). Representatives from investment funds argued that this is usually not the case and that minority shareholders are often excluded from companies’ management due to the majority system and ownership concentration of companies. They explained that this allows family groups to control the corporation’s direction and makes it difficult for minority shareholders to obtain board seats.9
The board is responsible for the company’s management.10 Its members or appointed managers represent the corporation, though at least one director must keep these representation powers (Article 370 TCC).11 Board decisions are adopted by majority rule, and directors can vote in person or electronically, with the same legal consequences. In case of a draw, the chair does not have a deciding vote, but the proposal is deemed to be rejected (Article 390 TCC).
The current regulatory framework for corporate law was established by Law No. 6102, which enacted a new TCC in 2011.12 Nevertheless, Turkish law has undergone significant legal reforms in recent years, impacting corporate governance. The TCC and the CMB’s regulations shape the current legal infrastructure regarding corporate governance principles for public companies. The jurisdiction’s framework considers three levels:
1. legislation from the TCC and the CML
2. communiqués or regulations from the Ministry of Trade and the CMB
3. CMB’s Communiqué on Corporate Governance, which is partly mandatory and partly applies on a “comply and explain” basis (see, Table 6.2), for a comprehensive list of applicable provisions and regulations).
From a substantive perspective, the rights and responsibilities of the general meeting participants are essentially established in the legislation and the Communiqué on Corporate Governance (CCG). Yet, meeting procedures are subjected to several layers of detailed regulation:
the regulation on procedures and principles of general assembly meetings of joint stock companies and the Ministry representative to be present in these meetings (RPP)
the regulation on general assemblies to be held in the electronic environment in joint stock companies (REGM)
the mandatory and procedure-related provisions in CCG
the company’s articles of association
the corporation’s internal directive on the working principles and procedures for general meetings.
Note: * The Communiqué on Corporate Governance is partly binding and partly applies on a “comply or explain” basis.
Source: MKK.
The general meeting is framed as the primary corporate forum for shareholders to exercise their rights (Article 407 TCC).13 Directors must call the annual general meeting (AGM) and ensure shareholders’ participation and voting. Listed companies must provide their investors with electronic means of participation and voting, as well as conduct their general meeting through the MKK system (Articles 1527[5] TCC and 30[5] CML).14
General meetings also require the participation of a Ministry representative, which is unique across jurisdictions (Articles 407, 422 TCC). The Ministry of Trade is responsible for appointing this official upon the company’s request. The Ministry representative’s primary duty is to oversee the legal and regulatory compliance of the meeting with the TCC (Articles 2, 33, 35 RPP). MKK representatives mentioned that companies have t praised it because it allows them to provide certainty to the process and ensure its compliance with the TCC. Similarly, local companies assured that having a Ministry representative in their general meeting has helped them to avoid potential breaches and enhance their performance with shareholders.
Shareholders are entitled to attend the general meeting, vote, receive information and pursue examination of the company’s affairs.15 MKK officials mentioned that the framework guaranteeing shareholder rights aims to align with EU standards, especially with the EU Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies and the EU Directive 2004/109/EC on the harmonisation of transparency requirements.
Furthermore, shareholders representing 5% of the shares or a nominal value of 1 million TL (EUR 26 thousand) can request the court appointment of a special auditor (Articles 439, 444 TCC).16 This is important to uphold minority shareholders’ rights, considering the high ownership concentration in the country. However, local investment fund industry representatives mentioned that court proceedings may not be speedy enough, making this entitlement less effective. Another shareholder action they noted as being often exercised is requesting the postponement of the general meeting for one month, justified on the basis of a need for better knowledge of the financial statements (Article 420 TCC). Unlike the auditor’s court appointment, this shareholder action does not require court approval. The company must postpone the meeting and re-perform all procedures required for convening a new meeting. Shareholders can also submit a court request for annulment of general meeting decisions (Article 445 TCC).
National market participants mentioned having overall positive experiences in engagement and participation in AGMs. Most companies set up an investor relations office to foster these policies, as CMB’s Communiqué on Corporate Governance (CCG) requires.17 They also remarked that the MKK platform provides investors with easy-to-manage tools to exercise their rights and that shareholders’ participation has increased in the last years, thanks to the E-GEM system. For instance, investors can access all the company’s reports and corporate governance performance features on the same platform.
Furthermore, shareholders’ participation and voting are highly encouraged by limiting directors’ powers to determine how investors must prove their property and control rights. Subsequently, investors’ attendance cannot be made conditional to depositing documents or share certificates (Article 415 TCC). Local market participants remarked that investors rarely face problems in this regard.
Companies are responsible for implementing the principles and provisions of the CCG for general meetings. Further, the MKK’s Data Analysis Platform (DAP) provides a Corporate Governance Maturity Index based on annual corporate governance compliance reports disclosed on KAP, where the companies’ compliance with the guidelines is published (Article 11, Chapter 4 CCG) (Annex 1-1.3 CCG).
Unlike other principle-based corporate governance directives in codes fashioned on a “comply or explain” basis, some of the Communiqué articles are compulsory, especially those related to general meetings and board governance (Article 5[1] CCG). For example, meeting arrangements should not create inequality of access among investors (Annex 1-1.3 CCG). The communiqué includes 29 mandatory provisions and 68 guidelines on a “comply and explain” basis. If companies do not implement the compulsory principles, they must provide an explanation and an amendment plan in their annual corporate governance compliance report (Article 8 CCG). This is done on the KAP system. Therefore, it is mandatory to implement those directives and to explain any departure.18
All market participants interviewed considered the national regulatory framework coherent, clear, and reasonable. Some banks operating as custodians highlighted that the staggered structure of the legal framework provides certainty about the rules each industry must comply with. Others remarked that secondary regulations and guidelines allow them to deal appropriately with specific topics. Similarly, asset managers said that the legal framework for securities is robust and specialised.
6.3.1. Electronic general meeting system (E-GEM)
Türkiye was one of the first jurisdictions to set new company law rules to allow electronic participation and voting of shareholders in general meetings and to make it mandatory for listed companies in 2012 (Eroğlu, 2012[4]). This new approach established a system to provide all companies with an electronic meeting and communications management platform, which MKK runs. The agency’s officials explained that before the 2012 reform, the system was complex due to a long share blockage period of one week; the need for paper-based and notarised powers of attorney for each meeting; difficulties in accessing the company’s materials and documents before the general meeting; and a lack of vote accuracy. They also remarked on the participatory consultation process with several market participants to build the new system, which allowed them to tailor it to the national dynamics while at the same time advancing to meet international standards and digitalisation of the system. Since 2012, the E-GEM platform has been used regularly by listed companies and investors for all AGMs and extraordinary shareholder meetings with substantial participation (Figure 6.1).
Source: MKK.
The E-GEM platform is also integrated with the KAP system, the primary information system related to Turkish capital markets (described in greater detail in the following section). For example, the board’s decisions about the general meeting date, time, place, and agenda should be disclosed on KAP, according to the CME (Communiqué Material Events Disclosure). This board submission to KAP is automatically transferred to the E-GEM platform, and the meeting is simultaneously created on the E-GEM system. Furthermore, the E-GEM system is integrated with relevant international systems such as SWIFT and national systems like MERSIS (Central Registry System).
The E-GEM platform covers the needs of the different participants. For example, issuers can call a meeting, publish proxy materials and the agenda items to be discussed at the AGM, as well as download the shareholder list on the day of the meeting and count votes. Shareholders can be notified of an incoming meeting, download documents, appoint a proxy without submitting powers of attorney, give instructions to the proxy, register their vote before the meeting, watch the meeting online, and send their opinions and questions to the chair. Similarly, custodians can record their voting instructions (partial and split voting are also possible) before the general meeting, send their questions to the chair, and receive voting results without submitting powers of attorney for each general meeting. All transactions performed in the system are notified electronically to the parties simultaneously.
The average duration of meetings performed on the E-GEM system has decreased from 109 minutes in 2012 to 36 minutes in 2024 (January-June). Conversely, the average voting duration has risen in the last six years from 10 seconds in 2018 to 34 seconds this year (January-June 2024), but overall, it has decreased from 2012 when it was 156 seconds.19
Electronic participation of shareholders has vastly outnumbered physical attendance every year since 2012 (Figure 6.2).20 However, physical participation is dominated by shareholders who own a large proportion of the company’s capital. For example, electronic attendance represented only 6% of the corporation’s shares in 2023, whereas the holders of nearly 60% of the companies’ property rights participated in person (Figure 6.3). Further, in 2023, total electronic investors’ participation peaked, with 18 736 investors participating remotely, while 6 839 attended in person.21
Source: MKK.
Note: Attendance rate (%) = capital owned by attendee *100 / total company capital.
Source: MKK.
Additionally, MKK representatives emphasised that the E-GEM system enables shareholders to exercise their rights electronically, issuers and companies to manage all the general meeting processes from calling the meeting to submitting and publishing the meeting’s minutes, and custodians to participate and vote on behalf of their beneficiaries. They emphasised that this aims to ensure safe meeting practices, remove cross-border voting barriers, and comply with international regulations.
Market participants interviewed suggested that there is room for improvement regarding voting time and the need for online logging in before the meeting for ratification purposes. They observed that most votes are generally cast and collected within 30 seconds and that they spend the remaining time waiting for a few shareholders who sometimes do not even vote. They suggested that voting time should be reduced from two minutes to one minute or 30 seconds. This aligns with the historical (2012-24) average voting time registered by MKK of 28 seconds per agenda item.
Moreover, some stakeholders have strongly advocated repealing the legal requirement of logging into the E-GEM system one hour before the meeting to participate electronically. This was required even if they had confirmed their intention to participate and submitted their voting intentions in advance. They mainly expressed concerns with this additional step for efficiency reasons, as many shareholders are not interested in engaging during the meeting but only in voting on the items they are interested in. They also described it as unfair because, in physical participation, they are not required to show up before the meeting but only at the time called. MKK representatives explained that the rationale is to prevent unauthorised attendance at the meetings, ensure that pre-filed votes are cast at the meeting, and make it as similar as possible to the in-person setting. In response to these market participants’ requests and concerns, the timeframe was recently lengthened, now allowing shareholders and their representatives to log into the E-GEM system at any time of the meeting day from 6:00 a.m. until five minutes before the meeting starts. The amendment entered into force on 24 July 2024 (new Article 5 of CEGMS).
The E-GEM platform has an articulated security infrastructure to ensure meeting security. This includes a system for encrypted and encoded audio and visual transmission. Furthermore, authorisation and authentication on the platform require factor authentication (namely, access via VPN and e-signature/mobile signature), which is allowed only for authorized users. The MKK also performs periodic assessments for the system’s security through vulnerability scans, third-party penetration tests, security information and event management, as well as cyber threat intelligence.22
6.3.2. Other platforms managed by the MKK: KAP and E-Sirket
The MKK provides other services besides E-GEM, including two essential company disclosure platforms: E-Sirket, an information portal for companies23 and the KAP. The latter is especially relevant for AGM management and is interconnected to E-GEM. Moreover, KAP facilitates listed companies’ disclosure of their financial reports, material events, corporate actions, sustainability, and corporate governance reports required in the CML and various Communiqués. Companies can also upload their communications, regular updates, and shareholder meeting minutes.24 Likewise, other capital market participants, such as investment firms, portfolio management companies, funds, audit firms, and regulatory authorities, must use KAP for their disclosure obligations.
MKK representatives remarked that all information disclosed in the financial statements must be updated during the year in the KAP platform in case of material changes. They mentioned that MKK’s Corporate Governance Compliance Report on 68 voluntary principles and the Corporate Governance Information Form are other relevant reporting obligations for listed companies on the KAP system. These notifications also must be updated in case of material changes. MKK officials noted that no corporate reporting obligations overlap and that the system has helped companies be more transparent and accountable to shareholders without increasing their regulatory burden.
Directors must call the AGM within three months from the end of each accounting period in Türkiye (Articles 409 TCC and 7[1] RPP). Shareholders representing 5% of the share capital can request the board to call a meeting and add items to the agenda through the intervention of a notary. If the board rejects the petition from shareholders, they may request the Commercial Court to appoint a trustee to undertake the procedure (Article 411, 412 TCC, and 8[3] RPP). The notice period is set at 21 days before the AGM’s day. This communication must be published on the company’s website and the Official Gazette, as well as submitted to KAP (Articles 414 TCC and 10[1][2] RPP). Agency officials remarked that the MKK system includes a special section for these publications and that registered shareholders automatically receive electronic notification for every meeting call.
Listed companies must include in their articles of association a template provision granting shareholders the right to attend electronically (Article 5 REGM). Companies have amended their articles of association to comply, as it has been mandatory since 2012. Additionally, listed companies must adopt an internal directive regulating their general meetings upon shareholders’ approval (Article 419 TCC). They must also register their meeting guidelines in the trade registry and publish them on their website (Article 40 RPP). Similarly to the template provision to be included in the articles of association, the Ministry of Trade offers a Model Internal Directive (MID) that most market participants interviewed have used as a reference to draft their company’s internal directives for shareholder meetings. Companies welcomed having a model to follow. They argued that having such a directive covering all the procedural aspects of general meetings leaves no room for misinterpretation or serious breaches. Many companies publish such company guidelines on their website together with their AGM materials reporting. Internal directives must cover procedures on:
entry and opening of company meetings
the chairing role
their duties and powers
procedures to be taken before discussing the agenda
steps for speaking and voting
preparation of the minutes
actions to be undertaken after the meeting.
The board of directors must draft the attendance list based on the physically attending and electronically registered participants the day before the meeting. They also make use of the shareholder list MKK provides one day before the meeting (Articles 30 CML, 16[1] RPP). No share blocking has been imposed on shareholders since the inception of the E-GEM system, and the record date is at the end of the day before the meeting.25 MKK officials explained that the E-GEM platform produces a list based on their electronic shares’ registrar, which companies can download on the day of the general meeting. Still, the board is legally responsible for the attendance list’s accuracy. Furthermore, attendance is overseen by the meeting chair and the Ministry representative (Articles 6 MID).
Electronic participation and voting require a secure electronic signature that shareholders must obtain from a third-party electronic signature provider company by paying an annual fee (Article 8 REGM). This enables them to access and use the E-GEM platform.26 MKK officials did not consider it problematic that some investors, especially elderly and rural-located retail investors, might be excluded from meetings because of the need for electronic signatures. They argued that shareholders can always participate and vote in person without having an electronic device, as general meetings are conducted in a hybrid setting.27 They added that foreign investors usually do not get an e-signature because they operate through their custodians, proxies, or banks.
Shareholders can vote personally or by proxy representation. The record date for this appointment and for giving instructions is at the end of the day before the general meeting. Custodians can only participate and vote with instructions being given (Article 45 RPP). Meeting participants must show their intention to attend one day before the meeting to be considered in the shareholders’ schedule. The company must check whether investors attending remotely intend to participate and are still present on the meeting date, even if they pre-filed their voting intentions.
Local banks acting as custodians revealed they set a broader administrative deadline than the legal record date. This can generally be two days before the meeting to allow them sufficient time to carry out their processes and submit to the MKK platform the powers and instructions documents their beneficiaries gave them. Local custodians also highlighted the problems they faced before the E-GEM system was set up due to the two-week share blockage period and the need to obtain specific powers of attorney. This meant significant extra administrative work and time, making the chain more complex, bureaucratic, and costly.
General meetings must be opened simultaneously in both settings, namely the physical meeting place and on the E-GEM platform.28 They are initially conducted by one of the board members or by company officers, depending on who called the general meeting (Articles 23 RPP, 6 MID). Executive members must attend the meeting, and at least one director must participate for the meeting to be valid (Article 17[1] RPP). To join the meeting in person, shareholders only need to show their identity, authorisation, or representation documents, and no other conditions can be requested for their participation and vote.
The shareholder meeting’s first action must be to elect the chair, who will be responsible for directing the process. Eventually, a vice-chair may also be appointed.29 The chair must appoint a minute clerk and can nominate a vote collector. The meeting leader does not need to be the board’s chair, i.e. a person elected by the same general meeting who does not need to be a shareholder or director. This is different from most jurisdictions, such as the UK and the Netherlands.30 Market participants interviewed did not express concern about this different approach and noted that, in practice, they regulate this matter in advance in their internal directive on general meetings.
The meeting chair must also check whether the company’s management undertook a legal compliance assessment of the documents granting the shareholders and their representatives the right to participate in the general meeting. The chair can appoint experts to conduct technical tasks on the E-GEM platform (Articles 23 RPP, 9 REGM, 7 MID). Market participants mentioned having set up teams of at least two to three officers responsible for organising and supporting general meeting tasks, all previously trained and certified by targeted MKK programmes. The primary duties and powers of the chair are to:
examine whether the meeting place is suitable and the one mentioned in the notice
ensure the meeting notice complied with timing and publication requirements
review the registered shareholders were duly notified by letter about the meeting and related information
take note of the reasons shareholders were not authorised to access the meeting if this is the case
revise whether the quorum is maintained until the end of the general meeting
check if proposals for substantial changes, such as share-ledger or auditor reports, obtained the permission of the Ministry of Commerce (Article 6 MID)31
engage with shareholders regarding adding agenda items and questioning the board, pursuant to the CCG. 32
The items to be discussed in the meeting will be those that are mandatory, such as discussing the annual report, distribution and profit matters, and the topics added by the shareholders (Article 413 TCC, 13 RPP and 10 MID). The list of items cannot change except for specific cases, including the unanimity of shareholders deciding otherwise, a request for a special audit being submitted, or alleged directors’ breach of duties (Article 25[1] RPPGAM). The chair must conduct the meeting according to the agenda by following its order, reading the items and their background information, and allowing the shareholders to interact. In turn, participants wishing to intervene must notify the chair to do so. The meeting chair can also give the floor to directors and auditors to provide explanations or a statement about the topic discussed (Article 11 MID).
Shareholders’ rights to speak, pose questions to the board, and give opinions are exercised differently depending on the setting in which they decide to participate. If they do it so person, the meeting chair will provide the floor to each person who has notified the chair about it. Speakers have only one opportunity to address the meeting audience, though they can reorganise their turns by agreement. Speaking time is limited, as proposed by the chair and approved by the meeting (Article 11 MID). On the other hand, shareholders accessing the meeting electronically through the E-GEM platform must submit their opinions in written form within a 600-character limit twice for each agenda item (Articles 10, 11 REGM).33 Hence, questions from shareholders attending remotely are read out by the chair and answered by directors.
MKK representatives did not report receiving a significant number of complaints from shareholders or investors about this different treatment in how questions are posed to the board. Representatives of listed companies and custodians also did not report concerns and suggested that the regulatory framework ensures that the board and the chair will provide the information and answers required. Moreover, they remarked that they usually participate in general meetings to vote and not to ask questions or give opinions because they engage with directors during the year on specific topics. Conversely, investment funds explained that this difference is a powerful reason why they attend in person when they aim to engage effectively or influence the company’s management, as they think that not being able to ask questions orally and not being seen in the meeting can diminish their opportunities and quality of engagement. Nevertheless, 93 % of investment funds have participated in general meetings remotely via E-GEM since 2012.34
The chair should ensure that all shareholders have equal opportunities to express their opinions and to raise questions, which should be answered directly in the meeting. Alternatively, directors can request to respond in writing within the next 15 days if the question asked (i) is not related to the agenda or (ii) if it is too comprehensive to be answered immediately. All questions and answers must be published on the company’s website within 30 days after the general meeting (Annex 1-3.5 CCG).
Some investment company officers argued that meeting minutes are not always comprehensive enough of the views of shareholders and discussions because the written version is expected to summarise what happened at the general meeting. Subsequently, they advocate for the meeting video recording to be made available with the written minutes to avoid discrepancies and inaccurate information.
Investors have one vote per share, but dual-class shares are exceptionally permitted.35 Votes are cast simultaneously in person and electronically for each agenda item after undertaking statements, explanations, opinions, and discussions. Once the chair calls the voting, no requests can be made except from procedural aspects (Articles 11 REGM, 12 MID). Each agenda item must be voted on separately. Voting in person must be done openly and generally by show of hands, whereas voting electronically is done digitally on the E-GEM platform (Articles 20, 23 RPP, and 9, 11 REGM).
The company must facilitate the exercise of shareholder voting rights, especially in cases of cross-border voting (Annex-1.4.1 CCG). Shareholders or their representatives can change their voting intention submitted to E-GEM before the meeting but cannot do it after voting in the general meeting (Article 11 REGM). Moreover, votes from shareholders in the meeting who did not show their hands nor submit their intention electronically are considered votes in opposition to the item (Article 12 MID).36 Market participants proposed requiring in-person shareholders to vote physically through an electronic device at the meeting instead of by show of hands. This is already the case in some companies, where in-person participants can vote via such devices. In that way, those votes would be automatically incorporated into the E-GEM system, saving time and enhancing the accuracy and rigour of the vote-counting process.
Custodians, depository institutions, or intermediaries require special permission to participate in and vote at the company meeting on behalf of their beneficiaries. However, the authorisation can be given through the MKK platform if the investor holds electronic shares (Article 18 RPP). Notably, even if the votes are pre-filled, they will not be revealed to directors and must be cast at the meeting, item by item, in real-time. This differs from other jurisdictions, where the board can be informed of the shareholders’ voting intention if they voted before the meeting. Only one person or agent can represent a shareholder for voting purposes.
To conclude the meeting, minutes must be provided in two copies at the meeting place. The minutes must be signed by the meeting chair and the Ministry representative, and must essentially mention (i) the number of votes cast per decision; (ii) the identification and reasons for dissenting votes unless the opposition was given by letter, in which case that piece is added to the minutes; and (iii) requests for annotations from the shareholders (Article 13 MID).
The chair must deliver a copy of the minutes and related documents to one of the board directors after the meeting. This is usually done by the end of the meeting day. Then, the company should transmit all the documentation to the KAP platform for the company’s disclosure on the meeting day. Moreover, company directors must submit a notarised copy of the minutes to the trade registry within 15 days after the meeting. They must also publish the minutes on the company’s website within the next five days (Article 29 RPP). Even if the general meeting can be conducted without a notary, they usually participate as a matter of good practice. In this way, minutes can be notarised quickly, facilitating compliance with this requirement.
Finally, the board must register and announce company matters subjected to declaration according to the law (Articles 422 TCC, 14 MID). The information published on companies’ websites must be prepared in foreign languages, mainly English, facilitating foreign investors’ access to information. Translations must be consistent with the Turkish versions and useful for their beneficiaries to make decisions (Annex 1-2.1.3 and 2.1.4 CCG).
BIST-listed companies and custodians mentioned that they consider the timeframe to be short for dealing with all the administrative work that must be completed once the meeting concludes, such as actions related to the minutes and obtaining the notary’s approval, This is especially the case of meetings held in both settings, as physical and electronic inputs like vote collection, document and minutes preparation must be put together for E-GEM submission from paper and electronic formats in a short period. Further, they noted that considering the extended use of MKK’s platform, all the votes and information obtained from the physical setting should be directly and electronically sourced to the KAP platform.
Türkiye’s capital market is characterised by high ownership concentration and a robust listing growth. According to the OECD Factbook 2023, 82% of Türkiye’s listed companies (438) were controlled by three or fewer shareholders, most of them family groups. Private corporation ownership reached over 40%, and institutional investors owned only 8% of securities. The latest figures from the MKK show substantial growth in the market in 2023 and 2024, supported by a large number of IPOs. This increased the total number of publicly traded companies to 562 as of August 2024, including some companies listed on pre-market and fund-trading platforms that are not included in the OECD data. Türkiye’s securities market value reached over TRY 18 trillion (EUR 480 billion) as of September 2024. Even with high ownership concentration overall, the recent growth in the number of IPOs and securities issuances has attracted a remarkable number of new retail investors to the market, rising from 2 million in 2020 to 7 million by mid-2024. With such significant growth in the size of the market and the number of retail shareholders, ensuring they can engage in AGMs and familiarise themselves with the MKK platform for meeting participation will be important to allow them to exercise their rights effectively.
The corporate governance framework for AGM management is coherent and transparent. While the framework is more prescriptive and less flexible than in many other jurisdictions, market participants say they appreciate the certainty this provides them. Laws and regulations provide a clear framework for company meeting procedures and roles, including chairing. In turn, the CCG sets standards of conduct for directors and the meeting chair, for example regarding their treatment of shareholders. Listed companies must also obtain shareholder approval for an internal directive to implement those meeting rules from the law and regulations into their specific corporate setting. Likewise, companies must include in their articles of association the right of shareholders to participate and vote electronically. Market participants agreed that the framework is clear and helps avoid confusion or dysfunction.
The institutional setting is clearly articulated by allocating regulatory, supervision, and enforcement powers to different bodies. The Capital Markets Board (CMB) enforces the Capital Markets Law (CML) and issues mandatory regulations for companies trading in regulated capital markets. CMB is the regulatory and supervisory authority for all capital market institutions, and the MKK is the entity responsible for managing the E-GEM system, which offers several electronic corporate services for market agents. Moreover, BIST enacts and enforces regulations for listed companies, and the CMB supervises MKK and BIST. Courts enforce legal provisions, especially from the TCC. The Ministry of Trade oversees the administrative regulations issued for general meeting procedures.
Türkiye’s centralised electronic platform successfully serves the needs of all market participants in conducting AGMs in a hybrid format. Indeed, Türkiye is a step ahead of other jurisdictions reviewed in providing a platform that gives shareholders a choice between participating remotely in a hybrid format or in-person attendance at the AGMs of all listed companies. The system offers 14 services for different constituencies. Most corporate tasks can be undertaken through the MKK platform. Further, the E-GEM system has adequately managed associated security risks. Market participants described it as an easy-to-manage and effective system that provides reliability and a more common field amongst listed companies by following uniform requirements and using the same platform. Hence, the country has adequately implemented technology to enhance corporate governance standards and correct problems reported regarding meeting participation before the system’s implementation in 2012.
Unlike most jurisdictions, general meetings are led by an ad hoc elected chair and overseen by a Ministry representative. General meetings are not necessarily chaired by the board leader but by someone elected in the same meeting. It is common practice to proceed this way, yet the company’s internal directive may provide otherwise. The meeting chair has relevant powers regarding the attendance list, participants’ right to speak, and the voting process. Additionally, the meeting is supervised by an officer appointed by the Ministry of Trade upon the company’s request, who oversees the meeting’s legal and regulatory compliance. This is a peculiar trait of the Turkish framework, which, according to market participants and companies, helps provide certainty to meeting procedures. Another difference with other jurisdictions is that votes sent by shareholders or their intermediaries in advance are not revealed to directors before the company meeting. This is because votes must be cast during the meeting itself. Before that, shareholders only show their intention to participate and vote. Indeed, they can change pre-filled ballots at the same general meeting. Furthermore, shareholders attending but not casting their votes are considered to have voted against the agenda item.
Electronic participation and voting have the same legal consequences as physical attendance but are performed differently. The E-GEM platform facilitates shareholders’ remote participation. Hybrid meetings are the general rule for listed companies, as they must conduct their meetings in person and through the E-GEM system by default. However, shareholders face differences in participation depending on their chosen setting. On the one hand, shareholders attending remotely need an electronic signature and authentication for which they pay. They must register their intention to participate electronically in the system one day before the meeting and confirm it by logging in on the meeting day. The government recently lengthened the time for this confirmation, responding to custodians’ concerns. Regarding electronic voting, shareholders and custodians must cast their votes within two minutes after the ballot is called. On the other hand, investors participating in person must vote, in principle, by show of hands. Since companies must count and put all this information together in the minutes the same day of the meeting, market participants strongly advocate for replacing voting by showing hands with voting through a digital device and automatically uploading the physical ballot results to E-GEM during the same meeting. MKK mentioned that they are devising a new feature for this on their platform. This would provide a vote calculation table for companies, and starting in 2026, physical participants should be able to vote electronically from their mobile phones while attending the meeting in person.
Only shareholders attending in person can take the meeting floor, speak to the attendees, and orally direct questions to the board. Another difference between in-person and electronic participants is that electronic participation allows only written questions of maximum 600 characters twice for each agenda item. According to MKK officials, there are some reasonable grounds for restricting their intervention to length-limited written questions, such as facilitating maintenance of an order of interventions while decreasing the possibility of disruptions. They also remarked that written submissions have the same legal status as oral questions. However, as the shareholder base and expectations evolve globally, Türkiye could consider expanding the platform to enable remote participants to ask questions orally and be seen via video, closing gaps between in-person and electronic participation.
The MKK platform has enhanced shareholder participation through electronic engagement facilitation and educational initiatives. Indeed, the involvement of both local and foreign shareholders in the company meetings has increased. The high rate of remote participants (78%) compared to the rate of physical participants (22%), the number of different jurisdictions (68) and the number of cities in Türkiye (78) from where investors are participating in company meetings using E-GEM supports this result. Yet, considering the lack of retail shareholder organisation and their considerable expansion, the continuation of existing financial literacy and investor education initiatives conducted by CMB, MKK and various stakeholders and the development of some institutional representation to look out for retail shareholder interests could be worth exploring.
References
[4] Eroğlu, M. (2012), “Istanbul Stock Exchange Moves First on Mandatory Electronic Voting”, Harvard Law School Forum on Corporate Governance, https://corpgov.law.harvard.edu/2012/11/06/istanbul-stock-exchange-moves-first-on-mandatory-electronic-voting/.
[2] MKK (n.d.), , https://www.vap.org.tr/.
[3] MKK statistics (2024), MKK system statistics, https://www.mkk.com.tr/en/data-services/system-statistics (accessed on 15 October 2024).
[1] OECD (2023), OECD Corporate Governance Factbook 2023, OECD Publishing, Paris, https://doi.org/10.1787/6d912314-en.
← 1. In 2023, 579 meetings were conducted and 427 were performed as of June 2024.
← 2. Based on information provided by the MKK and their official statistics as of June 2024.
← 3. It should be noted that OECD data do not include certain categories of companies such as those listed on pre-market and fund-trading platforms that are included in subsequent data provided by the MKK, and therefore is not fully comparable to later time periods cited. Conversions numbers between Turkish Lira and Euros used in this chapter are as of December of each year but as of 2 September 2024 for 2024 only. The USD to EUR conversion is based on the exchange rate provided by the European Central Bank at the end of December for each year. See US dollar (USD).
← 4. The TRY to EUR conversion is based on the exchange rate provided by the European Central Bank at the end of December for each year, but as of 2 September 2024 for 2024 only. See Turkish lira (TRY).
← 5. According to data prepared by the Turkish Capital Market Association and MKK’s platform. Investor numbers are published daily on https://www.mkk.com.tr/en.
← 6. This is a recent category with no companies listed because the CMB has not yet concluded any applications. However, MKK officers mentioned that it is already clear that these corporations will have to comply with the same provisions regarding electronic participation as listed companies and JSCs.
← 7. The MKK is a joint stock company with the status of a private legal entity. It provides its members with a depository, trade repository, reporting, corporate governance, and investor services.
← 8. Since 2013, BIST has been structured as a JSC owned 80.6% by the State through the Turkish Wealth Fund Management. Further, BIST holds 30.10% of MKK’s shares (71.75% if indirect ownership is included). The 2023 Factbook noted that the shares owned by the Treasury in BIST were transferred to the Turkish Wealth Fund Management, which is ultimately owned by the state (OECD, 2023[1]).
← 9. In some OECD Corporate Governance Factbook jurisdictions like Italy and Peru, representation of minorities in boards is required by law. Likewise, this incorporation is required in the United Kingdom by listing rules for companies with controlling shareholders (OECD, 2023[1]).
← 10. Every director is entitled to management powers and can transfer them even to a third party (Articles 366, 367 TCC). That is why the duty of care can even reach those third parties (Article 369 TCC).
← 11. However, the board of directors is responsible for its oversight (Article 375 [e] TCC).
← 12. Additionally, Law 6335 introduced complementary amendments in 2012.
← 13. Unlike other jurisdictions, enterprises are encouraged to allow individuals other than the shareholders interested in the business to participate. This is without the right to speak or to vote (Annex-1.3.11 CCG).
← 14. Further, a centralised electronic system provides a digital infrastructure for depository, corporate governance, investors, and data services, including electronic general meetings (Article 81 CML).
← 15. They can request copies of all company documents, like statements, books, and reports (Article 437 TCC).
← 16. The company must pay the expenses if the court accepts this.
← 17. CCG, Chapter Four, Article 11.
← 18. This is a different policy approach to “comply or explain” codes, where following corporate governance guidelines is entirely voluntary. Waivers are considered based on companies’ market capitalisation scale and other thresholds.
← 19. Data and statistics provided by the MKK as of July 2024.
← 20. Even though an in-person setting is still required by law for a meeting to take place validly, only the physical presence of the meeting chair and the ministry representative is sufficient. All shareholders who wish to do so can attend electronically.
← 21. Data and statistics provided by the MKK as of July 2024.
← 22. Information provided by the MKK as of July 2024.
← 23. In accordance with Article 1524 of the TCC, listed companies that are subject to independent auditing by law is under an obligation to open a website and to allocate a certain part of this website to the publication of announcements required by law. e-COMPANY: Companies Information Portal Platform offered by MKK is a system in which these announcements are uploaded to each of the companies’ dedicated pages with a secure electronic signature. E-Sirket is publicly accessible here: https://www.mkk.com.tr/en/corporate-governance-services/e-company-companies-information-portal.
← 24. The KAP platform is publicly accessible here: https://www.kap.org.tr/.
← 25. Share blocking consisted of a period during which shareholders were not allowed to undertake any transaction regarding their shares.
← 26. For example, shareholders and custodians are charged 14.8 EUR for one year, 18.6 EUR for two years or 26.22 EUR for three years of e-signature service.
← 27. MKK also provides training programmes on different topics, such as e-signature management.
← 28. The physical meeting place could be the company’s headquarters, the location determined by their articles of association, or the place mentioned in the meeting notice. By default, the physical meeting place must be within the corporation’s civil administration unit (Article 8 [1] RPPGAM). It is mandatory for listed companies to conduct their general meetings both in person in that venue and electronically through the MKK platform (Articles 17[4] CML, 2 REGM).
← 29. The Chair and Vice-chair might or may not be shareholders unless otherwise provided by the regulatory instruments (Articles 14 RPP, 9 MID).
← 30. It is common practice that the board leader directs the meeting in these and other jurisdictions. For example, the Model Articles of Association (Article 31) in the UK recommend this.
← 31. Additionally, the meeting leader must check the identity of attendees and the powers of their representatives, ensure that the executive branch, one member of the board and the audit are present, ensure legal and regulatory compliance of the general meeting, read or entrust someone to read the agenda, decisions, drafts, minutes and relevant information, check the voting process and report their results, and prevent any deviation from the articles of association, especially regarding privileged shares.
← 32. Furthermore, the CCG sets standards of diligence expected from the meeting’s chair. For example, it provides that they should be prepared and obtain the necessary information in advance (Annex-1.3.4 CCG).
← 33. Shareholders have a right to send two opinions for each agenda item and each opinion has a 600-character limit. E.g. if a general meeting has five agenda items to be discussed then each shareholder has a right to send twice, five opinions.
← 34. According to MKK data.
← 35. These shares are limited to fifteen votes per share and are not considered for amendments to the articles of association and liability lawsuits against directors (Article 479 TCC and Article 19[2] RPP).
← 36. Article 12(2) Model Internal Directive: Votes on the issues discussed at the meeting are cast by raising hands or standing, or by saying acceptance or rejection separately. These votes are counted by the meeting chair. When necessary, the presidency may appoint enough people to assist in vote counting. Those who do not raise their hands, do not stand up or do not make any statement are deemed to have voted “rejection” and these votes are considered to be against the relevant decision in the evaluation. (If voting methods other than those specified in this article are foreseen, they will be specified in the Internal Directive). Regulatory provision translated with Google. The official document is only available in Turkish here: Mevzuat Bilgi Sistemi.