Buy-Out of the Oppressed Minority's Shares in Joint Stock Companies : A Comparative Analysis of Turkish, Swiss and English Law

Article 531 of the Turkish Commercial Code grants right to request corporate dissolution for just causes to shareholders representing at least ten per cent of the capital in joint stock companies, and five per cent in publicly traded companies. Aside from dissolution, the court is entitled to order purchase of the claimant's shares at real value (buy-out remedy) or to adopt a different solution. This article conducts an economic analysis of the buy-out remedy against oppression and compares Turkish law with Swiss and English jurisdictions. Buy-out remedy is supposed to provide an ex post control on the controller's conduct, and it is expected to operate as a put option conditional upon oppression. However the current provision is not designed so as to provide the expected incentives. In this regard we suggest that (i) the relief sought by the claimant should be taken into account, (ii) the purchaser of the claimant's shares should be the oppressive controller, rather than the company in question, (iii) the standard of ‘just cause' to be proven should not be equal for each remedy, and thus, the courts should be able to give a buy-out order even if the facts do not justify corporate dissolution, (iv) dissolution order should not be given in cases where there is a going-concern value to protect, and finally, (v) valuation of the claimant's shares should be made, in principle, on a going concern and pro rata basis, and any depreciation of the claimant's shares due to the controller's abusive conducts should be taken into account