Focus on: Cumulative Voting System in Privately Held Joint Stock Companies in Turkey

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Under Turkish corporate law, the management body of Joint Stock Company is “Board of Directors” and the directors are elected by shareholders through their affirmative votes in shareholders’ meeting ( “general assembly meeting”).  The capacity of shareholders to have an impact on the management of the company depends on one’s number of shares in the share capital of the company as it reflects upon one’s power in voting for the election of the board of directors.

Shareholders don’t have any direct management rights but indirectly impacts the company’s management and policies through their voting power for the appointment of the board members. Voting rights belong to shareholders due to their ownership of shares. Each share gives shareholder at least one voting right and in the general assembly, voting rights are proportionate to one’s amount of shares. Shareholders voting in proportion with their shares in the general assembly is known as the “straight voting system”.

As an alternative to straight voting system, “cumulative voting system” is regulated under article 434/4 of Turkish Commercial Code (“TCC”); which enhances the shareholders’ ability to have an impact on the selection of board members of the privately held joint stock companies. Cumulative voting system, especially in privately held joint-stock companies where there is no controlling majority shareholder and an alliance is necessary due to the multiplicity of shareholding, increases each shareholder’s involvement in the management, along with providing a potential for minority shareholders to be represented more in the board of directors.


One of the main principles of joint-stock companies is the majority principle. Accordingly, in general assemblies decisions are made in line with the majority. Majority is achieved by the amount of shares a shareholder owns, not by the number of shareholders. The voting rights are calculated in proportion with one’s shares in the share capital of the company.

To implement the majority rule in an absolute form would bring the danger of minority shareholders’ rights being violated or it might cause failure in decision-making due to having multiple minority shareholders. In order to eliminate such danger and enable the minority to be represented in the company’s management, the lawmaker foresaw certain mechanisms. One of these mechanisms is the “cumulative voting system” relating to the selection of the board of directors in the general assembly.

Customarily, in general assemblies of joint-stock companies there are two different methods of voting. The first method is the “straight voting system” where each share authorises one voting right to vote for each board member candidate. In this system, shareholders who own the majority of the shares of the joint-stock company have the opportunity to select all of the board members as a result of the majority rule. The second method, “cumulative voting system” attempts to enhance the power of minority votes by providing shareholders to almost cumulate their votes and then divide it up. In this system, the shareholder owns a voting right equal to the multiplication of the number of board member candidates and his/her own shares. Unlike the straight voting system where each board member is elected one by one, the cumulative voting system requires board of directors to be chosen all together at once. As the latter allows minority shareholders to form an alliance to vote for one or two candidates therefore enabling their representation, the cumulative voting system is an exception to the common majority rule in joint-stock companies.


2.1 Cumulative Voting System For Privately Held Joint-Stock Companies Is a Method Accepted by TCC: Cumulative voting system has been accepted for privately held joint stock companies under article 434/4 of the TCC. With article 434/4 of TCC, Trade Ministry was delegated the authority to regulate the cumulative voting system for privately held joint-stock companies. Pursuant to this, The Trade Ministry published the “Communique Regarding the Fundamentals of Using the Cumulative Voting System in the General Assemblies of Privately Held Joint-Stock Companies” (“The Cumulative Voting System Communique”) through the Official Gazette dated 29.08.2012 and numbered 28396. Accordingly, the terms and operation of the voting system in privately held joint-stock companies, along with the calculation of the votes are subject to The Cumulative Voting System Communique.

2.2 Objective of the Cumulative Voting System is to alleviate the Representation of Minority Shareholders in the Board of Directors: As a rule, in joint-stock companies, the decisions of the general assembly are in line with the wishes of the shareholders who own the majority of the votes. As a result of the majority rule, in general assembly’s relating to the election of the board of directors, the members are selected according to the will of the majority; therefore, the minority shareholders do not have an impact on the election. The cumulative voting system provides an opportunity for shareholders with lesser shares to cumulate their voting rights and use it effectively to have an influence on the election of the board members. This method puts forward a legal mechanism which allows minority shareholders to be represented in the board of directors in relation to their rate of shares.

2.3 Cumulative Voting System is a Method Which Can Only Serve the Election of Board of Directors: In line with its objective, the cumulative voting system is reserved for the election of board members in the general assembly. In other words, such voting system can neither be used in a general assembly unrelated to the election nor be applied to any other agenda in an assembly where board of directors are elected.

2.4 Cumulative Voting System, Subject to Demand before Each General Assembly (As an Alternative to Straight Voting System) Is a Discretionary System: Although there should be an explicit provision in the company’s articles of association for cumulative voting to be implemented, this does not come to mean each election of the board of directors must use cumulative voting. To include the cumulative voting system in the articles of association does not remove the straight voting system altogether; however, it allows the invocation when the shareholders specifically request it as an alternative to the straight voting system. Thus, a shareholder who plans on voting under the cumulative system must inform the company at least a day prior the general assembly where the board of directors will be elected. Without such notice, the relevant general assembly will operate with the straight voting system. To elect the board of directors via the cumulative voting system, notice by only one shareholder prior to the general assembly would suffice. In such scenario, all shareholders (including ones who have not given any notice) must vote under the cumulative system. In other words, upon at least one shareholder’s demand, all shareholders are obliged to use their voting rights according to the cumulative voting system.

2.5 In Cumulative Voting System, It Is Substantial That All The Board Members Are Elected in The Same General Assembly. As a general rule, under the cumulative voting system, partial election of board members is prohibited. All members must be elected in the same general assembly meeting and take office for the same duration. Therefore, in case of a vacancy on the board, all the remaining members’ office terminates, and the board of directors must be reconstituted. The obligation to elect all members at once, the vacancy on the board, and certain exceptions are thoroughly explained below under (6) “The Effect of a Vacancy on the Board of Directors to the Cumulative Voting System”.


3.1 In the Case of Electing Board Members, “Cumulative Voting” Is an Alternative to Straight Voting Where Minority Shareholders’ Voting Power Is Enhanced: Straight voting system is accepted by TCC regarding all general assembly resolutions and it depends on the principle where a shareholder’s voting rights are proportional with her shares in the share capital of the company. So, the rule in the straight voting system states that each shareholder can vote for each matter with his/her voting power, which is proportionate and limited to the quantity of their shares. Similarly, in general assembly where board members are elected, straight voting allows shareholders to vote in proportion to their share quantities for each candidate separately. Therefore, each candidate is being voted severally; and in line with the majority rule, the candidate voted by the majority shareholder is elected as the board member. Whereas in the cumulative voting system, the voting right is attained by the multiplication of a shareholder’s number of shares and the number of member candidates. The shareholder can use his/her votes in only one candidate or can divide up the votes between several members. Thus, shareholders’ voting rights are calculated cumulatively, allowing them to distribute between candidates as they wish. Due to this, unlike the straight voting system where each board member is selected individually, under the cumulative voting system there is only one voting for electing all the board members. As a result, board member candidates are arranged from most voted to least voted, and from such sequence the number of available board seats are filled.

3.2 In a scenario for a company which has a share capital of TL 100 (hundred) (100 shares with the nominal value of TL 1), A owns 70% and B owns 30% of shares. In the election for the board which consist of 3 (three) members, A puts forward X, Y, Z candidates and B proposes Q, P, R. The calculation for such election under (i) the straight voting system and (ii) the cumulative voting system will be as explained below.

Straight Voting System Cumulative Voting System
For election of the board which consists of 3 members, A has 70 and B has 30 voting power. For election of the board which consists of 3 members, A has (70×3=210 votes) and B carry (30×3=90 votes).
Under any circumstances, due to A having the majority with 70% of voting rate; X, Y, Z would be elected as the board members. Regarding A’s distribution of votes:

X=90 votes

Y=90 votes

Z=30 votes

Regarding B’s distribution of votes:

Q=90 votes

P=0 votes

R=0 votes

There would be the above outcome.

B would not be able to put even one of its candidates in the member seat. As a result of cumulative voting; in the ranking which would be held amongst X, Y, Z, Q, P, R; the 3 most voted candidates (X, Y, Q) will form the board of directors. Therefore, B would have the opportunity to have 1 representative in the board.


4.1 The Articles of Association of the Company Must Explicitly State the Cumulative Voting System: There are 2 fundamental arrangements that a joint-stock company’s articles of association must include in order to apply cumulative voting for the election of board of directors.

4.1.1 An Explicit Provision Regarding the Cumulative Vote: There must be an explicit and clear provision in the articles of association stating that all the shareholders can cumulatively vote for one or more board members in the general assembly and that upon request of the shareholders, cumulative voting is available as an alternative.

4.1.2 A Fixed Number of Board Members Which Is Not Less Than Three: In order for the cumulative voting system to operate, the board of directors must at least consist of 3 members and accordingly, the articles of association must include a fixed number of members which is also not less than 3.

4.2 There Must Be No Provision in The Articles of Association Which Disable the Cumulative Voting System: According to the Cumulative Voting System Communique, it is prohibited for a privately held joint-stock company to include a provision in its articles of association which render the cumulative voting system inoperative.

4.2.1 Nomination Privilege: Under article 360 of the TCC, there is a privilege allowing certain shareholder groups to be represented in the board of directors, thus allowing nomination of a candidate. If the cumulative voting system is to operate, the articles of association must not include a provision relating to the candidate nomination privilege under article 360 of the TCC.

4.2.2 Privilege in Voting: Under article 479 of the TCC, there is a privilege which allows attainment of at most 15 different votes for equal nominal shares. If the cumulative voting system is to operate, the articles of association must not include a provision relating to the privilege in voting under article 479 of the TCC.

4.3 It Is Mandatory to Notify the Company before the General Assembly That the Cumulative Voting System Will Be Applied: The explicit provision in the articles of association is not sufficient to use cumulative voting. A shareholder who wants to vote under the cumulative system must provide a written notice to the company at least 1 (one) day before the general assembly. Therefore, without any written notice by a shareholder; as with any other agenda item, the straight voting system will be used for electing the board of directors.

4.4 The Straight Voting System Is Applied for All the General Assembly Resolutions except the Election of The Board of Directors: Even if a shareholder has provided a written notice and the board of directors will be elected with the cumulative voting system, the other agenda items of the general assembly will be subject to the straight voting system. Thus, in the relevant general assembly, cumulative voting system and straight voting system would be applied together, with the cumulative system being limited to the election of the board members.

4.5 General Assembly Announcements Must Include Statements Regarding the Cumulative Voting System: The joint-stock companies which implement the cumulative voting system must include explanations of the cumulative voting system in the general assembly announcements and on the website, if they send out an announcement inviting relevant people to the general assembly.

4.6 In the General Assembly, Cumulative Votes Are Given Via Ballots: Cumulative votes are given via written ballots which indicate the distribution of the cumulative vote, along with including the voter’s number of votes, name, surname, and signature. Even if there is no instruction under the certificate of representation regarding cumulative voting, as it is obliged to vote in such manner upon the request of any one shareholder or representative, the representative votes under the cumulative system when obliged. If there are no specific instructions under the certificate of representation, the representative decides on the distribution of the votes.


 5.1 The Distribution of the Cumulative Vote and Utility Maximization: It is in the shareholders’ discretion to give a written notice to invoke the cumulative voting system, to decide to vote in the general assembly, and to divide their votes. Therefore, the ability to use the voting rights cumulatively does not in itself bring a representation guarantee in the board for the minority shareholders as they can distribute their votes as they intend to.

Nevertheless; if the shareholders want to be represented in the board and elect the optimum number of board members, they should determine the number of members their votes can elect, calculate how the distribution between the candidates should be made, and divide their votes in an optimal manner. The cumulative voting system does not guarantee representation of the minority shareholders in the board, however, depending on the composition arising from the mathematical calculation of probabilities, such representation is enabled. Therefore, each shareholder should make a calculation regarding their shares and the candidate number; and according to the outcome, shareholders should make an optimum level distribution of their votes to choose the board members. On the other hand, if the shareholder who is voting cumulatively has voted for more than one candidate without indicating any specific division, it is assumed that the votes are distributed equally between the candidates.

5.2 Formulas relating to the Calculation of the Cumulative Vote: The two formulas of the cumulative voting system which depend on variables are explained as below.

5.2.1 The Calculation of The Minimum Requisite Share/Vote for the Desired Number of Board Members to be Elected: The below formula calculates the minimum requisite of share/vote for shareholders to use in order for the desired number of members to be elected for the board.

P2 = P1×Y2 +1


P2 = Requisite Number of Share/Vote for the Desired Number of Board Members To Be Elected.
P1 = Total Number of Share/Vote
Y2 = Desired Number of Members To Be Elected
Y1 = Total Number Of Members To Be Elected


5.2.2 Calculation of the Number of Candidates to be Chosen for the Board of Directors with Reference to One’s Owned Shares/Votes: Taking a reference from the formula above in section (5.2.1) regarding the number of the shareholder’s owned share/vote, the below formula creates the possible number of members which can be elected by that shareholder.


A = (S-1) x (K+1)


A = Number Of Members Which Can Be Chosen With The Owned Share/Vote
S = Number of Owned Share/Vote
C = Total Number of Share/Vote
K = Total Number of The Members To Be Elected


5.2.3 Principles of Applying the Formulas and Examples: From the outcomes of the calculations made above in section (5.2.1) and (5.2.2); (i) the P2 value in the first formula is the number of share/vote thus any fractions should be disregarded and (ii) the A in the second formula is the number of board members thus any fractions should be disregarded. Additionally, the share/vote number calculated under the above formulas are based on share numbers and do not represent the share’s equivalent in percentage. Therefore, in application of the above formulas, the shareholder’s share/vote number should be taken into account rather than the percentage of his/her shares within the company’s capital.

In applying the above formulas, below is given the minimum requisite number that a shareholder must have to be able to choose the desired number of the board members in a joint-stock company which issues 10,000 shares and votes, each consisting of TL 1. Table-1 depicts a scenario where 7 (seven), whereas Table-2 depicts an example where 11 (eleven) members are to form the board of directors.

Table – 1
Desired Number of Board Members to be Elected Requisite Number of Shares/Votes
1 1251
2 2501
3 3751
4 5001
5 6251
6 7501
7 8751
Table – 2
Desired Number of Board Members to be Elected Requisite Number of Shares/Votes
1 834
2 1667
3 2501
4 3334
5 4167
6 5001
7 5834
8 6667
9 7501
10 8334
11 9167


 6.1 General Rule Regarding the Prohibition on Filling the Vacancy on the Board: The Cumulative Voting System Communique article 5 paragraph 8 states: “The law numbered 6102 states that in case of a vacancy on the board under article 363 or a dismissal from the office under article 364; if the member who did not fulfil the office’s duration has been chosen with the cumulative voting system, other members are dismissed from office collaterally and a new election is made to choose the new board of directors. Nevertheless, this rule does not apply when the membership ends by itself under article 363 paragraph 2, or when the termination’s justification under article 364 is accepted by the court.” According to this regulation, in case of a vacancy on the board under article 363 of the TCC or a dismissal of board member under article 364 of the TCC the vacancy cannot be filled via another cumulative voting system. In other words, a temporary member cannot be appointed by the board or be submitted to the approval in the general assembly.

 6.2 Exceptions to the General Rule: As a rule, if the board has been selected in a cumulative voting system and one of the member’s office ends before it is due, all the other members’ offices are terminated. In scenario, a new general assembly is convened to reconstitute the board and choose the members again. Although this is the main principle, there are certain exceptions. As the Cumulative Voting System Communique article 5 paragraph 8 states, depending on the existence of the conditions and circumstances stated below, the board of directors can appoint a temporary board member to submit it for the general assembly’s approval in case of a vacancy on the board under article 363 of the TCC:

 6.2.1 Non-completion of the Office by a Member Who Has Been Elected by the Majority Shareholders: If the member in question has been elected by the affirmative vote of the majority shareholder, other members of the board continue their offices. In this scenario, the discharged office can be filled through the board’s decision appointing a new member.

 6.2.2 Membership Ending by Itself under Article 363/2: The article 363/2 of the TCC states: “if a board member is declared bankrupt or under interdiction or a lawful condition for the membership loses its qualification envisaged under the articles of association; then such membership can be terminated without any proceeding”. Therefore, in cases of bankruptcy declaration, under interdiction or losing of envisaged qualifications under the articles of association (e.g. a certain duration of professional experience, an affiliation with a specific occupational group, not being sentenced by particular crimes etc.) membership ends by the order of the law. In such resolution of office by the statute, a new member can be appointed by the board’s decision which can invoke the gap-filling method.

 6.2.3 Dismissal from Office of the Board Member by the General Assembly Whose Justification Has Been Found Reasonable by the Courts (Discharge): Article 364/1 of TCC 1 states that: “Even if the members of the board are appointed by the articles of association, they can be dismissed from office when there is no relevant section in the agenda or even if there is, when a rightful justification exists.” Therefore, as a rule, in the straight voting system the general assembly holds the power to always end one’s membership with a rightful justification. When the termination by the general assembly is according to a court’s judgment, other board members continue their membership and a new member can be appointed by the board’s decision which can invoke the gap-filling method.


1. The cumulative voting system is an effective and functional legal mechanism which can enable the optimal representation of the minority shareholders in the privately held joint-stock companies under Turkish corporate law.

2. The cumulative voting system can increase the representation ability of minority shareholders either by themselves or by the aggregation of their vote/capital powers, especially when it is compared with the nomination privilege under article 360 of the TCC. Because, under article 360 the TCC, nomination privilege, shareholders are only granted the right to propose a candidate to the general assembly which does not guarantee that the candidate will be elected. In the end, the right to choose a board member is reserved to the general assembly and the general assembly has the authority to not choose the candidate. Whereas in the cumulative voting system, the shareholder’s nominated candidate is elected so long as there are sufficient mathematical voting right/shares.

3. The cumulative voting system can be regulated in a discretionary manner under the AoA and it can be used as a backup to be invoked when there is a controversy between the shareholders. In this aspect, without any conflict between the shareholders, the cumulative voting system will not be needed; however, if a disagreement occurs, any shareholder can demand the application of the cumulative voting system, creating a high possibility of representation in the board. Therefore, the cumulative voting can be evaluated as a system invoked when there is a conflict, which allows shareholder representation in the board of directors without being dependent on the majority.