Rights of minority shareholders in Turkey and two examples...

If you ever examined any research on Corporate Governance practices in Turkey, you will read a lot about Galatasaray Sportif AS. In the report of “The Institute of International Finance Inc.” dated April 2005, the AIG Group’s failed relationship with Galatasaray Sportif AS is given as an example of majority shareholders can shut out minority shareholders under current Turkish Law. The story is that in August 2002, the majority shareholder of Galatasaray Sportif AS effectively prevented AIG from appointing members to the Board of Directors. The case went through the Turkish courts and later through an international arbitration court. The Court sided with AIG; however, Galatasaray Club objected to the verdict. Eventually AIG decided to exit from Galatasaray Sportif AS.

If you are thinking that Corporate Governance practices in Turkey are improving, you should better look at the recent news. QVT Fund, holding 9.5 % of Galatasaaray Sportif AS, applied for the annulment of the General Assembly, as they are deterred from using their right to vote.

There is also an announcement made for the company’s plan to merge Galatasaray Sportif AS with Galatasaray Futbol AS which is totally against their IPO prospectus. This plan will be very costly if realized.

By the way at the end of 2005, Fenerbahce Sportif AS also tried to change company’s articles of association and QVT resisted by asking CMB not to permit for the change. The change was about increasing the ratio of expenses made by company which is 10% of total income. After QVT’s resistance Fenerbahce was retreated.