October 27, 2015

Political extortion disguised as a trustee

Turhan Bozkurt

Upon the application of the Ankara Public Prosecutor's Office, the criminal judge of the peace -- a single-judge tribunal referenced by President Recep Tayyip Erdoğan as a “project” court -- issued a scandalous decision.

The judge's decision to appoint a trustee to take over the management of Koza İpek Holding, which owns media outlets that are critical of the government, is not nothing but an act of political extortion. This extortion, mediated by the judge, indicates that the campaign to silence dissident businessmen and journalists has entered a new stage. Freedom of the press, property rights, freedom of working and contract, which are guaranteed under the Constitution, have been tossed out with instructions from the interim Justice and Development Party (AKP) government and the palace. The public and organizations -- in particular, the Turkish Union of Chambers and Commodities Exchanges (TOBB), the Turkish Industrialists and Businessmen's Association (TÜSİAD), the Turkish Journalists' Association (TGC), the Press Council, the Turkish Journalists' Union (TGS) and the Turkish Bar Association (TBB) -- must come together as one to raise their voice against this politically motivated extortion, which is being justified with the dubious concept of “reasonable suspicion.” Otherwise, the judicial mechanism that has been hijacked by a handful of pro-government prosecutors and judges will be further motivated to beat other government-critical holdings with a stick disguised as a trustee. It wouldn't be a surprise if Doğan Holding and Koç Holding were to be faced with similar trustee scandals after Koza İpek Holding. Today, we must come together in front of Koza İpek Holding and state a unified 'no' to this attempt that is certain to devastate the economy.

Any fair person would acknowledge that Koza İpek Holding, a company paying record high taxes and providing employment opportunities for more than 5,000 people, was targeted because its media group expresses the truth that disturbs the ruling party. If Koza İpek Holding CEO Akın İpek had chosen to support the government by joining the pro-government media, no trustee would have been appointed to his company and he would not have faced slanders. If İpek has committed any crime in the government's eyes it is the defence of the public's right to information.

Moreover, for months, pro-government spin doctors have been presciently writing about how a trustee will be appointed to Koza İpek Holding. The fact that a decision masterminded by the palace was registered at the courthouse on the evening of Oct. 26 does not eliminate the government's disregard for the rule of law. Apparently, having found no criminal evidence during the raids conducted by police officers carrying Kalashnikov rifles, the prosecutor's office rushed to go with the trustee scandal in an effort to ward off political pressure. This controversial decision was taken just five days before the snap election slated for Nov. 1. This is proof that voters will cast their votes on Sunday in an atmosphere of a blackout where the free media are all but silenced. Article 30 of the Constitution reads: "Neither a printing house and its annexes duly established as a press enterprise under law nor press equipment shall be seized, confiscated, or barred from operation on the grounds of having been used in a crime." In this regard, the appointment of a trustee to take over the management of Koza Media Group is a violation of the Constitution.

No justification for a trustee

To appoint a trustee to a joint stock company is an exceptional remedy. Legal organs of joint stock companies are general assemblies, boards of directors and auditors. This exceptional move may be necessary when the company does not have any functioning organ, referenced above. A trustee is a temporary remedy for preventing the company's bankruptcy.

Article 530 of the Turkish Commercial Code is titled "Decreasing number of shareholders or lack of organs." It reads:
"If, after the registration of the company, the number of real shareholders decreases to less than five or if one of the organs which are required under laws does not exist or if the general assembly fails to convene, the court, upon request from one of the shareholders or company's creditors or from the Ministry of Commerce, shall give time to the company to correct these irregularities, failing which the court shall decide to dissolve the company."

(1) if one of the legally required organs does not exist, or
(2) if the general assembly fails to convene,
the trustee phase may begin.

But to this end, one of the shareholders (a privileged shareholder) or one of the company's creditors or the Ministry of Customs and Commerce must apply to the court. This procedure hasn't been taken into account. Upon the application, the court gives time to the company for it to correct the irregularities. After the end of this period, the court will reassess the situation. It will let the company exist if the company now complies with laws or dissolve it if it is still in breach of laws.

(a) The general assembly's failing to convene,
(b) the general assembly's failing to elect the board of directors or auditors,
(c) the failure to appoint new directors or auditors to vacancies and failure to reach a quorum to this end,
(d) the failure to make any organ function continuously due to the lack of quorum.

No other deficiency that would justify the assignment of a trustee apply in the Koza İpek Holding case. Moreover, even if there had been any irregularity, the court would have to give time for its rectification.

If the board of directors convenes regularly, the failure to reach a quorum in a meeting or some directors' dissent over a decision cannot be considered as a lack of an organ. Disagreement among shareholders or disputes stemming from diverse affairs will not justify the appointment of a trustee.

If the company fails to rectify the irregularities within the given time, a civil court of peace can decide to appoint a trustee by specifying his duties, powers, authorities and remuneration in detail. A trustee is not permitted to manage or represent the company continuously by replacing the missing organ. That is, a trustee is appointed only temporarily.

Businessmen cannot remain silent

The use of this exceptional remedy for Koza İpek Holding upon request from prosecutors citing “reasonable suspicion” means that even the Constitution cannot now protect firms in Turkey, can it? This is an attempt to forcefully capture all domestic or foreign capital. The European Union and the European Parliament must intervene immediately. The companies from EU member countries may face similar unlawful acts in Turkey. This decision is diametrically opposite to the political and economic criteria set by the EU. The prosecutor has no evidence, but moves to take such a decision with colossal consequences, merely citing some allegation about an imaginary terrorist organization.

Businessmen, civil society organizations (CSOs), the media and legal professionals must not let this happen. If we don't raise our collective voice against this politically motivated extortion disguised as the assignment of a trustee, all dissident or critical holdings and companies will be usurped.

Published on Today's Zaman, 27 October 2015, Tuesday