In doctrine, the right of first refusal may be simply described as an obligation to offer the subject of the right to right owners before selling to third parties.
I. In General
The right of first refusal provides its owner to claim the transfer of the subject of the right by unilateral declaration of intent and it provides its owner a right to transfer the subject of the right which may be (i) determined in the agreement ("contractual") or (ii) entitled to a specific person by legal provisions ("legal"). Accordingly, in this article, both contractual and legal rights of first refusal will be specified and the usage of the right will be examined briefly.
II. THE LEGAL RIGHT OF FIRST REFUSAL
The legal right of first refusal is regulated (i) under the title of joint ownership and annotation to land which in the Turkish Civil Code ("CC") and (ii) under the title of sale of real estate in the Turkish Code of Obligations ("TCO"). The legal right of first refusal can be used in conditions that the existance of joint ownership, the sale of the shares to third party, use of right in its legal term that is stated in code in (3) three months from the notification of the sale and (2) two years in all circumstances, not to withdraw the right and use of right by legal proceedings. The (3) three months period shall initiates by the delivery of the notarized notification of sale to the owner of the right and however, the right shall not be used after (2) two years from the sale.
III. THE CONTRACTUAL RIGHT OF FIRST REFUSAL
The contractual right of first refusal is a contractual restriction that gives its owner the option to enter a business transaction with the owner of something, pursuant to specified terms, before the owner is entitled to enter into that transaction with a third party. Accordingly, the shareholder's right to transfer the shares is not being totally omitted yet the shareholder is obliged to offer the shares first to the existing shareholders. This way the other shareholders will have a privilege as opposed to third parties to purchase the shares. Although the shareholder contemplating to sell the shares is under the obligation to offer the shares first to the holder of the privilege, at this step it may be considered that the offered party shall make a proposal for the sale price. In other words, if the shareholders to sell his shares do not consider the price offer made by the offered shareholder as an acceptable proposal, then he/she shall be free to consider offers by third parties, yet by complying with the contractual obligation of such offers being more favorable on the side of the seller.
CC regulates the contractual right of first refusal that enables to limit the property right of proprietor by legal transactions. TCO regulates the contractual right of first refusal. According to Article 238 of the TCO, the exercise of the contractual right of first refusal shall be binding for a period of maximum (10) ten years, in any event. Unless as the otherwise provided under an agreement, contractual right of first refusal may not be assigned, however; such rights may not be inherited.
The contractual right of first refusal is regulated in Article 240 of the TCO and according to such Article, it may be used for real estate purchase and the transaction that are equal to sale economically. According to Article 242 of the TCO the terms and significant issues regarding the usage of right are stated below. Accordingly, the contractual right of first refusal,
shall be used by the owner of right within (3) three months as of the sale notification of buyer or seller to the owner of the right;
shall be used in (2) two years as of the conclusion of the sales contract in all circumstances;
shall be only valid between the parties of right of refusal agreement, due to its reciprocal characteristic;
may be reserved against future proprietors by annotating the land registry and the validation of such annotation is limited for a period of (10) ten years.
As it is stated below, the terms which is regulated for a period of (3) three months and (2) two years mentioned in the CC, are certain terms for any claim. At the end of those periods the owner of the right may not claim the priority of his/her shares. Those periods shall be applied for contractual right of first refusal pursuant to the CC. However, parties may regulate different periods for the claim of the right and different initiative moment for the beginning of the notification period with the agreement.
In the Turkish Commercial Code ("TCC"), the right of first refusal regarding sale of share is not regulated, however, within the scope of TCO and TCC, the right of first refusal may be entitled to shareholders by articles of association. Pursuant to the articles of association referring to the right of first refusal term, the owner of the contractual right of first refusal may claim his/her right against seller or buyer. If it is stated in articles of association, the shareholder who demands to transfer his/her shares to third party; he/she has to propose to founding partners, board of manager members or other persons who has the right. Because of the right originates from the contract the right owned persons which will be proposed to buy the shares by the seller has to be specified in articles of association as the right owners. As of these provisions of articles of association the seller as a shareholder has to propose the shares that will be sold to the owners of the right of first refusal. The notification may be in various forms however; in condition that any conflict occurs, the notarized form shall be considerable in resolution. After the proposition of the shares, the owners of the right may claim to use his/her right of first refusal in a period that is stated in articles of association.
The shareholders may transfer their shares independently whether they are documented or not. The independently transfer of rights assumed as proportional acquired rights. Depending on this, the transfer of shares may be limited by consent of shareholders. The transfer of shares may be limited by shareholders in articles of association and as a seller the shareholder has to obey those limitations. On the contrary, the sale of shares shall not be binding for the company. Unless the limitation provision is regulated in the articles of association, the right of first refusal may not be used by the shareholders because of the shareholders of a joint stock company does not have a right which arisen from the code.
IV. CONCLUSION
As mentioned above, the terms that have been regulated by laws are certain periods to claim the rights. Depending on those periods, the contractual right of first refusal rights has to be used by the owner of the right in (3) three months as of the sale notification of buyer or seller to the owner of the right; however, it has to be used in 2 (two) years as of the conclusion of the sales contract. However; the parties may determine different terms and also agree on the different moment for the beginning of the notification period. Unless the parties do not have any regulation regarding the periods, the terms that are stated by law shall be valid automatically.