Consequences of cross shareholding in group companies and its effects on shareholders' rights

In legal systems, cross shareholding is not prohibited, however it is subjected to disincentives due to watered capital and similar risks. Fundamental regulations regarding cross shareholding are regulated in Article 197 and 201 of Turkish Commercial Code No. 6102 ("TCC"). Capital stock companies, holding at least one quarter of each other's shares, are accepted as a cross shareholding according to TCC Article 197. In doctrine, there is a division between basic cross shareholding and qualified cross shareholding. If there is a dominance in line with article 195 of TCC between the capital stock companies in cross shareholding, it is defined as a qualified cross shareholding. If there is not a dominance in line with article 195 of TCC between the capital stock companies in cross shareholding, it is defined as a basic cross shareholding. A capital stock company that consciously creates a cross shareholding will be subjected to a suspension. Application of freezing on shareholding rights and exceptional cases will be examined in this study.