Introduction
This Information Note (the “Note”) aims to assess the legal nature, content, limits of enforceability and benefits of the family constitution, the instrument that governs the relationship between the family and the company in family businesses.
Ninety-five per cent of companies in Turkey are family businesses[1]. By contrast, international sources indicate that around 30 per cent of family businesses survive into the second generation and 10–15 per cent into the third[2]. A study of well-known Turkish family businesses that have broken up found that the leading causes of break-up were intra-family conflict (43 per cent) and inheritance disputes (19 per cent)[3]. The family constitution is an instrument developed to manage this risk before a crisis arises.
A. Legal Nature of the Family Constitution
A family constitution is a document, signed by the members of the family, that sets out in writing the family’s values, the relationship between the family and the company, the roles of family members within the company and the principles governing shareholding. Family constitutions are not a type of contract regulated under Turkish law. They are atypical contracts formed under the principle of freedom of contract in the Turkish Code of Obligations No. 6098 (the “TCO”) and are valid provided that they do not contravene the mandatory provisions of the law, morality, public order or personality rights[4]. In practice, it is preferred that the text of the family constitution be kept confidential and signed by all adult family members.
Not all provisions of a family constitution carry the same legal weight. For instance, provisions on family values, the family’s mission and the functioning of family bodies are predominantly moral and social commitments; their specific performance cannot be claimed through litigation. By contrast, provisions that contain a specific obligation, such as granting the family priority in share transfers, confidentiality, disclosure of conflicts of interest or a penalty clause, give rise to contractual obligations, and their breach triggers liability for damages under Article 112 of the TCO[5].
B. Who Is Bound? The Three-Tier Structure
Under the principle of privity of contract, a family constitution binds only the family members who have signed it. As a rule, it does not bind the company, the company’s organs or third parties who subsequently acquire shares. The Court of Cassation has held that external agreements among shareholders do not bind the company and that the validity of general assembly resolutions is assessed against the articles of association, not against such agreements[6]. The Court of Cassation has further held that the grounds for refusing the transfer of registered shares must be expressly set out in the articles of association; a mere reference in the articles to a shareholders’ agreement is not sufficient, and that agreement cannot be invoked against a transferee who has not signed it[7].
For this reason, the family constitution is preferably designed not as a stand-alone document but as the top tier of a three-tier structure:
- Family constitution: It is preferably designed as an umbrella agreement regulating matters such as family values, family bodies, principles on employment and shareholding, and the dispute resolution procedure.
- Articles of association: To the extent permitted by the Turkish Commercial Code No. 6102 (the “TCC”), it is preferred that, in joint stock companies, share transfers be made subject to the company’s approval and grounds for refusal be set out; that, in limited liability companies, rights of first offer, pre-emption, repurchase and call rights be granted in respect of the capital shares or share transfers be prohibited altogether; and that, in both company types, increased meeting and resolution quorums be stipulated and share groups and privileges be created. Provisions adopted in this way also bind the company and those who subsequently acquire shares.
- Shareholders’ agreement: Provisions such as pre-emption and priority rights, tag-along and drag-along rights and obligations, voting undertakings, deadlock resolution mechanisms, non-compete obligations and penalty clauses may be included.
Succession and inheritance planning, in turn, are completed through instruments outside these documents. Likewise, the reserved portion (forced heirship) rules of the Turkish Civil Code No. 4721 (the “Civil Code”) cannot be overridden by a family constitution. Inheritance planning should therefore be carried out with the reserved portions in mind, and instruments such as a renunciation of inheritance agreement, which is subject to official form requirements, should be considered where necessary. If it is intended that shares and dividends acquired during the marriage should not be subject to the participation claim in the event of divorce, a matrimonial property regime agreement should also be considered.
C. What Does It Govern?
a. Family bodies
Family constitutions generally establish a Family Assembly composed of all adult family members and a smaller Family Council representing the family branches. They set out membership requirements, meeting and decision-making procedures, terms of office and the rule of recusal in the event of a conflict of interest. Family bodies do not replace the company’s organs. The Council cannot appoint company executives, distribute profits or incur debt on behalf of the company. The Council merely conveys the family’s expectations to the company’s organs and expresses its views.
b. Employment relationships
Family constitutions generally provide that working in the company is neither a right nor an obligation of a family member. They typically make entry into the company conditional on a genuine vacancy, education appropriate to the position and a certain period of experience outside the group, and ensure that remuneration and performance evaluation are subject to the same system as for non-family employees. They also regulate the position of spouses and in-laws, candidacy for the board of directors, planned succession and business continuity in the event of a sudden departure.
c. Ownership
The guiding principle of family constitutions is that shares remain within the family. They provide that a member wishing to sell shares first offer them to the family and that the price be determined by independent valuation, and they regulate the payment and closing terms, the fate of the shares in the event of death, divorce and attachment, and the protection of pre-emptive rights in capital increases. For these provisions to be effective against the company and third parties, they must, as explained above, be transposed into the articles of association to the extent permitted by the TCC.
d. Financial principles
Family constitutions regulate the dividend policy, the separation of personal expenses from company expenses, the prohibition on shareholders borrowing from the company, the family solidarity fund and social responsibility expenditure. The aim is to provide shareholders who do not work in the company with a predictable income while preserving the company’s equity structure.
e. Rules of conduct, sanctions and dispute resolution
Confidentiality, protection of the family name and reputation, press and social media rules, disclosure of conflicts of interest, and the procedure for amending and annually reviewing the constitution usually make up its final section. A penalty clause may be stipulated as a sanction for breaches of the family constitution by family members. Disputes are generally handled through a staged process: discussion within the family, a neutral facilitator or mediator, and then arbitration or litigation.
D. Why Is It Beneficial?
It prevents conflict before it arises. Questions such as the transfer of shares, who will work in the company and how profits will be distributed are discussed and settled by rules while relationships are good, rather than after a dispute has broken out[8].
It professionalises the company. When the entry and promotion of family members are tied to objective criteria, an environment of trust is created for non-family executives and employees. This directly affects the company’s value and its access to financing[9].
It plans the generational transition. When the transfer of management and ownership is designed in advance, the risk of the company being split up, left without an owner or sold below its value is reduced[10].
It provides a fair exit. A predictable sale procedure and valuation method are secured for the family member who wishes to leave, while those who stay are assured that control remains within the family. In the absence of such an arrangement, the remaining route is limited to the provisions of the TCC.
E. How Is It Prepared?
Preparation begins by obtaining the views of all family members, whether or not they work in the company. The draft is prepared by a working group drawn from within the family, with the participation of legal and financial advisers. Amendments to the articles of association, the shareholders’ agreement and the inheritance planning documents are drawn up at the same time as the constitution. The text is signed by all family members and reviewed regularly. Depending on the size of the family, the process may take between a few months and a year[11].
F. Conclusion
Family constitutions are documents, signed by the members of the family, that set out in writing the family’s values, the relationship between the family and the company, the roles of family members within the company and the principles governing shareholding. They can resolve intra-family conflicts before they arise, professionalise family businesses, assist with planning the generational transition and, where necessary, establish fair exit options from the family business. Nevertheless, a family constitution should not be regarded as a legal shield on its own: when established together with the articles of association, the shareholders’ agreement and the inheritance planning documents, it can form a comprehensive framework that protects the unity of the family and the continuity of the company. The right time to establish this framework is when the need is not yet felt.
The content of this article does not constitute a legal opinion. Demircioğlu Koçak Bayraktar Attorney Partnership shall under no circumstance be held responsible for the content hereof. It is recommended for the readers to contact our team for detailed information and professional support regarding the content of this article.
[1] Corporate Governance Association of Turkey (TKYD), TKYD’den Aile Şirketlerinin Kurumsallaşması İçin Yol Haritası (TKYD’s Roadmap for the Institutionalisation of Family Businesses), Press Release, 05.11.2021, p.1, available at: https://www.tkyd.org/wp-content/uploads/2022/12/TKYD_Aile-Sirketleri-Yayini_BB_onayli.pdf (accessed 24.10.2026).
[2] Alp/Karabacak, İşletmeler İçin Aile Anayasası – İşletmeleri Geleceğe Taşıyacak Bir Rehber (Family Constitution for Businesses – A Guide to Carrying Businesses into the Future), p.72.
[3] Savaş, Aile Şirketleri İçin Aile Anayasası (Family Constitution for Family Businesses), pp.15 and 17.
[4] Kırca, Aile Şirketleri ve Aile Anayasası (Family Businesses and the Family Constitution), pp.741-751; Alp/Karabacak, İşletmeler İçin Aile Anayasası – İşletmeleri Geleceğe Taşıyacak Bir Rehber, pp.95-96; Ünsal Özden, Aile Şirketlerinde Kurumsallaşma ve Aile Anayasası (Institutionalisation in Family Businesses and the Family Constitution), Erdem & Erdem Newsletter, July 2021, available at: https://www.erdem-erdem.av.tr/bilgi-bankasi/aile-sirketlerinde-kurumsallasma-ve-aile-anayasasi (accessed 24.10.2026).
[5] Bikmaz, The Family Constitution in Turkish Practice: A Gentlemen’s Agreement or an Enforceable Instrument?, GRATA International, 07.09.2026, available at: https://gratanet.com/publications/the-family-constitution-in-turkish-practice-a-gentlemen-s-agreement-or-an-enforceable-instrument (accessed 24.10.2026); Kırca, Aile Şirketleri ve Aile Anayasası, p.745 et seq.
[6] Decision of the 11th Civil Chamber of the Court of Cassation dated 11.10.2016, Case No. 2016/1275, Decision No. 2016/8000 (Lexpera) (accessed 24.10.2026).
[7] Decision of the 11th Civil Chamber of the Court of Cassation dated 03.02.2025, Case No. 2024/1865, Decision No. 2025/478 (Lexpera) (accessed 24.10.2026); for a commentary on the decision, see Özkan, Pay Devri Onayının Reddi: Yargıtay Yaklaşımı (Refusal to Approve Share Transfers: The Approach of the Court of Cassation), Erdem & Erdem Newsletter, 31.12.2025, available at: https://www.erdem-erdem.av.tr/bilgi-bankasi/pay-devri-onayinin-reddi-yargitay-yaklasimi (accessed 24.10.2026).
[8] Alp/Karabacak, İşletmeler İçin Aile Anayasası – İşletmeleri Geleceğe Taşıyacak Bir Rehber, pp.135-136: the constitution should be prepared while business is going well and family unity is strong; times of crisis are when the need is most apparent and preparation is most difficult.
[9] TKYD, Türkiye’de Aile Şirketleri İçin Kurumsal Yönetim: Neden ve Nasıl Uygulanmalı? (Corporate Governance for Family Businesses in Turkey: Why and How Should It Be Implemented?), p.15 and pp.64-68, available at: https://www.tkyd.org/wp-content/uploads/2022/12/TKYD_Turkiyede-Aile-Sirketleri-Icin-Kurumsal-Yonetim_01112021.pdf (accessed 24.10.2026); International Finance Corporation (IFC), IFC Aile Şirketleri Yönetim Rehberi (IFC Family Business Governance Handbook, Turkish edition), pp.21-24, available at: https://www.tkyd.org/wp-content/uploads/2022/12/ifc_aile_sirketleri_yonetim_rehberi_2013.pdf (accessed 24.10.2026).
[10] Alp/Karabacak, İşletmeler İçin Aile Anayasası – İşletmeleri Geleceğe Taşıyacak Bir Rehber, pp.124-127.
[11] Alp/Karabacak, İşletmeler İçin Aile Anayasası – İşletmeleri Geleceğe Taşıyacak Bir Rehber, pp.135-146.