In family businesses, the process of leaving a partnership is one of the least discussed issues, yet one of the most likely to lead to legal disputes. When a company is founded, everyone talks about “how we will grow”; talking about “how we will part ways” is treated almost as a sign of bad faith. That perception creates the greatest risk.
In a significant number of family businesses in Türkiye, a shareholders’ agreement either does not exist or consists of only a few pages showing ownership percentages. When someone wants to leave, dies, or becomes unable to work, the company is left in the middle of uncertainty. That uncertainty often ends up in court — and the court proceedings may last longer than the company itself.
The Reality
The vast majority of partnership disputes in Turkish family businesses arise from two questions: “What is my share worth?” and “Who will buy it?” If the answers to these two questions had been written down from the start, most of these lawsuits would never have been filed.
I. Share Valuation — Who, How, and When?
The value of a partner’s shares is something the parties are unlikely to agree on once a dispute has begun. The person selling will always assign a high value; the person buying, a low one. For this reason, the valuation method must be determined impartially before any disagreement arises.
Four Main Valuation Methods — When Should Each Be Used?
|
Method |
How it works |
What to consider |
|
1. Book Value |
Uses the equity value shown on the balance sheet. |
It is the easiest method to calculate, but the furthest from economic reality. It does not reflect the company’s customer base, brand, or people. It can only serve as an initial reference for small, early-stage companies. |
|
2. EBITDA Multiple |
Applies an industry multiple to earnings before interest, taxes, depreciation, and amortization. |
It is the most commonly used method for family businesses in Türkiye. Agreeing on the multiple in advance is critical — once a dispute arises, each side will propose a different one. |
|
3. Discounted Cash Flow (DCF) |
Discounts future cash flows to their present value. |
It is the most academic method. It is highly sensitive to assumptions — different growth and discount rates can double or halve the valuation. An independent expert is essential. |
|
4. Independent Valuation |
If the parties cannot agree, an independent valuation firm accepted by both sides is appointed. |
Unless this mechanism is included in the agreement from the start, the question of “whose expert should we use?” can become a tool for delay. |
II. Exit Mechanisms — Three Essential Tools
|
Mechanism |
How it works |
Effect |
|
Right of First Refusal |
When a partner wants to sell their shares to an outside party, the other partners have the first right to buy them at the same price. |
It is the most basic protection mechanism. Without it, an outsider may become a shareholder. |
|
Drag-Along Right |
When a majority shareholder wants to sell the company, they can require the minority shareholder to sell on the same terms. |
It makes a company sale easier. It is a risk for the minority shareholder and a source of power for the majority shareholder. |
|
Tag-Along Right |
When a majority shareholder sells their shares, the minority shareholder can also sell theirs at the same price and on the same terms. |
It protects the minority shareholder — when the major shareholder secures a good price, they cannot leave the smaller shareholder behind. |
III. The Most Common Exit Scenarios in Türkiye
|
Scenario |
Risk |
Preventive measure |
|
A partner dies |
The shares pass to the legal heirs. The heirs may know nothing about the company, disagree among themselves, or have no wish to become active shareholders. |
The share transfer procedure and pricing formula in the event of death should be defined in the agreement. A buy-sell mechanism funded by life insurance can be established. |
|
A partner wants to leave |
The parties cannot agree on the share value. The departing partner wants to sell to an outsider. The other partners cannot or do not want to pay. |
The valuation method and payment schedule should be agreed in advance. An option for a gradual buyout (payment in installments) can be added to the agreement. |
|
Divorce / inheritance |
A partner’s spouse or children may acquire shares through divorce or inheritance. People who have never been involved in the company become shareholders. |
Share transfer restrictions and family property arrangements should be made from the outset. Marital agreements may reduce this risk. |
|
A partner needs to be removed |
A partner is harming the company, failing to fulfill their duties, or the relationship of trust has completely broken down. But the agreement contains no removal clause. |
A right to remove a partner under specified conditions (performance breaches, violations of a non-compete obligation, criminal conviction), together with the applicable pricing formula, can be added to the agreement. |
The Golden Rule
Designing a partnership exit mechanism does not mean distrusting the company or a partner. On the contrary, it protects both the company and the partnership. Wearing a seat belt does not mean believing that an accident will happen — it means minimizing the cost if one does. The same logic applies here: an exit plan shows the maturity of the decision to enter the partnership.
Exit Planning Checklist
- Is the valuation method defined in the agreement? Will it use an EBITDA multiple, book value, or independent valuation? The method and multiple should be agreed in advance.
- Is there a right of first refusal? Before a partner sells their shares to an outsider, can the other partners buy them on the same terms?
- What happens to the shares in the event of death or incapacity? Will they pass to the legal heirs? Will the other partners buy them? How will the price be determined?
- Has the divorce scenario been addressed? What will happen if a spouse claims an interest in the shares? Are there marital property arrangements?
- Has the payment schedule been set? Will payment be made in full upon exit or in installments? Are the number of installments and the interest rate defined?
- Are drag-along and tag-along rights in the agreement? Have the rights of minority and majority shareholders been balanced in a company sale?
- Have the conditions for compulsory removal been defined? Which actions give rise to a right to remove a partner? Are those conditions written down and legally valid?
Key Takeaway
Exit planning shows the quality of a partnership, not merely where it ends. Both sides benefit from knowing that a fair exit mechanism exists: the feeling that “I can leave at a fair value whenever I choose” makes staying much more meaningful. In partnerships without that assurance, everyone quietly starts looking for a way out — and that search begins to erode the company from within.
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