Schrödinger's Constitution: Why Corporate Law Needs to Open the Box

Here is a clause you might find in any company's articles of association:

"A shareholder wishing to transfer its shares must first offer them to the other shareholders pro rata to their capital participation. The offer shall remain open for seven days. If not exercised within this period, the shares may be transferred to a third party on terms no more favorable than those offered to the existing shareholders."

Simple enough. Standard right of first refusal. Registered with the trade registry, published, visible to the world. But here's the question that should trouble every corporate lawyer: Is this clause actually binding on the company and future shareholders, or is it just decorative text?

In 2017, a Turkish shareholder transferred shares subject to exactly this kind of clause. For seven years, nobody knew whether the transfer was valid. Only in September 2024 did the Turkish Court of Cassation finally rule that the clause had "corporative effects", meaning the 2017 transfer had been partially invalid all along.

Welcome to Schrödinger's Constitution.

The Cat in the Corporate Box

The famous thought experiment imagines a cat that is simultaneously alive and dead until someone opens the box. Corporate constitutions work similarly. A clause in the articles of association may appear perfectly valid -registered, published, sitting there for years- yet its true legal "life" remains unknowable until a court finally decides.

This is not an abstract doctrinal puzzle. It is a structural pathology affecting investment decisions across European jurisdictions. When parties cannot predict whether a clause will produce the effects they intend, they either avoid the investment entirely or surround every deal with expensive contractual safeguards. The real problem is not that corporate law limits freedom; it is that we cannot tell where those limits actually lie.

Why Does This Happen?

The uncertainty stems from a 150-year-old debate that refuses to die: What exactly is the articles of association?

The contract theory treats the articles as a multi-party agreement grounded in shareholder autonomy—focus on formation, and founders are simply drafting their deal. The norm theory characterises the articles as objective legal rules deriving authority from corporate personality itself—focus on post-registration effects, and this view seems equally compelling.

Neither pure theory captures reality. The dominant "modified norm theory" in German case law, and Swiss/Turkish doctrine holds that the articles begin as a contract but transform into objective norms upon registration.

Attractive as this narrative sounds, it creates the very problem I am describing. If the articles become "norms," then provisions exceeding permissible boundaries should be invalid. Yet many such clauses survive trade registry scrutiny. They sit in the articles, formally valid, until litigation reveals their true status. Hence the duality: some clauses are real (corporative), producing effects within the corporate organisation; others are merely formal, binding only the original parties as a matter of contract law; still others are simply invalid.

The trouble is, we often cannot tell which is which.

The Cycle That Creates Uncertainty

There is a predictable dynamic at work. Shareholders want to personalise corporate arrangements with control mechanisms, exit rights, governance structures. They quickly hit the mandatory limits of corporate law. Frustrated, they turn to shareholders' agreements, which offer flexibility but cannot bind the company, its organs, or future shareholders. Recognising these weaknesses, practitioners try to return provisions to the articles of association.

But not everything inserted in the articles acquires corporative effect. The cycle repeats, leaving clauses in a doctrinal limbo.

Opening the Box: A Functional Approach

How do we restore legal certainty? Various criteria have been proposed: personal scope (does the clause bind future shareholders?), subject matter (does it regulate corporate organisation?), or whether the matter is explicitly addressed in commercial legislation. Each has limitations.

I propose a two-step functional test in my monograph. First, interpret the clause to determine whether the founders intended corporative effects—did they mean this provision to bind the company and all shareholders, or only themselves? Second, check validity against mandatory corporate law rules. If the clause passes both steps, it should be treated as corporative; if it fails either, the consequences follow accordingly.

This approach neither expands nor narrows the boundaries of private ordering; it merely renders those boundaries more predictable before disputes arise.

Why This Matters Now

The Istanbul Corporate Law Series symposium brought together scholars from multiple jurisdictions, and one theme resonated: uncertainty about private ordering boundaries is a shared legal problem across different jurisdictions. Professor Luca Enriques documented similar challenges for venture capital contracting in Germany and Italy. Professor Eva Micheler showed how English law faces parallel questions about the constitutional nature of company regulations.

The Schrödinger metaphor captures what practitioners have long suspected: we are operating in a system where clauses exist in superposition, simultaneously valid and invalid, until courts collapse the wavefunction. That is no way to run a capital market.

Corporate law scholarship must move beyond the tired contract-versus-norm debate and focus on functional criteria that deliver predictability. Shareholders deserve to know, before they invest, whether the governance arrangements they negotiate will actually work. The box needs opening, preferably by doctrine and legislation, not seven years of litigation.

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Cem Veziroğlu is an Assistant Professor of Commercial Law at Koç University Law School. 

This blog is based on a paper presented at the Koç University – ECGI Conference “Corporate Constitution and Private Ordering”.  Visit the event page to explore more conference-related blogs.

The ECGI does not, consistent with its constitutional purpose, have a view or opinion. If you wish to respond to this article, you can submit a blog article or 'letter to the editor' by clicking here.