Managing a Joint Stock Company in Turkey
Board of directors (BOD) is one of the legal bodies of the joint-stock company (JSC) that has the authority to direct and represent the company. The basic legal arrangements related to the board of directors are explained below.
1 - Single Member Board
According to the former Turkish Commercial Code the number of the members of the BOD should not be less than three. The new Turkish Commercial Code (TCC) lets the formation of the BOD of a joint-stock company with the existence of even one single member which means that board of directors may be constituted solely by one member.
Therefore, from the date of July 1, 2012, the newly established joint stock companies may have a single membered BOD, and on the other hand, by changing the company’s articles of association current joint-stock companies may reduce the number of BOD members to one.
2 - Members of the BOD are not Obliged to be Shareholders
Due to the former Commercial Code, only shareholders had the right to be a member of the BOD. Therefore, a member elected other than shareholders could only earn the title of the board membership after getting the share of the company.
The new TCC dissolved this obligation and gives the opportunity to persons who have no tie with the company to be elected as the members of BOD. The aim of this regulation is to employ professionals in the board and form multi-member BOD at joint-stock companies having less shares.
3 - Legal Entities as BOD Members
Legal entities (companies, foundations, NGOs, etc) were banned to be the member of BOD by the former Commercial Code. So, only the representatives (real persons) of the legal entities could be elected as the member of the board of directors.
Thankfully, the new TCC allows legal entities to be selected as members of the BOD besides real persons. Therefore, from the date of July 1st, 2012 legal entities can be elected as members of BOD.
But, if a legal entity is elected as a member of the board that legal entity will have to determine a real person to join the board of directors’ meetings on behalf of that legal entity and make sure that the concerned real person is registered and announced in conjunction with the legal entity. This real person can only participate and vote in meetings, but, the votes cast as legal entity’s.
4 - Directors and Officers Liability Insurance (D&O)
The new TCC allows joint stock companies to have insurance for the members of the board of directors as a guarantee for the damages and losses they may cause related to their duties.
However, it should be noted that this insurance is not mandatory, it is optional and depends on company's discretion. Therefore, the joint-stock companies may have D&O insurance from the date of July 1, 2012 if they wish.
5 - Article Requiring Authorized Representatives To be Turkish Citizen
As adopted on January 13th, 2011, the new TCC compelled at least one authorized member of the BOD (who has the right to represent the company) to be Turkish Citizen and reside in Turkey. In this regard, if a foreign real or legal person wants to establish a joint-stock company in Turkey, he/it could not be the only member of the BOD, so he/it has to elect at least one Turkish citizen as a member of BOD besides himself/itself.
Turkish Government foresaw that the aforementioned provisions might have a negative effect on foreign investments, so this obligation was repealed by Law No. 6335, dated June 26th, 2012. In this context, foreign real and legal persons can establish a joint stock company in Turkey and may elect themselves or other non-Turkish citizens and residents as members of the BOD, which means that they can direct their company without leaving their country of origin.
6 - Electronic Signature Usage
According to the new TCC, all legal operations of the companies can be performed with secure electronic signatures. The documents which are the basis of these transactions can be drawn up electronically in the same manner.
7 - Online Meetings of The BOD
Due to the technological advances, the new TCC allows meetings of the BOD to be achieved electronically. Correspondingly, all of the board members may participate in the meetings electronically or some may participate in a meeting electronically while others participate physically. But, in order to ensure this, it must be stated in the company's articles of association that the members should participate in the meetings of the BOD electronically.
Participation in the meetings of the BOD electronically will have the same legal consequences of physical participation. This arrangement will provide a great convenience to those joint-stock companies that have foreign capital.