The governing body of a limited company is the board of directors or director. If the right to manage is given to a single person, this person is authorized in the management of the company as a director. If more than one director is elected, they form the board of directors. According to the Turkish Commercial Code, the authority to appoint directors in a limited company is among the inalienable powers of the General Board. (TCC m.616/1-b).
In this bulletin, the process of establishing the management body in limited companies and the selection of directors has been discussed.
İçindekiler
1) Management, Representation and Directors of Limited Companies in General
The body of management and representation in limited companies is the director or the Board of Directors. The directors are authorized to take and execute decisions on all management-related matters that are not left to the General Board by the law or the company’s Articles of Association. While the General Board is the decision-making body, the director/ Board of Directors is the management and executive body of the company.
In the law, the inalienable powers of the director or the Board of Directors in limited companies are listed as follows;
- Senior management of the company and giving necessary instructions.
- Preparation of the General Meeting and execution of the General Board resolutions.
- Establishment of accounting, financial auditing and financial planning, if necessary for the management of the company.
- Supervision of the persons to whom some parts of the management of the company have been transferred, whether they act in accordance with the laws, articles of association, bylaws and instructions.
- Determination of the company management body within the framework of the law and company agreement.
- Preparation of company financial statements, annual report and, if necessary, group financial statements and annual report.
- Establishment of the committee for early detection and management of risks, excluding small limited companies.
- Notifying the court of the company’s insolvency.
2) Selection of Director or Directors
Pursuant to Article 623 of the Turkish Commercial Code, “The management and representation of the company is regulated by the company contract. By the Company’s Articles of Association, the management and representation may be given to one or more partners holding the title of director, or to all partners or third parties. At least one partner must have the right to manage the company and the right to represent it. If one of the directors of the company is a legal person, this person appoints a natural person who will fulfil this duty on behalf of the legal person.”
It is possible to draw the following conclusions from the text of the article;
- There may be one or more directors in a limited company.
- The Selection of the director can be made among the partners or from outside the company. However, one of the partners must also have the title of director in the company. If the limited company has one partner, if a non-partner is to be appointed as the director of the company, the sole partner must also be appointed as the director.
- All partners may have the title of director.
- The issue of management and representation should be regulated in the company’s agreement.
- The director of the company can be a natural entity, as well as a legal entity. If a legal entity has been selected as a director, the legal entity will designate a natural person to perform this task.
Management authority may be given to the director or directors by the company’s Articles of Association. It is possible to select a director by the Articles of Association, as well as by the General Board resolution. In both cases, the registration of the selected directors in the trade registry is also required.
In the evaluation of whether the defendant has the title of manager in the Supreme Court decision, it has been stated that the Turkish Commercial Code rules the appointment of a limited company manager only with the Articles of Association or the company’s General Board resolution.[1]
If there is more than one director of the company, one of them is appointed as the chairman of the board of directors by the General Board, regardless of whether he/she is a partner of the company or not. If there is only one director in the company, this person; if there is more than one manager, the chairman of the Board of Directors is authorized to call and conduct the General Meeting. These persons are also authorized to make all explanations and announcements unless the General Board takes a resolution in a different direction or there is no different regulation in the company contract. (TCC art. 624).
“The body that has the title of the concrete employer in commercial companies and legal entities can be a board, or it is possible for a real person to gain the title of an organ within the framework of the authority given to a single person.
In limited companies, a manager or directors can be appointed to manage and represent the company.
It is possible to select the director or directors from among the partners of the limited company, as well as from among third parties who are not partners. Regardless of whether he is a partner or not, the director is considered the body of the limited company.”[2]
If there is more than one manager, they make decisions by majority. In case of equality, the vote of the president will be considered superior. However, by the Articles of Association of the company, a different regulation may be introduced on how and for what purposes the directors will make decisions.
In the previous case of the law, there was a provision stating that at least one of the directors of a limited company must reside in Turkey. However, this provision has been abolished, especially considering that foreign investments may be adversely affected. (Article 628 of the TCC was repealed by Law No. 6335 dated 26/06/2012.). Currently, if a limited company director is a single person, it is not required to have a residence in Turkey, and if there is more than one director, at least one of them does not need to reside in Turkey. It has been made possible to select all limited company managers from foreigners who are not resident in Turkey.
3) Registration of Directors in the Trade Register
In a limited company, the name and surname or title, identity number and residence or centre of the directors and other persons authorized to represent the company must be registered in the trade registry. (TRR art.91). If a legal entity is elected to the company management, the name and surname, citizenship, residence and identity number of the natural entity determined by the legal entity and acting on behalf of the legal entity must be registered in the registry together with the legal entity. An application petition, a notarized General Board resolution and a list of attendants, if any, should be attached to the documents to be given to the trade registry regarding the selection of the director.
4) The Effect of Being Chosen as a Director on the Relationship Between the Company and the Director
In limited companies, the Supreme Court’s decision indicates that the person holding the title of director cannot be accepted as a worker since the manager is a body. It has been accepted that the relationship of the limited company with the director is of a commercial nature, not of a labour law;
“The body that has the title of the concrete employer in commercial companies and legal entities can be a board, or it is possible for a real person to gain the title of an organ within the framework of the authority given to a single person.
In limited companies, a manager or directors can be appointed to manage and represent the company. It is possible to select the director or directors from among the partners of the limited company, as well as from among third parties who are not partners. Regardless of whether he is a partner or not, the director is considered the body of the limited company Therefore, it is not possible to evaluate the relationship between the company manager and the company within the scope of the employment contract and to consider the company managers as workers.
In terms of the period when the plaintiff is the company director, the relationship between the parties is based on the Commercial Code. For the aforementioned reason, while the period when the plaintiff worked as a company director should have been excluded, it was wrong for the Court to accept that the entire working period, without any discrimination, was subject to the Labor Law No. 4857.”[3]
Conclusion
In limited companies, the director or directors are the body that undertakes the management of the company. This authority, which creates responsibility for many issues, is determined by the Articles of Association of the company or by the General Board resolution. As with every General Board resolution, the nullity, non-existence and annulment of director selections based on a General Board resolution can be claimed from the court. Duly choice of a manager is also important in determining the owner of the responsibilities.
You can contact our team for your legal questions and problems about limited company management.
Best Regards.
Solmaz Law and Consultancy Team.
References
ALTAŞ, Soner, (2016), Türk Ticaret Kanunu’na Göre Limited Şirketler, Seçkin Yayıncılık, p.135-139.
11th Civil Chamber of the Supreme Court, E.2012/9915, K.2014/1889, 04.02.2014 T.
22nd Civil Chamber of the Supreme Court, E. 2017/15836, K. 2018/28021.
22nd Civil Chamber of the Supreme Court, E.2016/24028, K.2017/14012.
Turkish Code of Commerce
Trade Registry Regulation.
[1] 11th Civil Chamber of the Supreme Court, E.2012/9915, K.2014/1889, 04.02.2014 T.
[2] 22nd Civil Chamber of the Supreme Court, E. 2017/15836, K. 2018/28021.
[3]22nd Civil Chamber of the Supreme Court, E.2016/24028, K.2017/14012.
