A. JOINT-STOCK COMPANIES

I. REGARDING THE TRANSFER OF THE MANAGEMENT AND AUTHORITY TO REPRESENT AND BIND

The joint stock companies are managed and represented by the board of directors in accordance with the Article 365 of the Turkish Commercial Code numbered 6102 (“TCC”). However, the board of directors does not have to exercise its management right and authority to represent and bind personally. Pursuant to the Article 367 of the TCC, provided that there is a provision in the articles of association, the board of directors can be authorized to delegate management partially or fully to one or more board members or to a third party in accordance with an internal directive to be issued. In this context, as long as there is no transfer of the authority by the board of directors, the right of management the company shall belong to all members of the board of directors.[1]

Executive member defined as the member to whom the duties and authorities of the board of directors are granted. However, delegation of duties and authorities by the board of directors to the executive members or third parties with the internal directive issued; shall not have the meaning that the non-delegable duties and authorities of the board of directors are able to be granted. In other words, the duties and authorities may be delegated to the exclusive director/member and / or another third party other than the duties and authorities that the board of directors have to exercise exclusively.

However; within the scope of the authorization of the board of directors to delegate rights of management and representation in accordance with the articles of association, at least one member of the board of directors must have the right to represent and bind, in case that this authority is granted to natural or legal persons other than the members of the board of directors.[2]

In summary, it should be noted that; in the joint stock companies, the delegation of management and representation authority of the board of directors has been made possible, provided that the delegation of management and representation authority is clearly stipulated in the articles of association as a prerequisite. In this regard, to stipulate a provision in the articles of association regarding the management and representation of the company, would be initiated without the need for an amendment on the articles of association when the delegation of management and representation authority is carried out as a requirement of the corporate governance, the drawing up processes of internal directive.

The management chart of the company, management of company in terms of technical, commercial and legal perspective and the managerial members to whom managerial authority is delegated, are specified and regulated with the internal directive to be issued by the board of directors. It also defines the duties required for management, indicates their positions, and particularly specifies who is subordinated to whom and who is obliged to provide information. In this context, it may be possible to issue a separate authority for each authority group by issuing authority groups.

II. LIABILITY

Pursuant to TCC 553/II, the bodies or persons who have delegated an authority arising from the law or the articles of association to someone else, shall not be responsible for the actions and decisions of these persons, except for the fact that they do not take reasonable care in the selection of the persons to whom these duties and authorities have been delegated. In this context, other members of the board of directors shall not be responsible for the acts and decisions of the managing director and / or third parties to whom delegation of management and representation has been delegated, provided that they do not breach the surveillance obligation.

However, it is important to note that even if the delegation of authority is made under the articles of association, the responsibilities of the members of the board of directors will continue in terms of their non-delegable duties and authorities as well as the duties and authorities that they have to exercise exclusively; and thus it would be unimportant whether the surveillance obligation is breached or not.

III. REGISTRATION AND ANNOUNCEMENT

In joint stock companies, for which delegation of limited authority regarding the management and representation of the company is stipulated in the articles of association; an internal directive to be issued in written form can be registered and announced by following the procedures and principles stated below.

• An internal directive issued written with a date and number for the delegation of the authority of the board of directors has to be prepared by the board of directors and has to be approved by the decision of the board of directors.
• The decision of the board of directors regarding the persons to be delegated with the limited authorities determined by this internal directive shall be taken.
• The registration and announcement procedures shall be completed by finalizing the notarized copies of the decisions mentioned above.
• Following the completion of registration and announcement procedures, the signature circular has to be issued and notarized in parallel with the resolution on representation and binding.

Following the finalizing of the above procedures, in case of any amendments and/or additions to be made in the internal directive; a new internal directive should be prepared with another date and number and the above procedure should be followed up.

B. LIMITED LIABILITY COMPANIES

I. IN GENERAL TERMS

Pursuant to Article 629 of the TCC, it is stipulated that the relevant provisions of the TCC regarding joint stock companies shall be applied by analogy to the scope of manager’s authority to represent, the restriction on authority, determination of the signatories, the form of signature, registration and announcement of all mentioned.

As the implementation is envisaged by analogy within the scope of the TCC, board of managers shall be responsible for issuing the internal directive in limited liability companies. As same in joint stock companies, the prerequisite for preparing an internal directive is to have been stipulated a provision in this direction in the articles of association.

Likewise, the explanations and procedures regarding the joint stock companies stated above would apply to the limited liability companies by analogy. However, the point to be considered here; is that in limited companies of which the management and representation is determined by its articles of associations, management and representation may be left to one or more shareholders as manager, as well as to third parties, but unlike joint stock companies, it is essential that one of the shareholders of the company has the authority to represent, not one of the board members.

C. CONCLUSION

In this Memorandum, the requirement of corporate governance and the legal structure of the delegation of management, representation and binding authority of the board of directors, which significantly reduces the workload of the board of directors, have been analysed and in this context, the responsibilities of the limited authorities, the matters that the board of directors / board of directors may delegate, and the registration and announcement procedure of the internal directive have been examined.

Nevertheless, transfer of limited the authority shall be valid for all issues other than the issues that have to be performed exclusively by the board of directors / board of managers and non-delegable duties and authorities. Moreover, proof of reasonable care in the selection and appointment of a limited delegate shall remove responsibilities of the board of directors in terms of the act and behaviour of the limited delegate. It would be expressed that the necessity of registration and announcement of the resolution of board of directors/managers regarding to which the internal directive is drawn up, approved and attached; and the resolution regarding to which limited authorizers are delegated; and in this regard drawing up a signature circular; as the steps regarding the procedures and principles of the delegation of managerial and representational authority in joint stock and limited companies.

This Memorandum has been prepared for the purposes of information and benefit to you. This Memorandum has been assessed based on the legal regulations of the Republic of Turkey and has not contained any exact validity. You can contact us at any time from the contact information in our website for further information.

[1] Article 367 – (1) In accordance with an internal directive to be issued by the board of directors based on a provision to be inserted into the articles of association, the board of directors can be authorized to delegate partially or fully management to one or more board members or to a third party. This regulation shall organize the management of the company; it shall define the duties required for management, indicate their positions, and particularly specify who is subordinated to whom and who is obliged to provide information. The board of directors shall, upon request, inform in writing the shareholders and the creditors who can make a persuasive case that their interests are worthy of protection.

(2) In the event management is not delegated, the company shall be managed by all board members.

[2] Article 370 – (2) The board of directors can delegate authority to represent to one or more executive directors or to third parties, but at least one board member must have representational authority.