Turkey’s Limited Liability Company Board of Director Selection
The governing body of a limited corporation is the board of directors or a director(“Müdür” in Turkish). If the authority to manage is granted to a single individual, that individual is entitled to participate as a director in the company’s management. If more than one director is elected, they comprise the board of directors. The capacity to nominate directors in a limited company is among the inalienable powers of the General Board, under Turkish Commercial Law. (TCC m.616/1-b).
In this blog, the procedure of establishing the management body in limited companies and the selection of directors has been described.
1) Management, Representation, and Limited Company Directors in General
In limited liability firms, the director or Board of Directors is the body of management and representation. The directors are permitted to take and execute decisions on all management-related topics that are not left to the General Board by the legislation or the company’s Articles of Organization. While the General Board is the decision-making body, the Board of Directors serves as the company’s management and executive body.
In TCC, the inalienable powers of the director or the Board of Directors in limited businesses are listed as follows;
- Senior management of the company and issuing orders as needed
- Planning of the General Meeting and execution of the General Board resolutions
- Develop accounting, financial auditing, and financial planning, if required for firm management
- Supervision of the persons to whom a portion of the company’s administration has been delegated to ensure that they comply with the laws, articles of organization, bylaws, and directions
- Determination of the company’s governing body in accordance with the legislation and the company’s charter
6. Prepare company financial statements and, if required, group financial statements and annual report
- Creation of the committee for early identification and risk management
8. Notifying the court about the insolvency of the corporation
2) Selection of Director(s)
Article 623 of the Turkish Commercial Code states, “The company contract governs the management and representation of the corporation.” Management and representation may be delegated under the Articles of Organization to one or more partners holding the title of director, or to all partners or other parties. At least one partner must have the authority to manage and represent the business. If one of the company’s directors is a legal entity, that director selects a natural person to fulfill this obligation on behalf of the legal entity.”
In other words:
- There may be one or several directors in a limited company.
- The director might be chosen from among the partners or from outside the organization. Nonetheless, one of the partners must also hold the position of a corporate director. If a non-partner is to be appointed as director of a limited liability company with one partner, the lone partner must also be nominated as director.
- All partners may hold the directorship position.
- The question of management and representation must be addressed in the company’s governing document.
- The director of the corporation may be either a natural person or a legal entity. If a legal entity has been selected as a director, that legal entity will appoint a natural person to carry out this function.
The company’s Articles of Organization may confer management responsibility from General Board to one or more directors. The Articles of Association and the resolution of the General Board both permit the appointment of directors. Registration of the selected directors in the trade registry is required in both instances.
In the Supreme Court’s review of whether the defendant possesses the title of director, it was concluded that the Turkish Commercial Code limits the appointment of a limited company director to the firm’s Articles of Organization or General Board resolution.
If there is more than one director, the General Board appoints one of them as the chairman of the board of directors, regardless of whether he or she is a partner of the company. If there is only one director, this person is permitted to call and conduct the General Meeting; if there are many directors, the chairman of the Board of Directors is authorized to do so. These individuals are also entitled to give all explanations and announcements unless the General Board passes a resolution to the contrary or the firm contract specifies otherwise (TCC art. 624).
In commercial businesses and legal entities, the body with the title of the actual employer can be a board, or a real person can acquire the title of an organ within the scope of the authority granted to a single person.
Management or directors can be chosen to oversee and represent a limited liability corporation.
It is possible to appoint the director or directors from among the limited liability company’s partners as well as from among non-partners. Whether or not he is a partner, the director is regarded as the body of the limited liability business.
If there are multiple managers, decisions are made by majority vote. In the event of a tie, the chairman’s vote shall be considered superior. Yet, the company’s Articles of Association may incorporate a different law regarding how and why the board will make decisions.
In the previous version of the law, at least one director of a limited liability company was required to reside in Turkey. This clause had a negative impact on foreign investments. (Article 628 of the TCC was repealed on 26 June 2012 by Law No. 6335.) Presently, not even a single director of a limited company is required to reside in Turkey, if there are many directors, none of them is required to reside in Turkey. It is now possible to appoint non-Turkish people for limited liability company business management.
3) Director Registration in the Trade Registry Gazette
In a limited liability company, the trade registration must contain the name and surname or title, identity number, and residence or center of the directors and any authorized representatives. (Trade Registry Regulation article 91) If a legal entity is elected to the company’s management, the name and surname, citizenship, residence, and identity number of the natural entity decided by the legal entity and operating on its behalf must be recorded in the registry alongside the legal entity. Regarding the selection of the director, the documents submitted to the trade registry must include an application petition, a notarized General Board resolution, and, if applicable, a list of attendees.
4) The Impact of Being Selected as a Director on the Relationship between the Company and the Director
In limited companies, the Supreme Court’s decision suggests that the director cannot be considered as an employee because the manager is the body of the company. It has been acknowledged that the relationship between a limited liability corporation and its director is commercial and not governed by labor law.
In commercial businesses and legal entities, the body with the title of the actual employer can be a board, or a real person can acquire the title of an organ within the scope of the authority granted to a single person.
Management or directors can be chosen to oversee and represent a limited liability corporation. It is possible to appoint the director or directors from among the limited liability company’s partners as well as from among non-partners. Whether or not he is a partner, the director is regarded as the body of the limited company. Hence, it is impossible to examine the relationship between the company manager and the company in terms of the employment contract and to consider the company managers to be employees.
Conclusion
In limited liability firms, the director or directors are the body responsible for corporate management. This authority, which provides accountability for numerous issues, is set by the company’s Articles of Association or a resolution of the General Board. As with every General Board resolution, the court can be petitioned to declare the invalidity, nonexistence, or annulment of director appointments based on a General Board resolution. In determining the owner of the tasks, the selection of a manager is equally crucial.
You can contact Bayraktar Attorneys for any legal queries and difficulties with limited business management or simply check out our legal services.
