1) In General
Board of Directors (“the BoD”) of Joint Stock Companies is the body which manages and represents the company in the structure of joint stock company. In this regard, the BoD is liable to determine the company organization, to appoint the authorized individuals that manages and represents the company and to supervise them. In addition to these, the BoD is liable to keep the corporate books and provide the company to duly keep the records and minutes of meetings. The BoD is also vested with the duties and authorities such as to convene the General Assembly (“the GA”), to determine and announce the agenda of the GA, to execute GA resolutions, to determine, submit and audit yearly balance sheet and profit loss account in line with the provisions of Laws. Besides all these, BoD members have several obligations and liabilities in line with the Turkish Commercial Code (“the TCC”) and the major ones are as follows.
2) Prohibition on Entering a Transaction with the Company
Article 334 of the TCC designates a prohibition for BoD members to enter into a transaction with the company within its fields of activity on behalf of themselves or a third party. The TCC purposes to prevent a BoD member from entering a transaction with the company on behalf of themselves or a third party, prevent misconduct and protect the rights of the company. This prohibition may be removed by the consent of the GA or a provision designated in the articles of association solely.
An executed transaction is deemed to be invalid as for sanction purposes. According to the Article 336/5 of the TCC, BoD members are jointly and severally liable for such transactions of one BoD member.
3) Non- Competition with the Company
As Article 335 of the TCC prohibits a BoD member from entering a transaction with the company on behalf of themselves or a third party without the consent of the GA regarding the matters related to the partnership, it also prohibits being an unlimited liability partner of a company that shares the same field of activity of the company. However, such transactions may enabled by a special provision designated at the articles of association of the company.
Actions against prohibition on non-competition regarding Article 335 of the TCC designates options. In this regard, the company may request the following from the BoD member that acts contrary to the prohibition;
- to compensate the loss of the company related to the act against the prohibition or
- to transfer the benefits to the company in case an agreement is concluded in favor of a third party or
- to deem the transaction executed on behalf of the company or
- to transfer the benefits to the company, quit partnership and return the benefits to the company in the event that a BoD member has attended to another partnership as an unlimited partner.
4) Prohibition to Attend to Meetings
Article 332 of the TCC prohibits the BoD members to attend to meetings where their own interest or their relatives’ (such relatives are determined in the Article 349 of the TCC) interest are discussed. The related member shall not attend to the mentioned resolutions and sign them. The member is liable to compensate the damage in the event that he has not informed the company and the company has suffered a loss accordingly.
5) Obligation to Confer Company Shares
In accordance with the Article 313 of the TCCC, each member of BoD is liable to confer his shares that represent 1% of company capital at least to the company as an assurance of his duty. In principle it is mandatory that the shares are of the BoD member in question however the BoD may permit for such shares to be conferred by a third party. Such shares are held within the company until he is removed of his duties by the GA and they cannot be returned or transferred to a third party.