Corporate Governance and Directors' Duties in Turkey 2024 - Part 1



1. What are the main forms of corporate entity used?

The main forms of corporate entity used in Turkey are the:

• Limited liability company (LLC).

• Joint-stock company (JSC).

The LLC and the JSC are the preferred company forms in Turkey for both foreign national and Turkish entrepreneurs.

The minimum capital requirement were recently increased and from 1 January 2024, the minimum capital amount for:

• An LLC is TRY50,000.

• A JSC is TRY250,000.

• A non-public joint stock company that adopted the registered capital system is TRY500,000.

(Presidential Decree No. 7887 of 2023 (published in the Official Gazette dated 25 November 2023).

These new amounts are valid for new companies established as of 1 January 2024.

LLCs and JSCs whose capitals are currently below the new minimum capital amounts, are now obliged to adjust their capitals

in line with the new minimum capital amounts before 31 December 2026 (Law 7511 Amending the Turkish Commercial Code

and Certain other Laws (published in the Official Gazette dated 29 May 2024, No. 32560) (Amendment Law)).

Otherwise, companies that have not adjusted their capitals as of the aforementioned date shall be deemed to have dissolved.

The answers in this Q&A relate to JSCs unless otherwise indicated.

Legal Framework

2. What is the main corporate governance legislation? What are the authorities that enforce it?

The main corporate legislation includes the:

• The Turkish Commercial Code (CC).

• Communiqué on Commercial Books of 19 December 2021 (28502).

• Regulation on the Procedures and Principles of GaMs of Joint Stock Companies and the Representatives of the

Ministry Attending Such Meetings of 28 November 2012 (28481).

• Decision on the Determination of Companies Subject to Independent Audit of 26 March 2018 (2018/11597).

• Capital Markets Law of 6 December 2012 (6362) (Capital Markets Law).

• Capital Markets Communiqués, including the Corporate Governance Communiqué of 3 January 2014 (CG

Communiqué) (see Question 4).

The Ministry of Trade is the main authority for the enforcement of the CC and its secondary legislation. Disputes arising from CC are mainly resolved before the commercial courts.

The Capital Markets Law and Capital Markets Communiqués are enforced by the Capital Markets Board. The Capital Markets

Board is the regulatory and supervisory authority in charge of the securities markets in Turkey. It can impose administrative sanctions on companies or individuals for non-compliance.

The Turkish Industry and Business Association (Türk Sanayicileri ve ## #nsanlar# Derne#i) (TUSIAD), which is an independent, voluntary non-governmental organisation, has an important role in the formation and development of corporate governance principles. TUSIAD issued the first Corporate Governance Best Practice Code in Turkey in 2002.

3. Has your jurisdiction adopted a corporate governance code?

The CC regulates the main principles of corporate governance for both public and non-public companies, including establishment, board composition, audit, sanctions and so on.

Various sanctions are provided for by the CC for non-compliance with its provisions. The sanctions include both judicial fines and prison terms.

Amendments are made to the CC from time to time reflecting the needs of companies in the changing business environment, however there are currently no plans to materially reform the CC in the near future.

The CG Communiqué regulates in detail corporate governance principles applicable to public companies. Under the CG Communiqué, public companies with shares traded on the stock exchange are subject to its mandatory Corporate Governance Principles (CG Principles).

The CG Communiqué has three categories of implementation, depending on the average market value of the company and its shares. Category 1 companies must comply with all mandatory corporate governance rules while there are some exemptions for companies that fall into Category 2 and Category 3.

The main topics covered under the CG Principles are:

• Shareholders.

• Other stakeholders.

• Public disclosure.

• BoD.

Public companies must state whether they comply with corporate governance principles in their annual reports.

If public companies do not comply with the CG Communiqué, the Capital Markets Board can take enforcement action such as filing a lawsuit or seeking an interim injunction to determine and cancel unlawful transactions that are contrary to the principles.

4. What is the management/board structure of a private company?


The board structure for both JSCs and LLCs is one-tier.


The management body of a JSC is a BoD containing at least one director. An LLC is managed by a board of managers consisting of at least one manager.

Board Members

Natural persons and legal entities can be board members in both JSCs and LLCs. If a legal entity becomes a board member, a natural person representative to represent that legal entity must also be elected who can attend the board meetings and vote on behalf of the legal entity. For a JSC, the board members do not have to be the shareholders. However, in an LLC, at least one of the shareholders must be appointed as a manager to the company.

Employees' Representation

Employees do not have a right to be represented in the board.

Number of Directors or Members

The board must be composed of one or more members under the CC. The number must not be less than five for companies subject to the Corporate Governance Principles (CG Principles, 4.3.1).

5. Are there any general restrictions or requirements on the identity of directors?

General Restrictions

Board members must have full capacity with power of discernment.


Board members must be older than 18 years.


There are no nationality restrictions in the CC.

Corporate Directors

Legal entities appointed as a director must not be bankrupt.


There are no gender restrictions in the CC. However, the CG Principles require companies to set a target ratio for female board members, which should not be less than 25%, and to create a company policy for achieving that target (Article 4.3.9, CG Principles).

6. Are non-executive, supervisory, or independent directors recognised or required?


Although there is no provision in the CC, both non-executive directors and independent directors are recognised and required by the CG Principles.

Board Composition

Under the CG Principles, a majority of the board's members must consist of non-executive members. In addition, the number of independent board members cannot be fewer than one-third of the total number of BoD' members, and there must be at least two independent board members (Article 4.3.4, CG Principles).


The CG Principles set out specific requirements for independent members (Article 4.3.6, CG Principles). The independence requirements state that members must:

• Not work or be linked with any companies and corporations whose management is controlled by the member's company.

Not be shareholders (of 5% or more of shares) or employees at an administrative level in the last five years in companies that the company purchases or sells goods or services to or from.

• Have the requisite professional education and knowledge to carry out the assigned duties.

• Not be full-time employees in any public authority, except as faculty members.

• Reside in Turkey (under the Income Tax Law).

• Be able to contribute to the operations of the company and must be impartial and able to independently take decisions according to strong ethical standards.

• Have time for the corporation business.

• Not have been on a BoD for more than six years within the last ten years.

• Not be an independent board member of more than three corporations of which the company or controlling shareholders of the company hold the control.

• Not be registered and announced as a legal entity representative board member.

7. Are the roles of individual board members restricted?

The roles of individual board members are not restricted. One person can be both the chair and chief executive.

8. How are directors appointed and removed? Is shareholder approval required?

Appointment of Directors

In the company establishment process, directors are appointed under the articles of association (Article 359, CC). Afterwards, the general assembly (GaM) appoints the directors. Both the articles of association and relevant GaM must be registered with the relevant Trade Registry and announced in the Trade Registry Gazette.

Removal of Directors

Directors can be dismissed at any time with a GaM if either of the following occurs:

• The dismissal is included in the meeting agenda.

• There is a justified reason for the dismissal, even it is not included in the agenda (Article 364, CC).

9. Are there any restrictions on a director's term of appointment?

In JSCs, directors can be appointed for a maximum three-year period. The same director can be appointed again, unless otherwise specified in articles (Article 362, CC). However, in LLCs, directors' terms of appointment are not subject to time restrictions unless otherwise specified in articles of association.

Directors' Remuneration

10. Must directors be employees of the company? Can shareholders inspect directors' service contracts?

Directors Employed by the Company Under the CC, directors do not have to be employees of the company. However, directors can be employees, shareholders or third parties.

Shareholders' Inspection

Shareholders have a right to receive information and to investigate the company's annual reports and financial statements (Article 437, CC). Directors must make an annual activity report and financial report available in company's central and branch offices for shareholders' inspection at least 15 days before the annual GaM. Every shareholder has a right to receive a copy of the statement of income and balance sheet.

In addition, during the GaM, shareholders can request information from directors concerning company operations, or from auditors concerning audit results.

11. Are directors allowed or required to own shares in the company?

Directors can own shares in the company, but there is no requirement in this regard.

In an LLC, at least one of the shareholders must be appointed as manager with authority to represent the company (see Question6).

12. How is directors' remuneration determined, and must it be disclosed? Is shareholder approval required?

The articles of association or a GaM can grant financial rights to directors, such as:

• Attendance fees.

• Wages.

• Bounties.

• Premiums.

• Percentages of annual profits.

(Article 394, CC.)

Determination of Directors' Remuneration

The GaM determines directors' remuneration, and this is one of the non-transferable duties of the GaM.


The GaM decision on the directors' remuneration does not need to be disclosed.

Shareholder Approval

Shareholder approval is required, as the GaM of shareholders determines directors' remuneration, and this is one of the nontransferable duties of the GaM.

Management Rules and Authority

13. How is a company's internal management regulated?

There is no specific provision on the length of the notice for board meetings. However, it is possible to regulate this in the articles of association.

Every board member can call the board for a meeting. Unless determined otherwise in the articles of association, the meeting quorum requires a majority of the members to be present and the votes of a majority of the members present are needed to pass a resolution.

In a JSC, if none of the board members requests a physical meeting, a decision by circulation among all board members can be taken (Article 390, CC). In this case, written approvals of at least majority of the members are needed.

14. Can directors exercise all the powers of the company or are some powers reserved to the supervisory board (if any) or a general meeting? Can the powers of directors be restricted and are such restrictions enforceable against third parties?

Directors' Powers

The BoD is responsible for all company business and transactions required for realisation of the company's operations, save for the non-transferable powers granted to the GaM by law or the articles of association.

Under the CC, the following issues are non-transferrable powers of the GaM (Article 408, CC):

• Amending the articles of association.

• Releasing the auditors and the BoD from liability or holding them liable for any wrongdoing.

• Appointing the members of the BoD, determining their fees and term of duties, and releasing and replacing them.

• Appointing and releasing the auditor (except in certain legally-defined circumstances).

• Taking decisions regarding:

• financial statements;

• annual reports of the BoD;

• savings from annual profits; or

• the determination of the dividend and gain margin, including injections of the reserve fund into capital or profit to be distributed, and deciding on the use of the reserve fund.

• Dissolving the company (except in certain legally-defined circumstances).

• Sale of a substantial part of the company.


Under the CC, in principle, signature authority must be exercised jointly by any two of the board members, unless otherwise stated by the articles of association or the BoD consists of only one member. However, the BoD can transfer all the management rights of the company to one or more executive members, or to a third party as the manager. In such a case the company regulates an internal directive but this internal directive does not need to be registered and announced by the trade registry.

Apart from the management rights, the BoD can transfer its representation authority to one or more executive members or a third party as the manager. In principle, a restriction on a director's power of representation has no effect against third parties acting on that representation in good faith, unless:

• The power of representation is restricted to the affairs of the company headquarters or branch or is restricted to joint signatures of members of the BoD.

• This restriction is duly registered and published.

(Article 371, CC.)

In addition, the BoD can appoint non-representative members of the BoD or persons bound to the company by a labour contract, as commercial representatives with limited authority or as other commercial assistants. This must be explicitly reflected in an internal directive issued in accordance with Article 367; however, this time the internal directive must be registered and announced.

15. Can the board delegate responsibility for specific issues to individual directors or a committee of directors? Is the board required to delegate some responsibilities, for example for audit, appointment or directors' remuneration?

Although there is no requirement to do so, it is possible for BoD to delegate responsibility for specific issues under the CC (see Question 16).

First published by Practical Law in Jul 01, 2024.

Link: Governance and Directors' Duties

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