Corporate Governance and Directors Duties in Turkey Overview - 1



The Q&A gives a high-level overview of corporate governance trends; the main forms of corporate entity used; the corporate governance legal framework; corporate social responsibility and reporting; board composition and restrictions; directors' remuneration; management rules and authority; directors' duties and liabilities; transactions with directors and conflicts; disclosure of information; shareholders' rights, company meetings, and minority shareholder action; and internal controls, accounts and audits.


Corporate Governance Trends


Amendments to the Commercial Code

Following amendments to Article 40 of the Turkish Commercial Code (CC), the Ministry of Trade amended its Communiqué on Execution of Articles of Association before trade registry directorates.The communiqué stated that the signatures of merchants who are real persons and the authorised signatories of merchants that are legal entities will be obtained electronically from the databases of public institutions and organisations and recorded in the Central Registry Number System (MERSİS) by the trade registry directorate during the registration process.If there is no record of a signature in the relevant database or the relevant records are not obtained, a specimen signature can be physically provided before a notary public, except the registration process of limited liability companies.A fourth paragraph was added to Article 64 of the CC authorising the Ministry of Trade to require share ledgers, board of director's resolution books and general assembly resolution books to be kept electronically.No further announcement has been made yet by the Ministry of Trade regarding the procedure and the principles to be followed regarding electronic company records.


Bearer Share Certificates

Under the Law on Prevention of Distribution and Financing of Weapons of Mass Destruction No. 7262 (published in the Official Gazette on 31 December 2020), bearer shares and bearer shareholders in joint stock companies must be notified and recorded to the Central Registry Agency (Merkezi Kayıt Kuruluşu). This law intends to enhance transparency by keeping records of the information about bearer shares and their shareholders and the transfer process at the Central Registry Agency.Companies that issue bearer share certificates must notify the Central Registry Agency of the owners of such certificates and their shares before they are distributed to the relevant shareholders. This means that owners of bearer share certificates can exercise their rights arising from their shareholding against the company, if:

  • They have proven their possession of such certificates.
  • The Central Registry Agency has been notified of this.

The transferring of bearer share certificates is only valid if the transferee notifies the Central Registry Agency of the transfer. The date of notification to the Central Registry Agency will be taken as the basis for claiming the rights arising from holding bearer shares (Article 489, CC).

In addition to suspending shareholding rights and invalidating share transfers using bearer share certificates, administrative fines will be imposed on those who fail to fulfil application and notification obligations.


Loss of Share Capital

The Communiqué Amending the Communiqué on the Procedures and Principles Regarding Implementation of Article 376 of the CC was published in the Official Gazette on 26 December 2020 and entered into force on the same date.Article 3 of this communiqué stipulates that if a company has lost at least two-thirds of its share capital and legal reserves, its share capital can be decreased by up to the minimum share capital amount, if at least half of the sum of the share capital and legal reserves are preserved in equity.

This communiqué also enables companies that fall within the scope of Article 376 of the CC to increase and decrease their share capital in the same general assembly meeting (GaM) without being bound by any requirements, if the following conditions are fulfilled:

  • The increased amount is fully paid.
  • At least half of the sum of the share capital to be registered and legal reserves are preserved in equity during the process.

Joint-Stock Company GaMs

The obligation to prepare the attendance list was abolished for GaMs of joint-stock companies with single shareholders (amendments made to the Regulation on the Procedures and Principles of the GaMs of Joint Stock Companies and the Ministry Representatives to be Present at These Meetings).In addition, the requirement for the attendance of ministry representative at GaMs of joint-stock companies with single shareholders was also abolished, except where establishing or amending articles of association (articles) are subject to the ministry's permission (for example, banks, financial leasing companies, and so on).



For all corporate governance issues that are subject to registration before the trade registry directorates (including establishment), online application on the Central Registration System (Merkezi Sicil Kayıt Sistemi) (MERSIS) is a mandatory step before submitting the hard copy documents to the competent trade registry directorate by hand.One of the aims of introducing MERSIS was to expedite the registration process, but MERSIS is now considered as an additional step in the registration process (as the documents still must be submitted in hard copies).The shareholders or the authorised signatories are appointed through the online platform first and then the required documents are submitted to the trade registry by hand.If a natural person who is a Turkish citizen is being registered as a shareholder or appointed as an authorised signatory of a business, they must approve the registration or appointment in the online system even if they were appointed previously.


Amended Liquidation Process

An amendment to Article 543 of the CC aims to provide a faster liquidation process. Once a company enters into liquidation, three announcements are made at one-week intervals at the Turkish Trade Registry Gazette to inform the creditors that the company is entered into liquidation and will be dissolved, and to provide time for the creditors to submit their claims.Once these announcements are made, and the debts (if any) are paid, the waiting period of six months to allow the distribution of the company’s assets has been reduced to three months. This means that the liquidator can distribute all the assets in three months after the last announcement and dissolve the company.


Ultimate Beneficial Owner Requirement

To prevent tax evasion and ensure financial transparency, the Turkish Revenue Administration under the Ministry of Treasury and Finance issued General Communiqué No. 529 on Tax Procedure Law (UBO Communiqué), which imposes an obligation to make an ultimate beneficial ownership (UBO) declaration on a wide range of entities.The UBO Communiqué represents the UBO declaration as an obligation to be performed regularly. Relevant parties, including corporate taxpayers, are required to submit their UBO information annexed to their provisional and annual corporate tax returns by the effective date.The effective date for all taxpayers except corporate taxpayers is 31 August. All companies are subject to the obligation to declare UBO status. This obligation also applies to branches.The UBO Communiqué defines the UBO as a natural person or persons who ultimately have control or the ultimate influence over a legal entity.For companies, the UBO is defined as a real person or persons holding more than 25% of the shares of that company.If the UBO is uncertain or cannot be determined or there is no natural person shareholder with such a share, the UBO can be considered to be:

  • Those having ultimate control of the company (such as shareholders of the holding company in group companies),
  • Natural person or persons with the highest executive power in the company.

The UBO notification must include the person(s)':

  • Name/identity.
  • Citizenship.
  • Identity number.
  • Address, telephone, fax and email information.
  • The reasons why that person is declared as the UBO.

Notifications must be made to the Internet Tax Office by filling in the "declaration form for ultimate beneficial owner". Submission of physical declaration forms (either by hand or by post) are not valid. Forms can be sent in the relevant period through certified public accountants with a brokerage and liability agreement concluded or through sworn-in certified public accountants with an income or corporate tax return certification agreement (full certification agreement).Sanctions will be imposed on those who submit an incomplete or misleading UBO notification or who fail to declare at all, under the relevant provisions of the Tax Procedure Law No. 213.

Corporate Entities

2. What are the main forms of corporate entity used in your jurisdiction?

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

  • Limited liability company (LLC).
  • Joint-stock company (JSC).

The LLC and JSC are the preferred company forms in Turkey for both foreign and local entrepreneurs. The minimum capital requirement for a JSC is TRY50,000 while the capital requirement for establishing an LLC is TRY10,000.As the CC is structured around JSCs and many provisions applicable to JSCs also apply to LLCs, the answers in this article relate to JSCs unless indicated.


Legal Framework

3. Outline the main corporate governance legislation and authorities that enforce it. How influential are institutional investors and other shareholder groups in monitoring and enforcing good corporate governance? List any such groups with significant influence in this area.


The main corporate legislation includes the:

  • 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), which entered into force on 30 December 2012.
  • 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 İş İnsanları Derneği) (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.


4. 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 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.


See Question 3.


Corporate Social Responsibility and Reporting



There are no legal requirements for companies in relation to corporate social responsibility (CSR). However, many larger Turkish companies choose to take part in CSR projects and to co-operate with non-governmental organisations. In practice, reputable companies (especially large or publicly held companies) disclose their social responsibility projects on their website and through the media.With the growing awareness of environmental, social and governance (ESG) issues globally, such as climate change and equity and diversity, investors are demanding higher standards for companies to operate in a sustainable environment . The authors expect further guidelines and legislation to be set for companies to establish and comply with CSR policies.


Board Composition and Restrictions


6. What is the management/board structure of a 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 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).


7. 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).


8. 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.

9. Are the roles of individual board members restricted?

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


10. 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 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).

11. 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.


12. Do directors have to 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.


13. 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 full authority to represent the company (see Question 6).


Directors' Remuneration


14. How is directors' remuneration determined? Is its disclosure necessary? 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 general assembly of shareholders determines directors' remuneration, and this is one of the non-transferable duties of the general assembly.



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


Shareholder Approval

Shareholder approval is required, as the general assembly of shareholders determines directors' remuneration, and this is one of the non-transferable duties of the general assembly.


General Issues and Trends

Directors' remuneration can vary depending on the sector in which the company is operating, the size and field of activity of the company.


Management Rules and Authority


15. How is a company's internal management regulated? For example, what is the length of notice and quorum required to convene board meetings, what are the quorum requirements at those meetings, and what voting requirements must be met to pass resolutions?

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.

To read the rest of this article series, please click on Corporate Governance and Directors Duties in Turkey Overview - 2

First published by GTDT in 31.01.2023.

Tagged with: Gün + Partners, Görkem Bilgin, Commercial & Corporate

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