Law Proposal No. 6102 on Amendments to the Turkish Commercial Code and Certain Laws Submitted to the Grand National Assembly of Turkey!
Thanks to its strategic location and dynamic economy, Turkey is an effective trade center in the international arena. While the global economy and trade practices are changing rapidly, taking measures to implement trade policies will make significant contributions to the economic growth of our country. In this context, on May 3, 2024, the Proposal for the Amendment of the Turkish Commercial Code No. 6102 (“TCC“) and Certain Laws (“Proposal“) was submitted to the Grand National Assembly of Turkey (“TBMM“). In this context, various amendments regarding the Board of Directors of the Company are envisaged. We draw your attention below to the amendments envisaged by the said proposal within the scope of the TCC.
I. Article 366 of the TCC allows for the election of the chairman and vice-chairman of the board of directors in accordance with the term of office of the board of directors.
Pursuant to the current regulation, the members of the board of directors may be elected for a maximum term of three years, while the chairman and deputy chairman of the board of directors must be elected every year. This situation imposes the obligation to re-determine the management organization of joint stock companies every year, even if the board of directors is elected for three years, which is the maximum period stipulated in the Law, and creates hesitation in practice as to who will exercise the powers and duties attributed to the chairman and deputy chairman of the board of directors. With the amendment made under the aforementioned Proposal, the chairman and deputy chairman of the board of directors may be elected in accordance with the term of office of the board of directors.
II. Article 375 of the TCC stipulates that the board of directors may delegate the authority to appoint and dismiss persons other than the senior executives of the company.
Pursuant to Article 375/1-d of the Turkish Commercial Code No. 6102 (“TCC“), the appointment and dismissal of the directors and all persons with the same function and signing authority are among the non-transferable duties and powers of the board of directors. These transactions, which must be fulfilled by the board of directors’ resolution, cannot be subject to delegation of authority. The expression “managers and persons with the same function” in the aforementioned regulation is intended to regulate the “senior management” in subparagraph (a) of the same paragraph, and the senior management is responsible for determining the policies such as investment, financing, dividend, especially the general operating policy, selecting the means to achieve the targets within the framework of the determined policies, and determining whether the targets are achieved or not, the control of financial practices and the determination of strategies, and the senior managers who will realize these are the people at the head of the management organization who will implement the strategy, policies and macro plans determined by the board of directors, but despite this, considering the wording of subparagraph (d), it is understood that the appointment and dismissal of all managers and authorized signatories of the company are among the non-transferable duties and powers of the board of directors, and there are conflicts in practice in the interpretation of the provision. However, in terms of institutionalization of companies and increasing their competitiveness, opening branches in order to carry out company activities in locations other than the company headquarters has become one of the necessities of today’s commercial life.
It is also of great importance that the processes related to existing and new branches to be opened are completed quickly. Accordingly, it is evaluated that the inability of the board of directors to delegate the authority to appoint and dismiss employees at all levels in companies with a wide branch network and a high number of authorized employees makes business processes difficult, and it is aimed to remove the appointment and dismissal of persons other than the senior executives of the company from the non-transferable and inalienable duties and powers of the board of directors in order to facilitate company transactions and to eliminate the hesitations experienced in practice.
III. Pursuant to Article 392 of the TCC, the chairman of the board of directors is obliged to call the board of directors for a meeting in the event of a request for a meeting made to the chairman of the board of directors by the majority of the members of the board of directors.
Pursuant to Article 392 of the Turkish Commercial Code No. 6102 (“TCC“), the authority to call the board of directors for a meeting is vested only to the chairman of the board of directors and, in cases where the chairman of the board of directors cannot be reached in accordance with the general regulations of the Code, to the deputy chairman of the board of directors.
However, in some cases where there is a need to convene a board meeting and negotiate, the chairman of the board of directors may remain silent on this request. This situation complicates the decision-making processes of the board of directors, which has the authority and duty to manage the company, and prevents the will of the majority of the board of directors from being reflected in practice. In this case, even though the issue may be resolved as a result of the judicial processes, this situation prolongs the decision-making processes of the company and increases the workload of the judiciary.
This Proposal imposes an obligation on the chairman of the board of directors to call the board of directors for a meeting in the event of a request for a meeting made by the majority of the members of the board of directors, and provides that in cases where the chairman of the board of directors still does not call the board of directors for a meeting or the chairman/his deputy cannot be reached, the request can be made directly by the callers. Thus, it is aimed to contribute to the formation of a deliberative environment in the governing body.
IV. As it is known, companies established before January 1, 2024 are obliged to regulate their minimum capital amounts until 31.12.2026.
Pursuant to the Presidential Decree No. 7887 published in the Official Gazette dated November 25, 2023 and numbered 32380, the minimum capital amounts of joint stock and limited liability companies were increased.
As it is known, the minimum initial capital for joint stock companies has been increased from TRY 50,000 to TRY 250,000, the minimum initial capital for limited liability companies has been increased from TRY 10,000 to TRY 50,000 and the minimum initial capital for non-public joint stock companies that have adopted the registered capital system has been increased from TRY 100,000 to TRY 500,000.
The amendment entered into force as of January 1, 2024. However, with the said amendment, no regulation was made for the companies whose capital is below the minimum amounts. In this context, it has become necessary to make a regulation for companies that were registered in the trade registry before January 1, 2024 and whose capital is below the minimum amount.
According to the proposal, joint stock and limited liability companies that do not comply with the minimum capital amounts must make new capital arrangements by December 31, 2026. The trade registry records of non-compliant companies will be canceled. According to the new regulation, no quorum will be required at general assembly meetings for compliance, decisions will be taken by majority vote and no privileges will be exercised against. It is also envisaged that the capital of non-public joint stock companies that have adopted the registered capital system will be harmonized with the new amount. In order to facilitate the transition period, the Ministry of Trade will be authorized to extend the period twice for one year each.
V. It is stipulated that no judicial expenses and attorney fees shall be awarded against the Trade Registry Directorates in the Revocation Cases.
In practice, in the reinstatement lawsuits filed against companies or cooperatives that have been deregistered pursuant to Provisional Article 7 of the TCC No. 6102, judicial expenses and attorney fees may be awarded against the trade registry directorates, which are obliged to participate in the lawsuit as legal relatives with the reinstatement decision. Since it is not appropriate to establish a provision in this direction against the trade registry directorates, which are obliged to implement the provisions of the article and fulfill the necessary procedures in accordance with the article, the last sentence is added to paragraph 15 in order to eliminate the hesitation and victimization experienced in practice and to be applied in the provisions to be given after its entry into force.
VI. Conclusion and Evaluation
Considering the fact that commercial life has evolved rapidly in recent times, it is of utmost importance for companies to take decisions faster and to put these decisions into practice. In this context, the proposed amendments in the Proposal regarding the delegation of powers of the board of directors may make the functioning of the company more efficient. Furthermore, the extension of the board of directors’ mandate for up to three years may reduce administrative and legal uncertainties. Finally, although there is still no clarity on the status of companies that fall below the minimum capital amount, we believe that this regulation is a positive step for a healthier future planning in commercial life.