A brief examination of a number of firms' specimens of signature reveals that the authority to represent a firm is limited with the subject matter and extent and the authority to represent such firm in all aspects unlimitedly is not vested in the professionals. Use of those specimen signatures which we have seen frequently in the past though contrary to applicable legislation shall decrease in the near future.
Pursuant to Article 321 of the former Commercial Code No. 6762, the representation authority may be bound with the business of the headquarters or a branch only or it may be subject to some limitations such as individual or joint representation so that any other limitation would not be valid towards bona fide third parties.
This provision of the former Code takes place in Article 371, paragraph 3 of the Turkish Commercial Code No. 6102 saying that the representation authority can be limited in two ways.
Accordingly, the representation authority may be;
- Delegated in connection with the business of the headquarters or a branch; and
- Limited with representation by an individual signatory or joint signatories. Any other limitation would not be valid towards bona fide third parties. In other words, a specimen signature with representation power limited in terms of subject matter and extent, which have been the common practice up to date, shall not possibly be issued or those issued ignoring this fact shall be applicable in internal relations only but not towards third parties.
For example, any authority to expend but limited up to EUR 100,000 or to transact solely for purchasing auto spare parts shall not be valid towards third parties which means that also the firm that has delegated the said authority shall be liable towards the third persons involved in the transaction in case the delegated limits are exceeded. In such a case, the firm shall not have the right to deny being bound by the agreement on the grounds that the person who made the transaction has overridden his/her authority and that the authority delegated through the specimen signature is limited with EUR 100,000 but the contract price is EUR 200,000. The firm may, however, recourse its staff who overrides his/her authority so delegated as a part of internal relations.
Despite the explicit provision of the Code No. 6102, Regional Registries of Commerce have continued to register specimen signatures limited with the subject matter and extent after 1 July 2012, the date the said Code was promulgated. In July, Eskişehir Chamber of Commerce requested the Ministry of Customs and Trade's General Directorate of Domestic Trade to clarify whether such registrations would be permitted or not in legal terms whereupon the said Directorate has issued a circular. According to the circular, signing authority cannot be split up or any specimen signature allowing so should not be attested by trade registries.
HOW TO DELEGATE SIGNING AUTHORITY WITHOUT LIMITING THE SUBJECT MATTER AND EXTENT?
A firm can no more delegate the representation authority to third party professionals through specimen signatures but powers of attorney.
All transactions the mandatary may perform shall be listed one by one in the power of attorney including limitation of amounts, as the case may be.
A Board of Directors willing to delegate some responsibilities of its members to third party professionals shall have to regulate internal operations of the company first through a decision and then prepare and implement an internal directive designating the reporting order as well as the powers and responsibilities of the signatories.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.