Turkey: Corporate Governance Rules

Introduction

The Capital Markets Board of Turkey ("CMB") issued the Communiqué on the Principles Regarding the Determination and Practice of Corporate Governance Rules, Serial: IV, No: 541, however, this communiqué caused an extensive argument in the public. Then, the CMB issued a draft Corporate Governance Rules and submitted it to the public for discussions and suggestions. CMB issued the Communiqué on the Principles Regarding the Determination and Practice of Corporate Governance Rules, Serial: IV, No: 562 ("Communiqué") by obtaining suggestions from the public, which is published on the Official Gazette numbered 28158, dated 30.12.2011.

Corporate Governance Rules

The Communiqué is applicable to the listed companies. Listed companies are defined as the public companies traded in Istanbul Stock Exchange.

According to the Communiqué, the listed companies are subject to articles 1.3.1; 1.3.2; 1.3.7; 1.3.10; 4.3.1; 4.3.2; 4.3.3; 4.3.4; 4.3.5; 4.3.6; 4.3.7; 4.3.8; 4.3.9; 4.4.7; 4.5.1; 4.5.2; 4.5.3; 4.5.4; 4.6.2; 4.6.4 of the Rules. The listed companies shall explain in the report with regard to the application of the Rules, whether or not they apply the other provisions of the Rules. As per the Communiqué, listed companies are distinguished in 3 groups. There are certain Rules that are not applicable for the 3rd Group. As a brief summary of the Rules;

All shareholders shall be treated equally. All shareholders shall have information and examination right and such right cannot be limited or cancelled.

Request of special audit is a part of the information right. A right for the shareholders to request a special audit from the general assembly in order to examine specific issues even though this request is not stated in the agenda of the general assembly provided that the right to obtain information and examination has been formerly used, can be inserted to the articles of association.

The announcement of the general assembly meeting shall be made at least 3 weeks prior to the meeting, to reach all shareholders and via any possible communication equipment including electronic communication; the provisions of the relevant legislation shall be reserved.

General assembly meetings shall be convened by causing the high participation of the shareholders at the minimum expense and shall not result in any inequality. Therefore, the general assembly shall be convened at the place where the majority of the shareholders reside provided that such provision is in the articles of association.

The general assembly should consent on whether, the shareholders holding the management control, board members, managers and their spouses or persons with blood or affinity relationship (to the second degree) may compete with the company or its affiliates or perform a transaction with them which may have a conflict of interest.

The affirmative vote of majority of the independent board members for certain 'important transactions' to be resolved in the board, is required provided that the decision does not require a general assembly decision with respect to the applicable legislation. Important transactions are defined as follows: transferring all or substantial part of assets, creating encumbrance over them or leasing them, purchasing substantial assets or leasing them, granting privileges or changing the scope of the privileges, or delisting.

The decision shall be submitted to the general assembly in case the affirmative vote of majority of the independent board members is not met or such transaction is desired to be performed besides the opposition of the independent board members. The opposition of the independent board members shall be disclosed to the public, notified to CMB and such opposition shall be notified to the shareholders at the general assembly. For the purposes of this provision the meeting quorum for the general assembly is not required and the decision shall be made with a simple majority. This provision shall be reflected in the articles of association.

For the purposes of determining the criteria of 'importance'; any of the following shall be taken into consideration:

  1. 20% of the total assets disclosed in the last financial tables to the public,
  2. 40% of the relevant account group disclosed in the last financial tables to the public,
  3. 25% of the equity disclosed in the last financial tables to the public,
  4. 20% of the gross sales revenue disclosed in the last financial tables to the public.

General assembly meetings may be opened to the beneficiaries and media having no right for them to comment therein. Such provision may be inserted to the articles of association.

Applications that complicate the usage of the voting rights and privileges in the voting rights shall be refrained. In case of privileges in the voting rights, the privileges that prevent the public shares to be represented in the management should be cancelled.

Minority rights may be granted to the persons who hold less than 1/20 of the share capital by a provision in the articles of association, and the capacity of the minority rights may be extended in the articles of association.

The company shall have a profit distribution policy. Such policy shall be submitted to the consent of the shareholders at the general assembly, stated in the annual report and disclosed to the public via website of the company.

Applications limiting or complicating the free transfer of the shares traded in the stock exchange shall be refrained from.

The website of the company shall be actively used for public disclosure and any and all information shall be updated therein.

The following information shall be stated in the website of the company (alongside with the required disclosure as per applicable law): information on the trade registry, current shareholding and management structure, details regarding the privileged shares, current articles of association together with the trade registry gazettes where any changes were announced, disclosures, financial reports, annual reports, prospectus and offering circular, agendas of the general assembly meetings, attendant list, meeting notes, power of attorney forms, information forms on the collection of shares and power of attorney for mandatory call, policy for purchasing its own shares, profit distribution mechanism, information policy, information on the transaction with related persons, ethical rules, questions, notices and information requests and their responses under frequently asked questions.

Beneficiaries are the employees and entities (i.e. clients, creditors, suppliers) related in achieving the objectives or business of the Company. The rights of beneficiaries shall be secured.

The board shall consist of at least 5 members. The board shall have at least one female director. The board shall consist of non-executive and executive members. The non-executive members shall include independent board members.

A clear distribution of duties between the chairman of the board and the executive chairman/general manager shall be made in the articles of association. The shareholders shall be informed in the general assembly meeting if the chairman of the board and the executive chairman/general manager are decided to be the same person and shall be explained in the annual report.

At least 1/3 of the members of board shall be independent board members. The fractions shall be completed to the following number. The number of the independent board members may not be less than 2.

A member who complies with the following criteria shall be deemed as an 'independent board member':

  1. He shall have no employment, capital or commercial relationship, direct or indirect, with the company, a person related with the company or with the legal entities having a management or capital interest by the shareholders holding 5% (direct or indirect) of the share capital and the member or any spouse or persons with blood or affinity relationship (to the third degree) within the last 5 years,
  2. He shall not have been employed in the firms conducting, in whole or in part, the business and organization of the company, especially audit firms or consulting firms, and he shall not have served as a director in such companies within the last 5 years,
  3. He shall not have been employed in the companies who supply significant services or products to the company and he shall not have been a shareholder or have served as an employee or a director in such companies within the last 5 years,
  4. He shall not hold more than 1 % of the share capital and such share shall not be privileged,
  5. He shall have the knowledge, education and experience in order to duly perform its duties in the board,
  6. To the extent possible by applicable law and except for the academics, he shall not be working as a full time basis in the governmental offices, at the time of the nomination and during its office,
  7. He shall be a resident in Turkey in accordance with the Income Tax Law.
  8. He shall have the ethical standards and occupational reputation and experience in order to give positive contribution to the company business and to keep his independency.
  9. He shall give his time to company business in order to duly perform his duties.

The board shall establish committees such as Audit Committee, Corporate Governance Committee, Committee of Early Determination of Risks, Nomination Committee, and Remuneration Committee. The Corporate Governance Committee may perform the duties of Nomination Committee, Committee of Early Determination of Risks, and Remuneration Committee if such committees cannot be established.

The Nomination Committee has important duties with regard to the nomination of the independent board members. It shall evaluate whether the nominees for the independent board member seat have the relevant criteria and provide a report to the board. The independent board member candidate shall submit a representation letter with regard to its independency.

The board shall submit the list of the independent board member candidates to the CMB at least 60 days prior to the general assembly meeting. The CMB shall submit its negative opinion, if any, within 30 days. If the CMB provides a negative opinion with regard to the nominee, such person cannot be nominated as the independent board member at the general assembly.

The affirmative vote of majority of the independent board members is required with regard to any and all related person transactions; and transactions for granting security, pledge and mortgage in favor of third parties. If the majority of the independent board members do not consent on such transactions then this shall be disclosed to the public along with all necessary details of the transaction and shall be submitted to the general assembly. The parties of the transaction and related persons may not vote in the decision of such transaction. The participation of the other shareholders shall be ensured. For the purposes of this article, the meeting quorum for the general assembly is not required and the decision shall be made with a simple majority. Any decisions adopted by the board or the general assembly without respecting this mandatory provision shall be void. Such provision shall be reflected to the articles of association.

Meeting and decision quorum of the board shall be determined in the articles of association.

The remuneration and other benefits given to the board members and the managers shall be disclosed to the public via annual report.

Conclusion

The Communiqué and the Rules provide mandatory provisions or advisory provisions for the listed companies to apply. In any case, the listed companies shall disclose whether the Rules are being applied or not; the reasons of non-application (if any); the conflict of interest which may arise in case of non-application and whether the company is planning to change its corporate governance principles in accordance with the Rules, in their annual report.

Footnotes

1. Published on the duplicated Official Gazette numbered 28081, dated 11.10.2011.

2. Published on the Official Gazette numbered 280158, dated 30.12.2011.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Erdem & Erdem Law
Eryürekli Attorney Partnership
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Erdem & Erdem Law
Eryürekli Attorney Partnership
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions