Turkey: Communiqué On Corporate Governance II

In accordance with the provisions of the Turkish Commercial Code No. 6102 ("TCC") and the Capital Markets Law No. 6362, the Communiqué on Corporate Governance II No:17.1 ("Communiqué") which abolished the Communiqué on the Determination and Implementation of Corporate Governance Rules (Series IV, No. 56) and the Communiqué on Principles to be Complied with by Joint Stock Companies subject to the Capital Markets Code (Series IV, No. 41), was published in the Official Gazette dated 03.01.2014 and numbered 28871. Other provisions of the Communiqué have been examined in our Newsletter article entitled "Communiqué on Corporate Governance I" and therefore, the subject of this Newsletter article is exclusively the examination of the principles prescribed in the Communiqué.


The Communiqué provides the corporate governance principles within its Annex-1 following the regulations of security issues by companies and transactions of related parties. It shall not be considered obligatory to follow all the principles as some of them are merely meant for guidance. The compulsory principles are enumerated in the Communiqué and these are mostly related to the protection of shareholders rights and the functioning of company decision maker mechanisms, especially the Board of Directors, in a transparent, independent and accountable manner. Where there is a violation of the compulsory principles, the Capital Markets Board ("the Board") has the authority to take measures to enforce compliance with the principles and to seek cancellation of the relevant transaction.

Protection of Shareholder Rights

The protection of shareholders rights shall be realized mainly through providing clear and efficient information, and the encouragement of participation in general assembly meetings.

The organs of the company and the investor relations department shall act effectively in order to insure the protection of shareholders rights and the facilitation of their usage. The corporate website of a company shall contain updated information on facts that would potentially affect the shareholders' rights.

The procedures relevant to General Assembly ("GA") meetings and resolutions, which are important for the usage of shareholders rights, are provided in Art. 1.3 in the Communiqué Annex. Some provisions of the GA meetings must be compulsorily followed. Pursuant to Art. 7 of the Communiqué, regarding enforcement, the Board may seek cancellation of the transaction, which is in violation of the obligation of compliance. To sum up the principles relevant to the GA, the convocation announcement must be detailed and comprehensible, and issues which may affect the usage of rights or create changes in the administration or activities must be highlighted. The Communiqué places focus on the pertinent issues in this respect. The meeting shall be conducted in an independent manner in order to transmit the items of the agenda to the shareholders and shall effectively encourage their participation. Further, pursuant to Art. 1.3.9, transactions that would affect the company's financial situation, due to their volume, necessarily require the majority of votes of non-executive members in order to be executed. In case said resolution is not adopted unanimously by members of the Board of Directors ("BoD"), it shall be approved by the GA and disclosed via the Public Disclosure Platform ("KAP").

Public Disclosure and Transparency

In addition to the information that shall mandatorily be disclosed pursuant to the legislation, a company's corporate website shall contain information important to stakeholders; such as information on privileged shares, current shareholding and management structure, the latest version of the articles of association, policy of profit distribution and financial statements.

Preferrably the the corporate activity report should contain information on subjects relevant for the independent decision making mechanisms of the company, such as reciprocal shareholdings, important lawsuits brought against the company and the activities of BoD members outside the scope of the company.

Protection of Stakeholders

In the Communiqué, the stakeholders are defined as institutions and special interest groups having a relationship with the company, such as employees, creditors, clients, suppliers, unions and several non-governmental organizations.

In case of violation of rights of the stakeholders, the principle of efficient and rapid compensation and the principle of taking measures in order to facilitate notification of the violating transactions to the BoD committees shall be followed.

Furthermore, models shall be developed in order to encourage the participation of stakeholders in the company's administration without prejudice to the company's activities and conduct.

Board of Directors

The activities of the BoD shall be conducted in a transparent, accountable, fair and responsible manner. The Board of Directors shall consist of at least five members. The majority shall be non-executive members. At least one-third, and in any case two members, of the Board of Directors shall be non-executive members.

The criteria for non-executive members are provided in detail in Art. 4.3.7, and require that the relevant person shall not have any material or personal connections to the company, and shall have the necessary professional abilities to perform said duty.

In the articles of association, the authorities of the president of the BoD and chief executive officer/general director shall be distinguished and be specified in the articles of association. Where it is decided that the same person shall perform these duties, it shall be disclosed in the KAP with relevant justifications.

Issues such as appointment of non-executive members and for the loss of status of independent members have been regulated with compulsory procedures to followed. It is also compulsory that companies aim to achieve 25 % female membership within their BoDs and actively develop a policy to this end.

Board of Directors Committees to be Established

The "Audit Committee", "Early Detection of Risk Committee", "Corporate Governance Committee", "Nomination Committee" and the "Compensation Committee" must be established for the effective functioning of the BoD. The working principles and members of the committees shall be declared in the KAP. Each committee shall have at least two members. The majority of the committee members must be non-executive directors, and if a committee has only two members then they must both be non-executive directors.

The compensation of members of the BoD and managers must be in writing and approved by the General Assembly. The corporate compensation policy must be included on the company website. The independent BoD members shall not be compensated with profit share, share options or performance based compensation plans; their compensation must be realized in a manner that will maintain their independence.


The Communiqué consists of guidance principles rather than obligatory rules. Nevertheless, issues that bear importance for the maintenance of transparency and accountability are regulated with obligatory provisions, and transactions that may be risky are subject to public disclosure rather than prohibition.

However, companies must pay attention to these rules, as non-compliance may result in the cancellation of the relevant transaction, and therefore the nullification of the resolutions of decision making bodies for procedural non-compliance; for example, regarding the assembly of the relevant body.

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.

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