Turkey: Independent Board Directors

Last Updated: 9 September 2014
Article by Şeniz Uluköklü

The new Turkish Commercial Code ("TCC") has been heavily criticized since the very date it took effect on July 1, 2012 due to the radical changes made on the draft text just before the said date as well as the uncertainty of some provisions and inadequate grounds of the Code.

On the other hand, it is an undeniable fact that the Code has introduced a number of favorable novelties in terms of professionalized business life, the transparency and harmonization with the global developments.

Since July 1, 2012, it is possible to establish a one-man simplified joint stock company, convene the Board and General Assembly meetings via the electronic mean, assign non-partners as board members and even to assign legal persons directly as the members of the Board of Directors.


The "straw partners" which was a common practice for many years now remain in the past with the introduction of the new Code. As per the former TCC, the number of partners had have to be completed to five at the foundation stage of a joint stock company and the professional board member be given a share of the company, even if symbolically. And as the company itself would not possibly be a board member, the real person who represented the company had have to assume entire liabilities of the Board of Directors so that the companies had used to decline their liabilities by hiding behind such real persons.

The new TCC, however, makes all those practices unnecessary. A new period based on transparency and professionalism of the boards has commenced as of July 1, 2012.


An independent director is a real or legal person assigned as a member of the Board of Directors without holding any shares of the company. Those directors are not partners of the company but have all the rights of a board member and assume all liabilities and risks intrinsic to the board membership. Liabilities and risks assumed by an independent director can be reviewed under two main headings namely the legal liabilities and the criminal liabilities.


As per the former TCC, liabilities of the directors were several where, for example, a liability action would be litigated against one of the 5 directors and the entire damages would be collected from that director if the court ordered so. In such cases, the sentenced director would indemnify the damages and then recourse the other directors in proportion with their defaults and therefore would be held liable for his/her own default only.

However, pursuant to the differentiated succession rule introduced by the new Code, default rates shall be determined prior to conclusion of the case and each director shall be held responsible for his/ her share of default which has caused the damage taking into consideration the conditions reigned in occurrence thereof.

For example, a director who has not attended the board meeting where the decision that has caused the damage was taken or voted against such decision shall not be held responsible for the damage or participate in the amount of indemnification even if to be reimbursed for such amount later on.


Directors shall be liable for the tax debts and the debts to the Social Security Institution (SSI) to a specific extent regardless of whether they are the shareholders of the company or not.

As to the tax debts, the company should be in default of paying a part of or the entire tax debt for the directors to be held liable therefor. The directors cannot be personally recoursed for collection of the company's tax debts before all other remedies towards the company have been exhausted. On the other hand, the director should personally be in default in accrual of the tax debt which means that the tax debt should have arisen during the office term of the director and the director should have been authorized to bind and sign on behalf of the company. And as to the debts to SSI, the company should again be in default of paying a part of or the entire tax debt to SGK and the directors should be in default in accrual of the debt and authorized to bind and sign on behalf of the company.

It should be pointed out in terms of both the tax debts and the debts owed to SSI that the "differentiated succession" rule defined above is not applicable to the public debts where liability of each director should be considered as default-based, personal, unlimited and several.


Liabilities of an independent director expire upon discharge from liability and/or due to prescription, as is the case for the shareholding directors.

The Board of Directors is discharged from liability at the General Assembly. The shareholders who affirm discharging of the board from liability with their votes lose their right to sue the directors for any of their liabilities. Other shareholders' right of litigation expires after six months following the date of discharge at the General Assembly.

It should be noted here that the liabilities of the directors arisen from the foundation of the company and capital increase cannot be removed by way of compromise and release unless 4 years elapse after the registration date of the company. Furthermore, removal of liabilities arisen from the foundation of the company and capital increase by way of compromise and release cannot be approved at the General Assembly if 10% of the shareholders representing the registered capital and 5% of the shareholders of a publicly-held company use dissenting votes.

The prescription period for liability is 2 (two) years following a shareholder granted the right of action becomes aware of the damage and the director liable therefor, and 5 (five) years in any case following the act that led to the damage is performed. However, if the act requires a punishment and therefore is subject to a longer period of prescription as per the TCC, the same period of prescription applies to relevant action for damages.


To this end, a dual separation can be made in terms of criminal liability: cases requiring an administrative fine and cases requiring a punitive fine.

As is known, an administrative fine is only a sanction payable in cash whereas a punitive fine results in imprisonment if not paid. A combination of an administrative fine and a punitive fine is usually applied when a director fails in performing his/her duties with due care. For example, activities, financial status, origins and progression of transactions found to be unrecorded in a traceable and comprehensible manner as reported by an independent auditor require an administrative fine whereas any failure in delivering the document requested by the government agencies may result in imposing a punitive fine which may be converted to imprisonment of the director if not paid in full.

Some transactions or acts of a director including violation of confidentiality, forgery of official documents, intentional falsification of commercial ledgers, misstatement of capital transactions when founding a corporation and collection monies from the public by giving promises for increasing the corporate capital require imprisonment.

Board membership is a prestigious position requiring utmost care when managing and representing a company as well as assumption of great liabilities which may result in both administrative and punitive fines and even imprisonment.


Assignment of non-partners as directors of a company is a revolutionary development in the Turkish commercial law and maybe one of the best examples of shaping the law in the course of practice. This regulation in our new Commercial Code shall eliminate pious transfers of shares to directors and therefore the backlog of transactions and push the companies to adopt the professional management concept and pave the way for improvement of institutionalization in Turkey.

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.

Şeniz Uluköklü
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
Related Articles
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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