IT HAS ONCE AGAIN BECOME POSSIBLE TO ALLOCATE SIGNATORY RIGHTS
TO COMPANY OFFICIALS OTHER THAN THE AUTHORIZED BOARD OF DIRECTORS
1- The new law that came into force on 11.09.2014 publicly known
as "Torba Yasa" has implemented some considerable changes
to the Turkish Commercial Code ("TCC") including an
amendment to article 371 of the TCC, which has partially eased the
representation restrictions of companies.
2- Within the framework of TCC Article 371/3 before this
amendment; it was only possible to limit the signatory rights of
authorized company representatives to the company center or a
specific branch or diversify with regard to sole/joint signature.
As a result of these limitations, it was no longer possible to
group signature rights based on monetary limits or subject matter
of the transactions, which caused serious difficulties to companies
in practice. As a result of this former provision, companies were
initially issuing a simple signature circular, only comprising of
Board of Directors ("BoD") members and consecutively
issuing additional documents such as Power of Attorney in order to
authorize company officials for the day to day business activities
within their specific requirements.
3- With an addition of a new paragraph 7 to TCC of 371, it has
become possible for company BoD to appoint non-executive BoD
members or company officials (that work based on an employment
contract) as commercial representatives or other merchant
assistants with limited representation rights.
4- Duties and rights of such appointees will be clearly defined
with an internal directive that will be prepared in accordance with
the article 367 of the TCC; and it will be possible to give limited
representation rights to these people based on monetary limits or
the subject matter of the transactions. As a result of this new
provision, the internal directive has ceased to be an intra-company
document and become a document that is obligatory to register and
publish at the Trade Registry. This way, it is aimed to let third
parties know the representation limits of these people and prevent
any damage that may arise due to unauthorized representation. It is
regulated that limits of representation rights, duty definitions,
authorities and obligations of such non-executive BoD member and
company officials should clearly be defined with these internal
5- However, these internal directives will not explicitly name
these commercial representatives and merchant assistants. In order
to do this, Companies will have to assume a separate regulation and
have it registered at the Trade Registry as well. Moreover, the
company BoD's will continue to be jointly and severally
responsible for any and all damage that can be rendered by these
people to the company or third parties.
6- According to the amendment (regulated under article 132 of
the new law) made to article 679 of the TCC, this new procedure
will also be applicable for limited liability companies and they
will also be able to appoint commercial representatives and
merchant assistants and by following the same procedure.
HOW WILL GIVING REPRESENTATION RIGHT BY MEANS OF AN INTERNAL
DIRECTIVE WORK IN PRACTICE?
1- The first condition for transferring management rights is
presence of a relevant provision in the Company's Articles of
Association ("AoA"). Without this, a company resolution
to that effect would not be sufficient. Based on such an AoA
provision, the BoD can transfer some of its rights by issuing an
internal directive. The internal directive will define the company
management, how it is divided and transferred, duties, duty
definitions and their placement, who reports to whom, within the
frame of accountability and responsibility principles.
2- According to the circular published by Istanbul Chamber of
Commerce dated September 17, 2014 on Practice of the "Company
Internal Directives (Article 367-371-629 of TCC) Regarding Limited
Notarized Internal Directives regulating limited authorities of
company representatives to be issued by a BoD or General Assembly
resolution in Joint-Stock Companies and General Assembly Resolution
in Limited Liability Companies shall be registered and published in
the Trade Registry.Internal Directive may comprise of signatory
groups and their defined authorities, however no name of
representatives shall be given.Names and Turkish ID numbers of
representatives shall be stated on BoD or General Assembly
resolutions referencing the date and the number of the Internal
3- Following the registry and publish of the Internal Directive,
BoD resolution also needs to be registered and published in the
4- Practitioners must keep in mind that the application of such
procedures may differ in other trade registries.
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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