Corporate governance is among the basics of the Turkish
Commercial Code1 ("TCC"), which was
entered into force in 2012 and is ratified recently. As globally
accepted, transparency, equal treatment, accountability and
responsibility are the mail principles of TCC in terms of corporate
governance. By doing so, the TCC aims to arrange a more reliable
Turkish commercial life, by protecting the corporations even from
their own shareholders, directors, holding companies
In this context, TCC imposes certain obligations on the group
companies to prevent the holding company to use its dominating
position over the affiliated company in a destructive way.
Affiliated Company Reports must be Prepared until March 31,
According to Article 199 of the TCC, the board of directors of
the affiliated joint stock companies (board of managers in the
limited liability companies) must prepare a report on its relations
with the holding and the affiliated companies within the first
three months of each activity year. The board of directors/the
board of managers, who fail to do so, are imposed a judicial fine
corresponding at least 200 days.
What is an Affiliated Company?
Under the TCC, the affiliated company would be constituted;
If a corporation directly or indirectly:
majority of the voting rights of another corporation,
is entitled to ensure the election of members forming a
resolution quorum in the management body of another commercial
entity under the articles of association, or
holds the majority of the voting right of another corporation,
directly or together with other shareholders.
Furthermore, if a commercial corporation is able to control
another corporation under its control in accordance with an
agreement or through other means; the initial corporation
constitutes the holding company and the latter the affiliated
The provisions relating to the group of companies in the TCC,
will be applied if headquarters of at least one of these companies
(holding company or affiliated company) is located in Turkey.
What must be included into the Affiliated Company Report?
TCC provides that the affiliated company report should cover the
Relationships with the holding company and with other
Performances and counter performances under legal
In case of measures imposed against the affiliated company by
the holding company, the reason of the measure and its advantages
and disadvantages for the affiliated company,
If a loss of the affiliated company by the holding company was
compensated, the method of compensation by the holding company or
what kind of a demand right from the holding has been provided to
the affiliated company against such loss.
Consequently, affiliated companies in Turkey must prepare their
affiliated company reports until March 31, 2016 in order for their
directors not to be imposed a judicial fine. Needless to say, the
report must be prepared in accordance with true and fair accounting
1 Turkish Commercial Code; dated January 13, 2011 and
numbered 6102 and published in the Official Gazette dated February
14, 2011 and numbered 27846.
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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