Turkey: Insurance Of Shareholders In Joint-Stock Companies

Last Updated: 2 January 2019
Article by Çağdaş Güren

ABSTRACT

Pursuant to Turkish Commercial Code Law No. 6102 ("TCC"), some changes have been made regarding the establishment and shareholding structure of joint stock companies. One of these changes is to abolish the obligation of becoming a shareholder for member of board of directors. In this context, the questions in regards to insurance statues of shareholders have been increased. In this article, we will try to answer question marks related to insurance statues of shareholders.

Keywords: Shareholders of Joint-Stock Companies, Insurance Statues of Shareholders, Shareholder Board Members

INTRODUCTION

According to Social Insurances and General Health Insurance Law No.5510 ("Law No.5510") , the term "insured" is defined as the person who is paid a premium on his behalf or who pays his own premium  regarding to short and / or long-term insurance branches. As per Article 4 of same law, the shareholder board members are regarded as insured in the scope of (b) clause. Therefore, members of board of directors who are shareholders or non-shareholder board members will be examined separately.

  1. THE INSURANCE STATUES OF SHAREHOLDER BOARD MEMBERS

The shareholder board members are regarded as insured under Article 4-b of the Law No. 5510 from the date they were elected and they shall notify this situation to Social Security Institution ("SSI") within 15 days.

However there are several points to be considered here. One point is insurance statue of shareholder board member who is insured before the date of 01.01.2018 when Law No.5510 came into force under Article 4/1-a.The insurance statues of shareholders described above continue until their works are interrupted. It means that acquired rights of shareholder board members who are appointed before the date of 01.10.2008 under Article 4/1-a will remain to be protected. On the other hand, if the shareholders who were insured in 4-a status before the date of 01.01.2018 are elected as a board member first time after 01.01.2018, their work within the scope of 4-a will finalize on the date which they are elected as a board member and as of this date, insurance coverage will begin within the scope of 4-b.

The insurance statues of shareholder board members under Article 4/1-b ends after exiting the board. The company or the insured must notify its exit from the board of directors to the institution within 10 days.

Another essential point caused discussion pertaining the insurance statues of shareholder board members is that if there are not shareholder whether it can be declared as a 4/1-a insured on a company.

Article 53 of Law No. 5510 was amended by Law on Amendments to the Restructuring Some Receivables and the Law on Social Security and General Health Insurance and Other Certain Laws and Decree Laws Law No.6111 entered into force on 01.03.2011 ("Law No. 6111") and in case of overlapping of 4 / a (Social Security Institution) and 4 / b (social security organization for artisans and the self-employed) statues, 4/1-a status will be taken as the basis of insurance contrary to the past.

For this reason, there is no obligation to be insured within the scope of 4/1-b of the shareholder of the joint stock company working as 4/1-a insured in a workplace where the company is not a shareholder or a member of the board of directors on 01.03.2011 and after this date. However, they may also pay premiums within the scope of 4/1-b in accordance with their wishes. These premiums payments will be taken into consideration in the calculation of pension payments.

  1. THE INSURANCE STATUES OF SHAREHOLDERS WHO ARE NON-MEMBER OF BOARD

Although founder partners and shareholder board of directors are deemed as insured as per social insurance institution for tradesmen and craftsmen and other self employed Law no: 1479 ,according to Law No.5510, shareholders who are non-member of board and founder shareholders are excluded from compulsory scope of 4/1-b.

Within the context of the regulation mentioned above, if shareholders who are non-member of board takes another task in the company, they will be insured under the Article 4/1-a and they shall be paid.

  1. THE INSURANCE STATUES OF FOUNDER SHAREHOLDERS

Founder shareholders are not regarded as insured under Article 4/1-b in Law No.5510 after the date 1.10.2008. However they shall be notified as insured under Article 4/1-a on the condition that they are subject to employment contract in their own workplace.

  1. THE INSURANCE STATUES OF BOARD MEMBERS WHO ARE NOT SHAREHOLDERS

Due to the insurance statue of board members who are not shareholders is controversial topic in the doctrine, we observe this topic lastly. Law No.5510 does not clarify insurance statues of board members who are not shareholders. However the same law indicates that the workers who are employed subject to employment contract under one or several employer are regarded as insured under Article 4/1-a. Herein it should be examined whether the relationship between board members and companies is employment contract.

According to Turkish Code of Obligations Law No: 6098, the employment contract is an agreement between the employee undertakes to perform work in subordination to the employer with definite or indefinite duration and the employer who undertakes to pay him based on time and work. Besides that, Labor Law. No 4857 defines employment agreement that an agreement whereby the employee undertakes to perform work in subordination to the employer who undertakes to pay him in remuneration for.

The most distinguishable feature of the employment agreement is dependency component. Dependency component means that being audited by employer and strict adherence to the orders and instructions of the employer during the work.

Furthermore, pursuant to Article 365 of Turkish Code of Obligations, joint-stock companies are managed and represented by board of directors. Also Article 502 of Turkish Code of Obligations defines agency contract as an agreement which the proxy undertakes to transact principal's business. In accordance with those regulations, there are the views about that the relationship between board of directors and legal entity of company is more suitable to power of attorney than employment agreement. 

CONCLUSION

In conclusion, after the last regulations, the shareholder board members are regarded as insured from the date they were elected under the Article 4-b. Besides that shareholders who are not member of the board and founder shareholders were not regarded as insured in the context of the Article 4/1-b in the Law No.5510 after the date 01.10.2018. However those shareholders may be insured under the Article 4/1-a  if they take another task in the company and they may be paid.

In addition to that, board members who are not shareholders are not necessarily regarded as insured under the Article 4/1-b because of their adjectives as a board member. Nonetheless, they should be insured under the Article 4/1-a on the condition that they work depending on the employment agreement.

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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