Ⅰ. INTRODUCTION
Legal entities are one of the fundamental elements of legal and economic life. Capital companies play a dominant role in the conduct of commercial activities. However, the fact that companies are legal entities does not change the fact that real persons are behind the management and representation activities. Pursuant to the Turkish Commercial Code No. 6102 ("TCC") and the Turkish Criminal Code No. 5237 ("TCRC"), company managers and board members operating under the umbrella of a legal entity bear personal criminal liability for certain unlawful acts. This situation is intended to ensure that the economic decision-making processes of companies are transparent and lawful.
In the performance of their duties, board members and executives are liable not only to the company, but also to the public, third parties and state authorities. This multidimensional responsibility is regulated under both private and public law. While the TCC regulates the duty of care and loyalty of managers within the framework of norms aimed at preventing fraudulent and unlawful transactions, the Turkish Criminal Code provides for direct criminal sanctions on managers if certain acts constitute a crime. In this context, the activities of managers are scrutinized both financially and publicly.
Due to the breadth of their fields of activity and the complexity of their duties, company executives may sometimes unknowingly cause unlawful acts. On the other hand, their consciously committing acts against commercial ethics, crimes such as tax evasion, fraud or misappropriation of the company's assets also give rise to criminal liability. Indeed, these responsibilities serve the purpose of protecting not only the economic structure of the company, but also the order of the markets, the rights of third parties and public trust.
Therefore, in this article, the criminal liability of company executives and board members will be evaluated from a multi-dimensional perspective within the scope of the TCC and the TCRC. First, the criminal sanctions of the executives in case of breach of their duties within the framework of the special provisions regulated in the TCC will be discussed, and then the criminal responsibilities will be detailed according to the general crime types in the TCRC. Thus, the circumstances in which company directors assume personal liability and the limits of this liability will be revealed.
ⅠⅠ. GENERAL PRINCIPLES
The management and representation of capital companies, particularly joint stock and limited liability companies, are carried out by the members of the board of directors and authorized managers in accordance with the principles set forth in the law. These persons are not only obliged to protect the interests of the company while fulfilling their duties, but also bear civil and criminal liability.
The criminal liability of the members of the board of directors and managers is valid not only against the company, but also against shareholders, creditors and public authorities, and the scope of this liability is determined by both private and public law norms. Within the framework of the TCC and the TCRC, the activities of directors are based on the principles of duty of care and loyalty, financial responsibility, protection of the company's assets and avoidance of fraudulent transactions against third parties.
In capital companies, the veil of legal personality generally ensures that the responsibilities for management and representation activities remain with the company. However, under certain circumstances, managers or board members behind the legal entity may be held personally liable. At this point, the principles of fault liability and tort liability come into play. In the event that the company or third parties are harmed as a result of a negligent or intentional act, the directors may face both civil and criminal sanctions.
The directors are jointly liable for the acts committed by them to the extent that they participate in the decisions of the board of directors. However, members who vote against an unlawful decision and record it in the minutes may be released from this responsibility. Likewise, the extent of criminal liability differs between acts committed by directors negligently and acts committed intentionally. Taking these differences into account, the TCC and the TCRC provide specific sanctions for each of the acts that violate the duties of management and representation.
ⅠⅠⅠ. CRIMINAL LIABILITY UNDER TURKISH COMMERCIAL CODE
While the TCC regulates and supervises the activities of managers and board members in many aspects, it also provides for criminal sanctions for those who perform their duties unlawfully. In this context, especially breaches of the duty of care and loyalty, financial statement fraud, unlawful general assembly resolutions and misuse of company assets lead to criminal liability.
Breach of Duty of Care and Loyalty (TCC Art. 369, 553)
Article 369 of the TCC requires the members of the board of directors and managers to act with the diligence of a prudent manager and to act in accordance with the interests of the company while fulfilling their duties. In the event of a breach of this obligation, the person or persons concerned shall be liable to indemnify the damage suffered by the company. However, criminal liability will arise if such violations are committed consciously, i.e. willfully. For example, if a member of the board of directors damages the company by using the company's assets for his/her personal benefit or cooperates with a rival company, this is considered as misconduct and criminal sanctions are imposed under both the TCC and the TCRC. Article 553 of the TCC, on the other hand, stipulates that such liability of the directors applies not only to the company, but also to creditors and third parties.
Preparation of Fraudulent Financial Statements (TCC Art. 562/1-a)
Article 562 of the TCC stipulates criminal sanctions in the event that the financial statements prepared by company executives contain false information. Preparation of fraudulent financial statements is considered a serious offense since it leads to misleading shareholders and creditors and violating public order. According to this provision, managers who prepare false balance sheets, profit and loss statements or income and expense reports are subject to a judicial fine or imprisonment. In addition, if such actions cause financial loss to the company, the relevant executives are also liable to compensate for the loss.
Violation of General Assembly Resolutions (Art. 562/2 TCC)
The members of the board of directors are obliged to comply with the decisions of the general assembly, which is the highest decision-making body of the company. However, if the directors take actions contrary to the decisions of the general assembly, this constitutes unlawful management and criminal liability arises. For example, the failure of the members of the board of directors to pay dividends despite the general assembly's decision to distribute dividends may lead to criminal liability.
Misuse of Company Assets (TCC Art. 562/1-b)
Board members and executives are obliged to protect and increase the company's assets. However, the expenditure of company resources for personal interests or the deliberate diminution of company assets give rise to criminal liability of the directors. Pursuant to Article 562 of the TCRC, directors who misuse company assets are subject to imprisonment. For example, unauthorized withdrawal of money from the company's coffers, use of company resources for personal expenses or intentional loss of company assets fall within the scope of this offense. Such acts constitute offenses not only under the TCC, but also under the fraud provisions of the TCRC (Art. 157-158 TCRC).
Joint Liability and Countervoting Rights
Under the TCC, the members of the board of directors are jointly and severally liable for the decisions they take. However, the members who vote against an unlawful decision or submit a dissenting opinion may be released from criminal liability. This requires the effective use of the right to vote against, which must be recorded in the decision book. Thus, it is ensured that the responsibility is imposed only on the manager or managers who committed the act.
Ⅳ. CRIMINAL LIABILITY UNDER THE TURKISH CRIMINAL CODE
Legal Framework of Criminal Liability of Legal Entities
Turkish law does not directly recognize the criminal liability of legal entities. Pursuant to the principle of individuality of criminal responsibility, only natural persons who commit the act are subject to criminal sanctions. However, in some special cases, legal entities are also held indirectly responsible for unlawful acts and are subject to administrative sanctions rather than criminal sanctions. This approach is clearly set forth in Article 20 of the TCRC with the provision "No criminal sanctions may be imposed on legal entities."
However, the veil of legal personality can be lifted and the managers or authorized persons on behalf of the company can be directly held criminally liable for crimes committed during the activities of legal entities. In this framework, if company executives use the company as an instrument of crime, their personal criminal liability arises and criminal investigations are conducted against the relevant real persons. This is particularly important for crimes such as tax offenses, fraud, forgery of documents and fraudulent transactions.
In addition, security measures may also be imposed on legal entities. These measures are regulated under Article 60 of the TCRC and include sanctions such as confiscation of legal entities' profits derived from crime, revocation of their operating licenses or prohibition from certain activities.
Liability of Managers for Using a Legal Entity as a Vehicle
The TCRC regulates the criminal liability of company managers and board members for their personal actions. The actions of company directors may be considered within the scope of various crimes such as abuse of office, fraud, forgery of documents, tax evasion. The TCRC also recognizes the criminal liability of real persons behind legal entities, and provides that under certain circumstances, directors themselves may face criminal sanctions. In cases where legal entities are instrumentalized to commit crimes, the criminal liability of the executives who are the perpetrators of the act directly comes to the fore. For example:
- Issuing false invoices for the purpose of tax evasion,
- Obtaining unjust gains through the company for fraudulent purposes,
- Misrepresentation of the financial structure of the company through the preparation of false financial statements.
In such cases, personal criminal liability is envisaged, as the criminal act is committed directly by board members or company executives. At the same time, security measures may also be imposed on the company's activities due to the criminal act. This has been developed to prevent the abuse of legal entities.
Abuse of Trust (Article 155 of the TCRC)
Company executives and members of the board of directors are vested with broad powers over the management of the company's assets and resources. They must use these powers and responsibilities in line with the interests of the company. However, if the managers use these powers for their own benefit or for the benefit of third parties, the crime of abuse of trust occurs pursuant to Article 155 of the TCRC. The qualified form of the crime occurs when the perpetrator misuses the property entrusted to him due to his profession, duty or legal responsibility. If company executives misuse their commercial activities and authorities, this crime is considered as a qualified form and the penalty is more severe.
Crime of Fraud (TCRC Art. 157-158)
Company executives are punished under the crime of fraud if they cause damage to third parties or the company through deceptive behavior. Simple fraud, which is regulated under Article 157 of the TCRC, covers the damage caused to third parties by managers by providing false information or issuing false documents. Qualified fraud (Article 158 of the TCRC), which carries more severe sanctions, involves misconduct related to public institutions or in a way that harms the commercial activities of the company. For example, a member of the board of directors submitting false financial statements when applying for a loan on behalf of the company or transferring company assets to another company through fictitious contracts may be considered as fraud offenses. In case of qualified fraud, the penalty may be imprisonment from 2 to 7 years and a judicial fine.
Crimes of Forgery of Documents (TPC Art. 204-207)
Articles 204 and 207 of the TCRC regulate the offenses of forgery of official and private documents. Company executives are criminally liable if they falsify official documents or forge documents. These offenses damage the credibility of the company and cause irreparable damages in commercial relations. For example, if a manager uses a forged signature on an official document issued on behalf of the company or prepares misleading accounting records, it is considered within the scope of the crime of forgery of documents. The penalty for forgery of official documents is imprisonment from 2 to 5 years. In case of forgery of private documents, the penalty is imprisonment from 1 year to 3 years.
Tax Evasion Crime (TCRC Art. 359)
Tax evasion is regulated under Article 359 of the Turkish Criminal Code and it is stipulated that criminal liability will arise if company executives provide misleading information in their tax returns or avoid tax liabilities by using false documents. The offense of tax evasion puts both the company and the managers under financial and legal risk and requires prosecution. For example, if a manager attempts to obtain an unjustified VAT refund by issuing false invoices or evades tax liability by under-declaring the company's revenues, he/she may face imprisonment and heavy fines. The prison sentence for this act can range from 18 months to 5 years.
Disclosure of Trade Secrets (Art. 239 TCRC)
Article 239 of the TCRC criminalizes the unauthorized disclosure of trade secrets, customer information or sensitive information regarding the economic situation of the company. Board members and executives face criminal sanctions if they share the company's trade secret information with third parties or use it for their personal benefit. For example, if a director provides information about the company's customer portfolio to a competitor or shares confidential information about the tender process, this is considered within this scope and may result in imprisonment from 1 to 3 years.
V. CRIMINAL LIABILITY OF COMPANY DIRECTORS IN THE CONTEXT OF OCCUPATIONAL ACCIDENTS
Company managers are obliged to act in accordance with occupational health and safety legislation. These obligations of managers cover issues such as preventing occupational accidents, ensuring the safety of employees and taking necessary measures. Although the principle of individuality of criminal responsibility is taken as a basis within the scope of the Turkish Criminal Code, in some cases, even if there is no personal fault of the managers, they may be criminally liable for their negligence or violations when their powers and responsibilities are evaluated. The responsibility of managers can be evaluated within the framework of the following elements:
Violation of Legal Obligations: Failure of the employer to comply with occupational health and safety legislation gives rise to the liability of managers. For example, if necessary safety equipment is not provided or workplace safety is not ensured, managers may be held liable in tort.
Lack of Supervision and Control: Members of the board of directors are obliged to supervise the implementation of safety measures at the workplace. Lack of supervision and control may lead to occupational accidents. Detection of such deficiencies increases the responsibility of managers.
Training and Information Obligation: Managers are obliged to ensure that employees are trained on occupational health and safety issues. If failure to provide adequate training or information to employees causes occupational accidents to occur, the responsibility of managers arises.
Negligent Behavior: If the personal misconduct of the managers contributes to the occurrence of occupational accidents, the managers may be subject to tort liability for this reason. For example, if the manager creates a dangerous situation at the workplace by violating the occupational safety rules, liability arises.
Occupational accidents are an important area of responsibility for company managers. Managers are obliged to take the necessary measures regarding occupational health and safety, to ensure the safety of employees and to avoid unlawful behavior. Damages arising as a result of occupational accidents are evaluated within the framework of tort liability and the liability of managers arises in case of failure to act in accordance with occupational health and safety legislation.
In this context, the prevention of occupational accidents is only possible if managers fulfill their duties effectively and responsibly. Damages arising as a result of occupational accidents not only give rise to the employer's liability for compensation, but also expose the managers to tort liability depending on their fault.
Ⅵ. CONCLUSION
Company executives and board members bear significant criminal responsibilities under both the TCC and the Turkish Criminal Code. These responsibilities are directly related to the company's financial status, commercial activities and obligations to third parties. It is of great importance for board members and managers to act in accordance with the law, to protect the interests of the company and to preserve public order in order to avoid criminal liability.
The provisions of the TCC require the executives to exercise utmost care when preparing financial statements and performing transactions on behalf of the company; otherwise, both criminal and civil liabilities will arise. Regulations under the TCRC, on the other hand, provide for criminal liability in cases where company executives and board members abuse their powers to the detriment of the company and third parties, and crimes such as abuse of trust, fraud, forgery of documents, tax evasion and disclosure of trade secrets may expose company executives to severe criminal sanctions.
For this reason, many regulations have been stipulated at the legal level and these regulations aim to prevent the abuse of the powers granted to company managers and board members, to ensure that company activities are carried out in accordance with the law, to prevent arbitrary behavior of managers and to deter unlawful acts.
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