Key Responsibilities and Obligations of Company Directors and Shareholders in Turkey: A Guide to Corporate Governance and Compliance

Introduction:

In Turkey, as in many other jurisdictions, company directors and shareholders play crucial roles in ensuring the effective governance and compliance of businesses. Understanding their responsibilities and obligations is essential for maintaining transparency, accountability, and legal compliance within the corporate framework. This article aims to delve into the key responsibilities and obligations of company directors and shareholders in Turkey, focusing on corporate governance principles and compliance requirements. This question is especially very crucial for the investors planning for company registration in Turkey.

1. Corporate Governance Framework in Turkey:

– Turkey has a well-established corporate governance framework that emphasizes transparency, accountability, and fairness in business operations.
– The Capital Markets Board of Turkey (CMB) plays a significant role in regulating corporate governance practices, particularly for publicly traded companies listed on the Istanbul Stock Exchange (Borsa Istanbul).
– The principles of corporate governance in Turkey are largely aligned with international standards, including those outlined by the Organisation for Economic Co-operation and Development (OECD) and the International Corporate Governance Network (ICGN).

2. Responsibilities of Company Directors:

– Fiduciary Duty: Company directors in Turkey are bound by fiduciary duties, including the duty of care, loyalty, and good faith towards the company and its shareholders.
– Strategic Decision Making: Directors are responsible for making strategic decisions that promote the long-term interests of the company, including setting corporate objectives, approving business plans, and managing risks effectively.
– Compliance with Laws and Regulations: Directors must ensure that the company complies with all applicable laws, regulations, and corporate governance guidelines, including those related to financial reporting, taxation, and environmental sustainability.
– Board Oversight: Directors oversee the management of the company’s affairs and appoint executive officers, while also providing oversight to ensure effective risk management, internal controls, and ethical conduct.
– Accountability: Directors are accountable to shareholders and stakeholders for their actions and decisions, and they must act honestly, responsibly, and in the best interests of the company at all times.

3. Obligations of Shareholders:

– Voting Rights: Shareholders have the right to vote on significant corporate matters, including the election of directors, approval of financial statements, and major corporate transactions.
– Shareholder Meetings: Shareholders are entitled to participate in general meetings of the company, where important decisions are made, and they have the right to express their views, raise concerns, and vote on resolutions.
– Information Disclosure: Shareholders have the right to receive timely and accurate information about the company’s financial performance, operations, and material developments, enabling them to make informed decisions.
– Minority Shareholder Protection: Minority shareholders are afforded certain protections under Turkish law, including the right to challenge unfair treatment, related-party transactions, and actions that prejudice their interests.
– Shareholder Activism: Shareholders have the opportunity to engage in shareholder activism by exercising their rights to propose resolutions, nominate directors, and hold management accountable for performance and conduct.

4. Compliance Requirements:

– Financial Reporting: Companies in Turkey are required to prepare and disclose financial statements in accordance with Turkish Accounting Standards (TAS) or International Financial Reporting Standards (IFRS), depending on their size and listing status.
– Corporate Governance Disclosures: Listed companies must comply with the corporate governance principles and disclosure requirements set forth by the CMB, which includes disclosing information about board composition, executive compensation, related-party transactions, and internal control systems.
– Insider Trading Regulations: Directors, executives, and shareholders with access to material non-public information are subject to insider trading regulations, which prohibit the use of such information for personal gain or to manipulate the market.
– Anti-Corruption and Bribery Laws: Companies operating in Turkey must adhere to anti-corruption and bribery laws, including the Turkish Penal Code and the Anti-Corruption Law, which impose criminal penalties for bribery, embezzlement, and other corrupt practices.
– Data Protection and Privacy: Companies are required to comply with data protection and privacy laws in Turkey, including the Personal Data Protection Law (KVKK), which regulates the collection, processing, and transfer of personal data.

5. Enforcement Mechanisms and Penalties:

– Regulatory Oversight: The CMB, Ministry of Trade, and other regulatory authorities in Turkey oversee compliance with corporate governance and securities regulations, conducting inspections, investigations, and imposing sanctions for violations.
– Civil and Criminal Liability: Directors and shareholders may face civil liability for breaches of fiduciary duties, negligence, or misconduct, which could result in financial penalties, damages, or disqualification from holding office. In severe cases, criminal charges may be brought against individuals for fraud, insider trading, or other criminal offenses.
– Shareholder Lawsuits: Shareholders have the right to initiate legal proceedings against directors, executives, or other parties for actions that harm the company or its interests, such as breaches of fiduciary duties, mismanagement, or fraud.

Conclusion:

In conclusion, company directors and shareholders in Turkey play pivotal roles in upholding corporate governance standards and ensuring compliance with legal and regulatory requirements. By fulfilling their responsibilities and obligations with diligence, integrity, and transparency, directors and shareholders contribute to the sustainable growth, profitability, and reputation of businesses in Turkey’s dynamic business environment.

This article has provided an overview of the key responsibilities and obligations of company directors and shareholders in Turkey, emphasizing the importance of ethical conduct, accountability, and adherence to best practices in corporate governance and compliance. As Turkey continues to attract investment and expand its presence in the global economy, the commitment to sound corporate governance principles and regulatory compliance will remain essential for fostering investor confidence and long-term business success.