Many companies in Turkey don’t fail because of market conditions—they fail because of weak governance and weak controls: unclear authority, undocumented decisions, uncontrolled payments, and compliance gaps. These issues become especially risky in foreign-owned companies where shareholders are not physically present and rely on reports rather than daily oversight.
This guide explains corporate governance in Turkey with a practical focus on audit and internal controls: what to implement, why it matters legally, and how it reduces director/manager liability and shareholder disputes.
1) What Corporate Governance Means in Practice (Not Theory)
Corporate governance is the system that answers:
- Who can decide what?
- Who can spend what?
- Who approves loans, guarantees, and major contracts?
- Who sees financial information, and how often?
- How are conflicts of interest handled?
In Turkey, strong governance is not about bureaucracy—it’s about creating an evidence-backed decision system that prevents misuse and protects management when disputes arise.
2) The 3 Biggest Risk Areas Governance Must Control
A) Money Flows (Payments and Banking)
Most corporate disputes involve payments:
- unapproved expenses,
- related-party transfers,
- undocumented withdrawals,
- hidden guarantees.
A governance system must control bank access and payment approvals.
B) Authority (Signing and Representation)
If signing authority is too broad, the company can be bound to obligations without shareholder awareness. If it is too strict, the company can’t operate.
Governance must balance speed with control using thresholds and approval rules.
C) Compliance (Tax, SGK, Corporate Records)
Late filings and messy books create:
- penalties,
- audit risk,
- personal exposure discussions for management,
- difficulty in M&A exits.
Internal controls must include a compliance calendar and accountability.
3) Internal Controls Toolkit (What to Implement)
1) Authority Matrix (By Amount + Transaction Type)
Create a written matrix covering:
- procurement and supplier contracts,
- leases,
- hiring and compensation approvals,
- borrowing, guarantees, and security,
- asset sales/purchases,
- related-party agreements.
Use tiers:
- routine → single approval
- medium → dual approval
- high-risk → board/shareholder approval + joint signature
This prevents “one person can do everything” risk.
2) Payment Controls (The Practical Core)
Implement:
- two-person approval for payments above a threshold,
- documented invoice + contract requirement before payment,
- vendor onboarding checks (bank account ownership, tax number),
- monthly reconciliation review (bank vs ledger).
If a company controls payments, it prevents most abuses.
3) Reporting Package for Shareholders (Monthly/Quarterly)
A strong governance model includes a standard reporting pack:
- P&L and balance sheet,
- cashflow summary,
- bank movements summary,
- major contracts signed list,
- outstanding receivables/payables aging,
- compliance checklist status.
Foreign shareholders should make this a contractual obligation in the shareholders’ agreement.
4) Related-Party Transaction Policy
Many disputes in Turkey involve related-party contracts. Create rules for:
- disclosure of conflicts,
- pricing method (arm’s length logic),
- approval procedure (reserved matter),
- documentation standards.
This reduces tax and corporate litigation exposure.
5) Corporate Records Discipline (Minutes and Approvals)
Proper minutes are not “formalities.” They are evidence that:
- decisions were approved,
- management acted diligently,
- conflicts were disclosed.
Establish:
- template resolutions for common decisions,
- a secure archive system (digital + physical),
- a standard process for objections and voting records.
4) Audit in Turkey: What Role It Plays for Risk Reduction
“Audit” can mean different things in practice:
- statutory audit obligations (where applicable),
- contractual audit rights (investor-driven),
- internal audit or periodic compliance review.
For many private companies, the most valuable is a periodic governance and compliance audit that checks:
- payment approvals,
- contract documentation,
- tax/SGK filing health,
- authority compliance,
- related-party transaction evidence.
This can be quarterly or semi-annual and often prevents disputes by catching issues early.
5) How Governance Reduces Director/Manager Liability in Turkey
Management liability claims often say:
- “You acted without approval,”
- “You ignored risk,”
- “You misused company assets,”
- “You failed to supervise compliance.”
Internal controls protect management by creating:
- documented approvals,
- risk assessment evidence,
- compliance accountability,
- transparent reporting.
In disputes, the company that has a clean governance file usually has the stronger legal position.
6) A Practical 30-Day Governance Implementation Plan
If you want fast, real improvements, implement in this order:
- Define signing authority + banking access rules
- Implement payment approval thresholds
- Create monthly reporting pack template
- Set compliance calendar with owner/responsible person
- Add related-party policy + approval workflow
- Standardize corporate minutes and resolution templates
Most companies feel immediate risk reduction after steps 1–3.
FAQ
Do small companies in Turkey need corporate governance?
Yes—especially if there are multiple shareholders or foreign owners. Simple controls prevent most disputes and compliance problems.
What is the most important internal control?
Payment approval and banking access control is usually the single most effective control.
Can governance slow down operations?
Bad governance can. Good governance uses thresholds so routine work stays fast while high-risk actions require approvals.
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