Introduction
Corporate governance has become a central pillar of Turkish company law, particularly after the enactment of the Turkish Commercial Code (TCC) No. 6102 and the strengthening of Capital Markets Board (CMB) regulations. Turkish joint stock companies (Anonim Şirket – A.Ş.) are subject to detailed governance rules designed to enhance transparency, accountability, and investor protection.
For foreign investors, private equity funds, and multinational corporations operating in Turkey, understanding corporate governance in Turkish joint stock companies is critical. Governance standards affect board composition, shareholder rights, disclosure obligations, and liability exposure.
This article provides a comprehensive overview of governance principles applicable to Turkish joint stock companies, including statutory framework, board structure, minority rights, compliance obligations, and best practice considerations.
1. Legal Framework
Corporate governance in Turkish joint stock companies is governed by:
- Turkish Commercial Code (TCC) No. 6102
- Capital Markets Law No. 6362 (for public companies)
- Corporate Governance Communiqués issued by the CMB
- Secondary legislation and trade registry regulations
The TCC applies to all joint stock companies.
Publicly traded companies are subject to additional CMB governance requirements.
2. Governance Structure of a Joint Stock Company
Under Turkish law, a joint stock company has two primary corporate bodies:
1️⃣ General Assembly (Shareholders)
2️⃣ Board of Directors
Turkey follows a single-tier board system, unlike certain European jurisdictions with dual board structures.
3. General Assembly
The General Assembly is the supreme decision-making body.
It has exclusive authority over:
- Amendment of articles of association
- Election and dismissal of board members
- Approval of financial statements
- Dividend distribution
- Capital increases and decreases
- Mergers and demergers
Shareholders exercise voting rights proportionate to their shares unless otherwise specified.
4. Board of Directors
The Board of Directors manages and represents the company.
Key features:
- At least one member required
- May consist of real persons or legal entities
- No nationality requirement
- No shareholding requirement (unless stated in articles)
Board members owe fiduciary duties to the company.
5. Duties of the Board
Under TCC, directors must:
- Act in good faith
- Exercise duty of care
- Protect company interests
- Avoid conflicts of interest
- Maintain confidentiality
They are personally liable for breach of duties.
6. Representation Authority
The Board may:
- Represent the company jointly or severally
- Delegate representation to executive directors
Representation powers must be registered with the Trade Registry.
Unauthorized transactions may bind the company vis-à-vis third parties in certain circumstances.
7. Independent Board Members (Public Companies)
Public joint stock companies must appoint:
- Independent board members
Independence criteria include:
- No financial ties to controlling shareholders
- No employment relationship
- No material business relationship
Independent directors enhance minority protection.
8. Corporate Governance Committees
Public companies must establish committees such as:
- Audit Committee
- Corporate Governance Committee
- Early Risk Detection Committee
- Nomination and Remuneration Committees
Private companies are not legally required to establish such committees but may adopt them as best practice.
9. Minority Shareholder Rights
Corporate governance in Turkish joint stock companies includes strong minority protections.
Minority shareholders (typically 10% or 5% in public companies) may:
- Request general assembly meeting
- Add agenda items
- Demand special audit
- File annulment actions
- Request dissolution in justified cases
These rights protect against majority abuse.
10. Information and Inspection Rights
Shareholders have:
- Right to request financial information
- Right to examine company documents
- Right to inspect balance sheet and reports
Board must respond unless disclosure harms company interests.
11. Dividend Policy
Dividend distribution is subject to:
- Annual profit calculation
- Legal reserve requirements
- General assembly resolution
Public companies must disclose dividend policies in advance.
12. Conflict of Interest Rules
Directors must:
- Avoid self-dealing transactions
- Disclose related-party transactions
- Abstain from voting when conflicted
Public companies face stricter disclosure obligations.
13. Transparency and Disclosure
Public joint stock companies must:
- Publish financial statements quarterly
- Disclose material events
- Announce insider information
- Maintain investor relations department
Failure to comply may result in administrative sanctions.
14. Internal Control and Risk Management
Companies are encouraged to implement:
- Internal audit mechanisms
- Risk assessment systems
- Compliance programs
- Whistleblower channels
Large companies must establish risk detection committees.
15. Corporate Governance Principles (CMB)
The CMB Corporate Governance Principles are based on:
- Transparency
- Fairness
- Accountability
- Responsibility
For public companies:
- Certain principles are mandatory
- Others follow “comply or explain” model
Private companies may voluntarily adopt these standards.
16. Liability of Directors
Directors may face:
- Civil liability
- Criminal liability
- Administrative fines
- Tax liability
They are jointly liable for damages caused by breach of duty.
Claims may be filed by:
- Company
- Shareholders
- Creditors (in certain cases)
17. Corporate Governance in Closely Held Companies
In non-public joint stock companies:
- Governance structure is more flexible
- Shareholders’ agreements often supplement TCC provisions
- Board composition may be more concentrated
Family-owned businesses often implement customized governance models.
18. ESG and Sustainability Trends
Environmental, Social, and Governance (ESG) factors are gaining importance.
Public companies are increasingly required to:
- Disclose sustainability reports
- Comply with international reporting standards
Foreign investors prioritize ESG compliance in Turkish investments.
19. Practical Governance Challenges
Common challenges include:
- Majority shareholder dominance
- Weak board independence in private firms
- Informal decision-making practices
- Limited transparency in family-owned companies
Professionalization improves investor confidence.
20. Best Practices for Foreign Investors
Foreign investors should:
- Ensure board representation
- Negotiate reserved matters
- Strengthen audit mechanisms
- Align articles of association with shareholders’ agreement
- Conduct governance due diligence before investment
Corporate governance quality directly affects investment security.
Conclusion
Corporate governance in Turkish joint stock companies has significantly evolved through legislative reform and regulatory oversight. The Turkish Commercial Code and Capital Markets Law provide a structured governance framework emphasizing accountability, transparency, and minority protection.
For foreign investors and institutional stakeholders, governance standards are not merely formal requirements but essential risk management tools. Proper board structuring, compliance mechanisms, and transparency practices enhance corporate stability and long-term value creation.
When effectively implemented, corporate governance in Turkey supports sustainable investment growth and strengthens investor confidence in the Turkish corporate ecosystem.
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