Introduction
Corporate governance principles for listed companies in Turkey are a central part of Turkish capital market regulation. A company whose shares are traded on Borsa İstanbul is not managed only for the interests of controlling shareholders or board members. It must operate under a transparent, accountable, fair and responsible governance structure that protects investors, minority shareholders, creditors, employees and other stakeholders.
The main regulatory source is the Communiqué on Corporate Governance II-17.1, issued by the Capital Markets Board of Türkiye, known as the CMB in English and SPK in Turkish. The CMB’s official legislation list identifies the Communiqué on Corporate Governance II-17.1 as one of the core regulations applicable to issuers, together with regulations on sustainability principles, dividends, buybacks, mergers, takeover bids, squeeze-out and sell-out rights, and voting by proxy.
Corporate governance is not merely an internal management issue. In listed companies, governance quality directly affects market confidence, valuation, access to financing, investor relations, public disclosure reliability and legal liability. Weak governance may result in related-party abuses, misleading disclosures, unfair dilution, shareholder disputes, regulatory sanctions and investor claims. Strong governance, on the other hand, supports trust in the company and the capital market.
Legal Framework of Corporate Governance in Turkey
The core legal framework for corporate governance in Turkish listed companies is based on Capital Markets Law No. 6362, the Communiqué on Corporate Governance II-17.1, the Turkish Commercial Code, Borsa İstanbul rules, KAP disclosure procedures and other CMB regulations. The CMB’s official communiqué list states that the Communiqué on Corporate Governance II-17.1 was published on 3 January 2014, making it one of the main secondary regulations governing listed companies.
The official English version of Communiqué II-17.1 states that its purpose is to determine corporate governance principles and the procedures and principles relating to related-party transactions to be applied by corporations. It also states that certain categories of corporations, such as publicly held corporations whose shares are not traded on the exchange, are not subject to some chapters of the communiqué, while listed corporations remain within the main corporate governance framework.
This structure shows that Turkish corporate governance law is not only a voluntary best-practice code. Certain principles are mandatory for listed companies, while other principles operate under a comply-or-explain approach. Listed companies must therefore understand which rules are compulsory, which require explanation if not complied with, and which create additional disclosure obligations.
Main Objectives of Corporate Governance
Corporate governance in Turkish capital markets is built on four core concepts: fairness, transparency, accountability and responsibility. These concepts guide how listed companies should treat shareholders, disclose information, structure their boards, manage stakeholder relations and control conflicts of interest.
Fairness requires equal treatment of shareholders, especially minority shareholders. Transparency requires accurate, timely and complete public disclosure. Accountability requires the board and management to be answerable for their decisions. Responsibility requires the company to operate lawfully, ethically and with awareness of its duties toward stakeholders and the market.
For listed companies, these principles are especially important because ownership and control may be separated. A controlling shareholder may dominate the board, while thousands of retail and institutional investors hold minority shares. Corporate governance rules help prevent the abuse of control and ensure that market investors receive reliable information.
Scope of the Corporate Governance Communiqué
Communiqué II-17.1 applies primarily to corporations whose shares are traded on the relevant Borsa İstanbul markets within the scope of the communiqué. The official text provides exclusions for certain corporations, including publicly held corporations whose shares are not traded on the exchange and corporations whose shares are traded on markets, marketplaces or platforms outside the specified markets.
The communiqué also regulates related-party transactions, investor relations obligations and certain securities, pledges, mortgages and sureties. This is significant because corporate governance is not limited to board composition. It also covers transactions that may affect shareholder value and minority investor protection.
Following amendments published in 2020, the communiqué also links corporate governance reporting with sustainability principles. The official English text notes that corporations other than those excluded under the relevant paragraph are subject to sustainability principles and that corporate governance compliance reports must include explanations on the sustainability principles compliance outline.
Shareholder Rights
Shareholder rights are one of the most important pillars of corporate governance. Listed companies must facilitate the exercise of shareholder rights and avoid practices that make participation difficult. Shareholders should be able to receive information, participate in general assembly meetings, vote, ask questions, review disclosures and benefit from dividend rights where dividends are distributed.
The CMB’s corporate governance principles emphasize transparency around dividend rights. The official English text provides that corporations should have a clearly defined and consistent dividend distribution policy, submit it to the approval of shareholders at the general assembly and disclose it through the corporate website. It also states that if the board proposes not to distribute dividends, the reason and information on how the retained amount will be used should be included in the relevant agenda item.
Transferability of shares is also important. The corporate governance principles state that practices making free transfer of shares difficult should be avoided. This is essential for listed companies because market liquidity and investor confidence depend on the ability of shareholders to trade their shares freely within the legal framework.
General Assembly Practices
The general assembly is the main forum where shareholders exercise key rights. Listed companies should conduct general assembly meetings transparently, lawfully and in a way that allows shareholders to participate effectively. Agenda items should be clear, documents should be made available in advance, voting procedures should be fair, and questions from shareholders should be addressed properly.
In practice, general assembly governance involves several issues: timely announcement of the meeting, publication of information documents, disclosure of board proposals, explanation of dividend decisions, election of board members, approval of financial statements, authorization of related-party matters where required and proper recording of meeting minutes.
A listed company should avoid using procedural complexity to discourage minority shareholders. Long, unclear agenda items or insufficient disclosure may undermine shareholder rights. Good governance requires that shareholders understand what they are voting on and why.
Board of Directors and Governance Responsibility
The board of directors is the central body responsible for governance. In listed companies, the board does not merely approve management decisions. It must supervise strategy, risk management, financial reporting, internal control, public disclosure, related-party transactions and compliance with capital market rules.
A properly functioning board should include members with sufficient experience, independence, financial literacy, legal awareness and sector knowledge. Board members should question management where necessary and should not approve major decisions mechanically. Their duties are particularly important in public companies because board decisions may affect investors who are not directly represented in management.
The board should also ensure that the company has effective internal systems. These systems include audit, risk management, investor relations, legal compliance, sustainability reporting, corporate governance reporting and KAP disclosure procedures. A board that fails to establish such systems may expose the company and directors to liability.
Independent Directors
Independent directors are one of the most important safeguards in listed company governance. Their function is to provide objective oversight, reduce conflicts of interest, protect minority shareholders and improve board accountability. In companies with controlling shareholders, independent directors are particularly important because they may help prevent decisions that benefit the controlling group at the expense of the company or minority investors.
Independence is not only a formal title. A director must be capable of acting independently in substance. A person who is economically, professionally or personally dependent on the controlling shareholder may not provide effective independent oversight. Therefore, listed companies should treat independence as a governance function rather than a box-ticking requirement.
Independent directors are especially important in related-party transactions, audit committee work, risk management, corporate governance committee work and major corporate decisions. Their objections, questions and votes may become relevant if a transaction is later challenged by investors or reviewed by the CMB.
Board Committees
Board committees are practical tools for improving governance quality. Listed companies generally establish committees such as the audit committee, corporate governance committee, early detection of risk committee, and in some cases other specialized committees. These committees help the board review technical matters more effectively.
The audit committee plays a key role in financial reporting, internal control, independent audit and accuracy of public disclosures. The corporate governance committee may oversee compliance with corporate governance principles, investor relations and board nomination processes. The early detection of risk committee supports risk identification, monitoring and reporting.
Committees should not be symbolic. They should meet regularly, keep records, prepare reports and escalate important findings to the board. A committee that exists only on paper does not protect the company from liability. Effective committee work may also protect directors by showing that decisions were reviewed through a structured governance process.
Investor Relations Department
Investor relations is a mandatory and practical component of listed company governance. A listed company must communicate with investors accurately, consistently and equally. Investor relations personnel act as a bridge between the company, shareholders, analysts, institutional investors and regulators.
The purpose of investor relations is not to promote the share price. It is to ensure transparent and lawful communication with the market. Investor relations teams should help shareholders exercise rights, respond to information requests within legal limits, coordinate general assembly procedures, support KAP disclosures and assist in corporate governance reporting.
The official Communiqué II-17.1 text states that certain corporations excluded from specified corporate governance provisions are also not subject to Article 11 on the investor relations department, which confirms that investor relations obligations are a distinct and important part of the corporate governance framework for relevant listed companies.
Public Disclosure and Transparency
Public disclosure is at the heart of Turkish corporate governance. A listed company must ensure that investors have access to accurate, timely and complete information. Disclosure obligations are not limited to financial statements. They also include material events, annual reports, corporate governance compliance reports, sustainability disclosures, general assembly documents and website information.
The CMB corporate governance principles require corporate websites to include trade registry information, current shareholder and management structure, details about privileged shares, the latest articles of association, material event disclosures, financial statements, annual reports, prospectuses, general assembly agendas, attendance lists, minutes, proxy voting forms, dividend policy, disclosure policy, ethical rules and other investor-relevant information. They also state that the corporate website should contain at least the last five years of information.
This website obligation is not merely cosmetic. It ensures that investors, including foreign investors, can access governance information without relying on informal sources. A company with an incomplete or outdated website may create investor distrust and compliance risk.
English Disclosure and Foreign Investors
Foreign investors are significant participants in Turkish capital markets. For this reason, corporate governance principles also address foreign-language disclosure. The official English text of the CMB principles states that financial statement notifications, except material event disclosures and notes, that must be publicly disclosed under capital markets legislation should be disclosed on the Public Disclosure Platform in English as well as Turkish. It also states that English disclosures should be true, complete, direct, understandable, satisfactory and consistent with the Turkish version.
This principle supports equality of information between domestic and foreign investors. If English disclosures are incomplete, delayed or inconsistent with Turkish disclosures, foreign investors may be disadvantaged. Listed companies with international investor bases should therefore treat English disclosure as part of their governance strategy.
Corporate Governance Reporting Through KAP
Corporate governance compliance is reported through KAP. The SPK announced that, pursuant to its decision dated 10 January 2019 and numbered 2/49, corporate governance compliance reporting under Communiqué II-17.1 must be made through the Public Disclosure Platform by using the Corporate Governance Compliance Report, known as URF, and the Corporate Governance Information Form, known as KYBF. The SPK announcement states that URF is used to report compliance with voluntary principles, while KYBF provides information on current corporate governance practices.
The same announcement states that these reports must be made annually through KAP within the financial reporting notification period and, in any event, at least three weeks before the general assembly meeting; it also states that necessary explanations must be included in the annual report under Article 8 of Communiqué II-17.1.
This reporting structure is significant because it transforms corporate governance into a publicly verifiable system. Investors can compare companies, identify areas of non-compliance and evaluate whether explanations are satisfactory.
Comply-or-Explain Approach
Turkish corporate governance reporting relies partly on a comply-or-explain model. Some principles are mandatory, while others are voluntary but require explanation if not followed. This approach recognizes that not every company has the same structure, size, shareholder base or operational complexity, while still requiring transparency.
The SPK’s 2019 announcement explains that URF is used for reporting compliance with voluntary principles, while KYBF is used for providing information on existing corporate governance practices. This means a company may not always be sanctioned merely for not applying a voluntary principle, but it must disclose its compliance status and explain its practices.
The quality of explanations matters. A generic statement such as “the principle is not applied because it is not mandatory” is weak. A strong explanation should identify why the principle is not applied, whether the company plans future compliance, what alternative safeguards exist and whether non-compliance creates any conflict of interest or investor risk.
Related-Party Transactions
Related-party transactions are among the most sensitive issues in corporate governance. These transactions may involve the listed company and its controlling shareholder, group companies, directors, executives or entities connected with them. Such transactions can be legitimate, but they may also be used to transfer value away from the listed company.
Communiqué II-17.1 expressly states that one of its purposes is to determine principles and procedures relating to related-party transactions to be applied by corporations. This confirms that related-party transaction control is a core component of Turkish corporate governance regulation.
Listed companies should evaluate related-party transactions carefully. They should determine whether the transaction is at arm’s length, whether independent valuation is needed, whether board or general assembly approval is required, whether independent directors should be involved and whether KAP disclosure is necessary. Poor handling of related-party transactions may lead to minority shareholder claims, CMB review and reputational harm.
Guarantees, Pledges, Mortgages and Sureties
Corporate governance rules also address securities, pledges, mortgages and sureties provided by listed companies. These transactions can create serious risks if a listed company provides guarantees or collateral for the benefit of controlling shareholders, group companies or related parties without proper corporate justification.
Communiqué II-17.1 states that certain publicly held corporations whose shares are not traded on the exchange are not subject to the provisions of Article 12 regarding securities, pledges, mortgages and sureties, which shows that such matters form a distinct compliance area under the communiqué for relevant listed companies.
From an investor protection perspective, these rules matter because guarantee and collateral obligations may create hidden financial risk. A company that guarantees another group company’s debt may become exposed to liabilities not visible from ordinary operating performance. Such transactions should be disclosed and approved in accordance with applicable rules.
Dividend Policy and Minority Shareholder Protection
Dividend policy is a key governance issue because it affects investor expectations and shareholder returns. The CMB principles require a clear and consistent dividend distribution policy, shareholder approval at the general assembly and disclosure through the corporate website. They also require explanation where the board proposes not to distribute dividends.
A transparent dividend policy helps investors understand whether the company prioritizes reinvestment, debt reduction, growth or cash distribution. It also reduces conflicts between controlling shareholders and minority investors. If a company retains profits without explanation, minority shareholders may question whether funds are being used efficiently.
A balanced dividend policy should consider both shareholder interests and the company’s long-term needs. The CMB principles expressly state that a balanced policy should be followed between shareholder benefits and corporate interests.
Corporate Website as a Governance Tool
The corporate website is an important governance tool. It should not be treated as a marketing page only. Under the CMB principles, the website must include a wide range of governance information, including shareholder structure, privileged shares, articles of association, material disclosures, financial statements, annual reports, prospectuses, general assembly documents, dividend policy, disclosure policy and ethical rules.
For investors, the website provides a practical way to evaluate governance quality. A listed company that publishes clear, updated and complete information demonstrates respect for transparency. A company that hides basic governance documents or fails to update shareholder information may create concerns about compliance culture.
The website is also important for foreign investors. The CMB principles state that information on the website should also be prepared in foreign languages selected according to need, with the same content as the Turkish version, for use by international investors.
Sustainability and ESG Governance
Sustainability is now linked to corporate governance in Turkey. The official English text of Communiqué II-17.1 states that corporations other than the excluded categories are subject to sustainability principles, and that their corporate governance compliance reports must include explanations on the sustainability principles compliance outline.
This development is important because investors increasingly evaluate companies not only through financial performance but also through environmental, social and governance risks. Climate risks, labor practices, board diversity, ethics, anti-corruption systems, data security, human rights and stakeholder relations may affect long-term value.
KAP examples show that companies disclose sustainability compliance matters by reference to ESG issues, board-level determination of environmental, social and corporate governance risks and opportunities, and the relationship between sustainability reporting and URF/KYBF disclosures.
Legal Liability for Poor Corporate Governance
Poor corporate governance may create legal liability. Liability may arise from misleading disclosures, defective financial reporting, unfair related-party transactions, improper general assembly practices, failure to disclose material information, breach of board duties, market abuse, insider trading or violations of CMB regulations.
Corporate governance reports themselves may also create legal risk if they are inaccurate or misleading. KAP examples show that corporate governance information forms and compliance reports are examined together with annual reports and financial statements, and that responsibility statements may declare that reports do not contain untrue statements on material matters or deficiencies that may make them misleading.
Directors should therefore not treat corporate governance reporting as a routine administrative task. If a company states that it complies with a principle but does not actually comply, investor claims and regulatory scrutiny may arise.
Role of Annual Reports
Annual reports are an important channel for explaining corporate governance. They should include information about board structure, committees, investor relations, risk management, internal controls, related-party transactions, sustainability, shareholder relations and compliance with governance principles.
The SPK’s 2019 announcement states that necessary explanations under Article 8 of Communiqué II-17.1 must be made in the annual report, while URF and KYBF reporting must be conducted through KAP. This means that annual reports and KAP governance templates work together.
A good annual report should not simply state that the company complies with corporate governance principles. It should explain how governance operates in practice, what committees did during the year, how risks were managed, how shareholder rights were protected and where improvement is planned.
Practical Compliance Checklist for Listed Companies
A listed company in Turkey should maintain a structured corporate governance compliance program. The company should first identify which principles are mandatory and which are subject to comply-or-explain reporting. It should maintain updated URF and KYBF disclosures through KAP, and should ensure that annual reports contain the required governance explanations.
The board should review committee structures, independent director status, investor relations staffing, related-party transaction procedures, dividend policy, disclosure policy, ethical rules and sustainability reporting. The corporate website should be updated regularly and should contain the information required under CMB principles.
The company should also maintain written policies on insider information, public disclosure, conflicts of interest, general assembly procedures, shareholder communication, board evaluation and risk management. These policies should not remain on paper; they should be implemented, monitored and documented.
Practical Checklist for Directors
Directors of listed companies should ask several practical questions. Does the company have an effective disclosure system? Are related-party transactions reviewed independently? Are committee reports meaningful? Are shareholders treated equally? Are dividend decisions explained? Are KAP disclosures and website disclosures consistent? Are URF and KYBF reports accurate? Are sustainability risks reviewed by the board?
Directors should also make sure that their questions and objections are recorded in board minutes where necessary. Documentation is important. If a governance dispute arises later, minutes, committee reports, legal opinions and internal correspondence may show whether directors acted with due care.
Practical Checklist for Investors
Investors evaluating a listed Turkish company should review its corporate governance compliance report, corporate governance information form, annual report, articles of association, shareholder structure, privileged shares, board composition, independent directors, committee structure, dividend policy, related-party transaction disclosures and sustainability reports.
Investors should pay special attention to repeated “partial compliance” or “non-compliance” explanations in URF. Not every non-compliance is equally serious, but weak explanations may signal governance risk. Investors should also compare website disclosures with KAP filings and annual report statements.
Conclusion
Corporate governance principles for listed companies in Turkey form a central part of Turkish capital market law. The main legal source is Communiqué on Corporate Governance II-17.1, which regulates corporate governance principles and related-party transaction procedures for corporations within its scope.
For listed companies, corporate governance is not merely a reputational issue. It affects shareholder rights, board accountability, public disclosure, related-party transactions, dividend policy, investor relations, sustainability reporting and legal liability. The CMB framework requires companies to report corporate governance compliance through URF and KYBF templates on KAP, within the annual reporting timetable and before the general assembly.
For directors, corporate governance means active supervision. Board members must ensure that disclosures are accurate, committees function properly, related-party transactions are reviewed, minority shareholders are protected and corporate governance reports reflect reality. For investors, corporate governance reports provide essential information for assessing risk, transparency and management quality.
In conclusion, listed companies in Turkey should treat corporate governance as a continuous legal compliance system rather than a yearly reporting exercise. Strong governance protects investors, supports market confidence and reduces regulatory and litigation risk. Any listed company, board member, controlling shareholder or investor dealing with Turkish corporate governance matters should obtain professional legal advice when structuring board practices, related-party transactions, public disclosures, shareholder meetings or compliance reports.
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