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Corporate Governance in Turkey

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Legal framework on Corporate Governance

The Turkish Commercial Code (TCC), which entered into force in July 2012, provides new standards regarding establishment and governance of commercial companies, and new principles that comply with international corporate governance and auditing standards, such as international trade, finance, industry, and transparency of companies in terms of accounting and financial reporting.

In addition to the above, the other laws, communiqués and principles governing corporate rules and practice are:

  • Law No. 6335, amending the TCC;
  • the Capital Markets Law dated 6 December 2012 (Law No. 6362), which entered into force on 30 December 2012, replacing the former Capital Markets Law dated 30 July 1981 (Law No. 2499);
  • the Capital Markets Board Communiqués;
  • the Corporate Governance Communiqué dated 3 January 2014, serial II, No. 17.1 (the Communiqué); and
  • the Corporate Governance Principles (CGP) listed in Annex 1 of the Communiqué.

The Corporate Governance Communiqué issued by the Capital Markets Board does not apply to:

  • publicly held companies whose shares are not traded on the stock market;
  • listed companies or initial public offering applicants whose shares are or will be traded on markets or platforms other than the National Market, the Secondary National Market or the Corporate Products Market; and
  • ‘foreign entities' as defined under Decree 32 on the Protection of the Turkish Currency.

The communiqué makes a further distinction between three groups of companies it captures based on systemic importance (Article 5), taking into account their total market value and market cap, with ‘smaller' companies exempted from a number of mandatory provisions (Article 6).

Corporate structure

Under Turkish law, both listed and unlisted companies use one-tier board structures.

The Commercial Code requires the boards of publicly listed companies to establish an expert committee tasked with the early diagnosis and management of risks that would endanger the company's existence, development and continuity. The committee must report on the risks and remedies to the board every two months. As regards other types of companies, although this is not mandatory, the auditor may require the board of directors to establish such a committee. The Commercial Code also allows the board of directors to create other committees and task them with:

  • overseeing the business;
  • preparing reports on certain subjects;
  • implementing its decisions; and
  • conducting internal audits.

The Commercial Code does not require or recommend the appointment of independent board members. However, the Corporate Governance Principles provide that:

  • companies must have at least five board members; and
  • one-third of the board and at least two members of the board must be independent. 

Board members are selected, appointed and removed exclusively by decision of the general assembly, as an exception to the general assembly's exclusive authority, in joint stock companies, if a vacancy arises on the board of directors for any reason, the remaining board members can select and appoint a new member who will serve for the remaining term of service of the replaced member, provided that this appointment is approved at the first upcoming general assembly.

There is no diversity requirement or recommendation as to board composition under the Commercial Code. The Corporate Governance Communiqué, on the other hand, requires that companies set a target of having a board that is at least 25% female by a specified date, as well as a policy through which to achieve this target. Further, the Corporate Governance Principles require that at least one board member be female.


As the governing body of a joint stock company (JSC), the board of directors is responsible for the management and representation of the JSC.

According to the Commercial Code, board members have the following non-delegable and indispensable duties and powers:

  • conducting the top-level management of the company and providing instructions in this regard;
  • establishing the company's management organisation;
  • establishing the necessary system for financial audits and accounting, to the extent required;
  • appointing and removing managers and other persons with the same function, and authorised signatories;
  • supervising management to ensure that it is acting in compliance with the law, the articles of association, internal regulations and written directives of the board of directors;
  • maintaining the company books (eg, the share ledger and book of board of directors' resolutions), preparing the annual activity report and corporate governance disclosures and submitting them for the general assembly's approval, organising general assembly meetings and executing the resolutions of the general assembly; and
  • notifying the competent court if and when the liabilities of the company exceed its assets.

Board members owe these duties primarily to the company and then to the shareholders and finally to the creditors.

As a general principle of civil liability, board members are personally liable for damages incurred by the company, shareholders and creditors caused by violation of their duties under the articles of association and the law.

Each board member may be found liable based on the degree of his or her negligence. Thus, while one board member may be liable based on his or her negligence against third parties, other members who acted with the necessary care may not be liable for losses.

Board members can also be liable for public debts of the company if those debts cannot be collected from the company.

The Commercial Code provides that members of the board of directors will be criminally liable for the following actions resulting from an act or omission:

  • failure to keep company books;
  • misrepresentations in or omissions from corporate documents;
  • misrepresentation of share capital;
  • breach of confidentiality; and
  • failure to launch a website (see question 10.1).


Turkish companies are characterised by highly concentrated and centralised ownership structures. Families, either directly or indirectly, retain majority control. Separation of ownership and control is mainly achieved through pyramidal or complex ownership structures. Given the prevalence of a controlling – even dominating – shareholder in most companies, privileged shares are common, taking the form of golden shares in state-owned enterprises; and many companies have share classes either with the privilege of nominating board members or with multiple voting rights.

Under Turkish law, controlling shareholders do not have any specific duties to the company or to non-controlling shareholders. However, all controlling shareholders must exercise their rights by complying with good faith principles. Further, there are special provisions for minority shareholders.

Additionally, the TCC regulates provisions with regard to group companies, and article 202 of the TCC specifically stipulates that the dominant (controlling) company cannot exercise its dominance in a way that may give rise to a financial loss of a subsidiary (eg, instruct the subsidiary to be the guarantor of a loan), unless this loss is compensated within the same financial year or a right to claim compensation is granted to the subsidiary within the same financial year by providing details on when and how the loss will be compensated. The loss concept herein covers causing a potential risk to the company’s financial assets or future profitability as well as value depreciation on them. Therefore, not only the actual losses sustained, but also potential risks that may arise thereof, fall within the definition of ‘loss’.

Both the shareholders of the subsidiaries and their creditors may claim the indemnification of the loss of the subsidiary company from the dominant company by filing a lawsuit.

According to the TCC, the shareholders’ liability is normally limited to their subscribed capital contribution. This rule is applicable for both joint-stock companies and limited liability companies. There is an exception for limited liability companies concerning government debts. Accordingly, shareholders of a limited liability company are personally liable for government debts and this responsibility should be calculated over the shareholding ratio in the company capital.

Regarding tax debts, the Council of State’s General Assembly on Unification of Judgments decided that tax debts that are due and cannot be collected from a limited liability company (in whole or in part, or that are understood to be uncollectible from the company itself) can be collected from its shareholders directly in proportion to their share capitals. In such a case, there is no need to collect the debts in question from the legal representatives first.

Shareholder activism

Studies have shown that the costs of collecting information and private enforcement are high for institutional investors and other activist shareholders; hence, they usually choose to exit where they fail to exert an influence on company policies. Minority shareholders, including institutional investors, are reluctant to bear these costs and the loss of liquidity by blocking their shares before casting their votes in the presence of highly concentrated ownership structures and voting privileges. Even where investors choose not to exit, given the absence of specialised dispute resolution mechanisms, public supervision and enforcement through the Capital Markets Board appears to be by far the most effective tool for implementing corporate governance principles – albeit at the cost of ‘moral hazard' on the part of the minority shareholders, which have little or no incentive to take an active stance.

The key focuses of individual and collective shareholder activism include:

  • the appointment of independent board members;
  • dividend distributions (a rarity among Turkish listed companies); and
  • transparency in related-party transactions through monitoring, reporting and audits.



Governance Around the World - Turkey by Good Governance Academy

Corporate Governance in Turkey 2023 by Görkem Bilgin and Edanur Atlı (First published by GTDT in May 31, 2023)

Turkey: Corporate Governance Comparative Guide by Ömer Faruk Çıkın and Serhat Aydın (14 July 2022)


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