In a Turkish joint stock company, the board of directors is the mandatory body that manages and represents the company. That authority carries significant responsibility: a director who culpably breaches duties arising from the law or the articles of association is liable for the resulting loss to the company, its shareholders and its creditors.
The legal basis of liability
The core provision is Article 553 of Turkish Commercial Code No. 6102. It requires three elements: breach of a duty arising from the law or the articles, fault in that breach, and an adequate causal link between the breach and the loss. Directors must perform their duties with the care of a prudent manager and protect the company’s interests in good faith (Article 369).
Liability is not automatic; each director is liable to the extent of their own fault and the loss attributable to them.
Differentiated joint liability
Unlike the former code, the current code adopts “differentiated joint liability” among directors (Article 557). Where several persons are liable for the same loss, each is jointly liable only to the extent that the loss can be personally attributed to them, given their fault and the circumstances. The position of a director who recorded a dissenting vote, or who had no involvement because of an allocation of duties, is therefore assessed separately.
Practical note. Recording written dissent in the minutes, documenting the allocation of duties in internal regulations and basing major decisions on expert reports are the most effective ways of later proving the absence of fault.
Liability to whom?
The company may bring a liability action against a director, which requires a general assembly resolution. Shareholders may also claim that the company’s loss be paid to the company. Shareholders and creditors have their own right of action for losses they suffer directly (Article 555). In bankruptcy, the creditors’ right to sue for loss caused to the company is exercised first by the bankruptcy administration (Article 556).
Release and limitation
A general assembly release only covers matters that were disclosed, and only binds shareholders who voted in favour; it does not cover concealed transactions. Claims are time-barred two years after the claimant learns of the loss and the liable person, and in any event five years after the act causing the loss; if the act is also a crime, the criminal limitation period applies (Article 560).
What this means for directors
Board membership requires understanding the company’s legal and financial risks and documenting the basis of decisions. We recommend that companies consider directors’ and officers’ insurance together with internal regulations allocating duties.
Relevant legislation
- Turkish Commercial Code No. 6102, Arts. 369, 553–560
- Turkish Code of Obligations No. 6098, Arts. 49 et seq. (general liability)
Relevant decisions
- Court of Cassation, 11th Civil Chamber — settled practice that fault must be assessed individually under differentiated joint liability
- Court of Cassation, 11th Civil Chamber — decisions holding that a release covers only disclosed matters
This article is for general information only and does not constitute legal advice. Please consult a lawyer about your specific circumstances.
