Introduction
The managers of limited liability companies are regulated under
articles 623 to 630 of the Turkish Commercial Code No. 6102
('TCC'), within the scope of the management and
representation of the company.
With the TCC, the natural organ principal, whereby all of the
shareholders of the company are per se managers, has been abandoned
and the elected organ principal has been adopted. The title of
Manager may be appointed with the articles of incorporation during
the incorporation of the company or afterwards by way of a
shareholders' general assembly resolution.
Therefore, the management and representation of the company may be
left to shareholder or non-shareholder persons that have been
elected. However, the management and representation of the company
cannot be left entirely to third parties, at least one of the
shareholders must possess the right to management and
representation of the company.
Management Board
With the TCC, an execution understanding similar to that of
joint stock companies has been introduced with the determination
that, if there is more than one director, then they will form a
board.
Pursuant to Article 624 of the TCC, if there is more than one
manager of the company, one of these managers shall be elected as
the president of the management board by the general assembly. The
management board adopts resolutions with the vote of the majority
and in the case of a deadlock, the president shall have a casting
vote.
The president manager also has other functions such as convening
the general assembly, carrying out general assembly meetings and
making declarations and announcements, unless agreed
otherwise.
With the new regulation, it is now possible for legal entities to
also be appointed as manager. This way, an association, a joint
stock, a limited liability or an unlimited liability company may be
appointed as manager to the company.
Pursuant to Article 632/2 of the TCC, "where one of the
managers of the company is a legal entity, such legal entity shall
determine a real person to carry out its duties on its
behalf".
Therefore, although the manager title belongs to the legal entity,
the real person representative appointed by the legal entity shall
perform the management duties.
Duties and Authorities of the Managers
Managers are responsible and authorized for all matters that are
not within the responsibility and authority of the general assembly
according to the law and the articles of incorporation.
Compared to the Turkish Commercial Code No. 6762, the TCC
regulates the loyalty and diligence duties of managers in a more
detailed manner.
Managers and other persons that are responsible for the management
of the company are obliged to perform their duties with utmost
diligence and to protect the interests of the company within the
framework of the principal of good faith.
The managers are under the obligation of equal treatment to
shareholders. Within this scope, managers must realize equal
actions for shareholders under equal conditions. However, if some
of the shareholders possess preferential rights on pre-emptive
rights, then as there are no longer equal conditions, the managers
shall not be under the obligation of equal treatment.
The non-compete obligation of managers is regulated under Article
626/2 of the TCC. Within this scope, managers and other persons
that are responsible for the management of the company shall not
engage in activities that are in competition with the company. This
provision is not mandatory and it may be otherwise agreed within
the articles of incorporation, or an approval stating otherwise may
be obtained from the shareholders.
The managers have the duty to notify and give notice of bankruptcy
in the event the company loses its capital or is in debt.
In accordance with the principle of separation of functions,
Article 625 of the TCC lays down the non-transferrable duties and
authorities of the manager or the management board. All of the
non-transferrable and inalienable duties and authorities relate to
the execution and formation of the organization and the management
units of the company in a general sense.
Although the law does not explicitly regulate the transfer of the
management and representation authority, under Article 577/1/i,
authority provisions with respect to transfer of the company
management to third parties shall be binding if provided under the
articles of incorporation. Under Article 625 of the TCC, "the
supervision of whether the persons to whom certain aspects of
company management has been assigned are acting in compliance with
the laws, articles of incorporation, by-laws and instructions"
is one of the non-transferrable and inalienable duties and
authorities of the managers. As understood, management and
representation authority may be transferred in limited liability
companies.
Liability of the Managers
As per Article 644 of the TCC, Article 549 regarding the
unlawfulness of documents and declarations, Article 550 regarding
inaccurate declarations with respect to the capital and the
knowledge of insufficiency to pay, Article 551 regarding corruption
in pricing, and Article 553 regulating the liability of
incorporators, board of directors, managers and liquidation
officers, shall be applied to the liability of the managers of
limited liability companies.
Accordingly, persons violating Articles 549 to 551 are subject to
the penalties set forth under Article 562 paragraphs 8 to 10.
Furthermore, managers are, along with the shareholders and the
limited liability company itself as a legal entity, personally
liable for public debts. This liability is applied pursuant to the
Social Security and General Health Code No, 5510, Tax Procedure
Code ("TPC") and Code of Procedure of Collection of
Public Receivables ("CPCPR").
Pursuant to the TPC, Article 10, in order for tax and other debts
belonging to a limited liability company to be collected from the
assets of managers, the tax office must have been unable to collect
the tax due to the managers not performing their duties related to
the tax. Pursuant to repetitive Article 35 of the CPCPR, which
constitutes another provision governing the personal liability of
statutory representatives for tax liability of limited liability
companies, if public receivables may not be fully or partially
collected, or if such receivables appear to be uncollectible from
the assets of the legal entity, they shall be collected from the
personal assets of the statutory representatives of the legal
entity. The repetitive Article 35 does not require the fulfilment
of a condition regarding whether the statutory representatives have
performed their duties or not for collecting the debt from their
assets.
Conclusion
As can be seen, an understanding similar to that of joint stock companies is put forth in the TCC for limited liability companies with the adoption of new concepts such as the management board and legal entity managers. However, it should be kept in mind that the managers are personally liable for the public debts of the company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.