Article 35 of the Law on Collection of Public Receivables numbered 6183 (the "CPR Law") regulates the responsibility of company representatives regarding the public receivables. Paragraph 5 states that the representative who is on duty when a public receivable occurs and the representative who is on duty when the payment of such public receivable becomes due, are jointly responsible for the payment of such public receivable.  Paragraph 6 of article 35 states that the responsibility of company representatives defined in the CPR Law (under paragraph 5 stated above) cannot be revoked by the Tax Procedure Law. This article will review the decision given by the Turkish Constitution Court on 19th of March 2015 (decision no 2014/144E-2015/29) which terminates the provisions in paragraph 5 and 6 of the article 35on the grounds that they are in contradiction with the Constitution of the Republic of Turkey. ("Constitution")

The Case

4th Chamber of the Council of State ("Danıştay 4. Daire" in Turkish) applied to the Constitution Court claiming that paragraph 5 and 6 of article 35 of the CPR Law violates article 21 of the Constitution which was discussed during a dispute where a company representative's car was seized because of public receivables and the representative was claiming that such seizure should be cancelled.

Decision

The Constitution Court accepted the application of 4th Chamber of Council of State and ordered that paragraph 5 and 6 of the article 35 of the CPR Law violates the Constitution. The court stated that paragraph 5 violates the Constitution since it states that even if a representative acts with due care regarding the payment of public receivables during his/her duty period, he or she cannot avoid the risk to be jointly held responsible for a public receivable related with another period that he/she was not on duty and basically has no possibility to interfere. Holding persons jointly responsible for the actions or non-actions that they have no possibility to interfere is not fair. Imposing such a liability will harm the  principles of the state of law and will hold such people under an ambigious and non-secure position. Therefore, it violates the Constitution.

The court stated that paragraph 6 was also violating the Constitution since it regulates a certain issue which is also regulated in another law, namely, Tax Procedural Law and it causes confusion as to which law shall govern the matter.

Final Remarks & Opinion

The decision of the Constitution Court is actually abolishing a very important liability of company representatives, which was considered as a huge risk for persons appointed as representatives of companies. In practice, we face a lot of cases where representatives are claimed to be liable for huge amount of public receivables related with the companies they were previously representatives of. To avoid any misunderstanding, we would like to mention that such responsibility was limited to receivables already occurred but not became due when the company representative was on duty. However, in any case, such responsibility is risky and in most cases company representatives have no guarantee that such public receivable will be paid by the company when it becomes due. Therefore, we agree with the Constitution Court's decision. We would also like to mention that the decision only limits the risk but there are also some other provisions of the CPR Law that still constitutes risk for company representatives regarding public receivables. For instance; representatives are still responsible for due public receivables when they are on duty. Therefore, in case the company does not have any assets to pay the public receivable, the company representative shall still be under the risk of paying such receivable. In practice, there are many representatives who are held responsible for public receivables of their companies.

Given all above, it is important to keep in mind that being a company representative brings considerable obligations and responsibilities one of which is the public receivables issue and people should carefully think before accepting being a representative of a company they are not familiar with.

Footnote

1.  Article 2 of the Constitution of the Republic of Turkey;
II. Characteristics of the Republic
ARTICLE 2.

The Republic of Turkey is a democratic, secular and social state governed by the rule of law; bearing in mind the concepts of public peace, national solidarity and justice; respecting human rights; loyal to the nationalism of Atatürk, and based on the fundamental tenets set forth in the Preamble

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