Turkey: Cases Requiring Issuance Of Internal Directives In Joint Stock And Limited Liability Companies

Internal directives can be defined as the documents in which the issues related to the operation of a company are regulated, the details concerning the internal law of the company are included and, if regulated, the relevant persons are obliged to comply with.   Although the documents serving the same purpose as internal directives have been issued for a long time, the concept of internal directive has been introduced to Turkish legal system together with the Turkish Commercial Code numbered 6102¹ ("Code"). In the rest of this Article, certain cases that require issuance of internal directives will be examined both for joint stock and limited liability companies.

I. Internal Directives in Joint Stock Companies

According to the Code, joint stock companies are obliged to issue an internal directive for; (i) the limited transfer of authority and (ii) the determination of the working principles and procedures of the general assembly.

i. Limited Transfer of Authority

As it is known, the representation and management of company is carried out through the managing bodies and more spesifically through the board of directors in the joint stock companies. However, companies may authorize certain persons for the representation and management of the company in order to fasten the processes. According to Article 367 of the Code, the board of directors of the company may transfer the representation and management of the company to one or more members of the board of directors or to third parties, partially or completely, through issuing an internal directive.

As predicted, there are some conditions to be fulfilled in order to transfer authorities through internal directive. Firstly, a provision regarding the transfer of authority through internal directive should be present in the company's articles of association. Then, authorities to be transferred through the internal directive should be explained in detail and a board of directors decision should be taken for the determination of the authorized persons.

Finally, the internal directive should be registered to Trade Registry and announced through Trade Registry Gazette along with the board of directors decision.

ii. Determination of the Working Principles and Procedures of General Assembly

The obligation of issuing an internal directive for the determination of the principles and procedures of general assembly in joint stock companies is regulated under the Regulation on the Procedures and Principles of General Assembly Meetings of Joint Stock Companies and the Representatives of the Ministry of Customs and Trade to be Present in These Meetings² ("Regulation") and the Article 419 of the Code. Accordingly, the board of directors of the company should prepare an internal directive regarding the principles and procedures of the general assembly and bring it into force in fifteen (15) days following the approval of the general assembly through registering to Trade Registry.

Pursuant to the Article 41 of the Regulation, the minimum matters to be regulated in the internal directives are; entering the meeting place and opening the meeting, creating the meeting chair, duties and powers of the meeting chair, agenda and the actions to be taken before discussing the agenda, the procedure of taking floor and voting in the meeting, preparation of the meeting record and actions to be taken at the end of the meeting.

II. Internal Directives in Limited Liability Companies

The matter of issuing internal directives in limited liability companies is regulated under the Articles 616 and 629 of the Code. The Article 629 of the Code which regulates representation in limited liability companies refers to the Articles 367-371 of the Code regulating the transfer of limited authority in joint stock companies and says that the appointment of commercial agents or other merchant assistants in limited liability companies shall be accomplished in same way. Therefore, limited liability companies that are wishing to appoint a commercial agent or merchant assistant through the transfer of limited authority will have to issue an internal directive by following the procedure set forth for joint stock companies and described above.

Moreover, according to Article 616, the issuance of an internal directive on the side performance obligations is among the non-transferable authorities of the general assembly in limited companies. However, issuing an internal directive for this purpose is not an obligation for the limited liability companies under the Code.

Consequently, the issuance of internal directives is compulsory for both joint stock and limited liability companies in order to transfer the authority of managing bodies finitely. In addition, it is essential to determine the working principles and procedures of the general assembly with an internal directive in joint stock companies. On the other hand, although issuing an internal directive on the side performance obligations is one of the non-transferable authorities of the general assembly, it is not deemed as an obligation for the companies.

Footnotes

1. Turkish Commercial Code numbered 6102 and dated January 13, 2001 published in the Official Gazette numbered 27846 and dated February 14, 2011.

2. Regulation on the Procedures and Principles of General Assembly Meetings of Joint Stock Companies and the Representatives of the Ministry of Customs and Trade to be Present in These Meetings published in the Official Gazette dated November 28, 2012 and numbered 28241.

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.