Companies, regardless of their types and sizes, often need to appoint individuals other than their board members, to perform certain tasks arising from their day-to-day operations. Under Turkish corporate law system, granting such powers can be done by issuing a power of attorney in favour of someone, or by appointing a person as a registered authorized signatory with limited powers. This article will be outlining the differences between the two, from companies' points of view.
I. Power of Attorney
A power of attorney establishes a contractual relationship between the parties as regulated under the Turkish Code of Obligations No. 6098 ("TCO"). Pursuant to the law, holder of a power of attorney ("proxy") has the following statutory obligations: to comply with the instructions of the issuer of the power of attorney ("grantor"), to execute the acts in person, to adhere to the grantor's instructions, carrying out transactions diligently, and accounting for their acts, which all are subject to certain exceptions (not included in this article). When issuing a power of attorney, it should be borne in mind that a proxy is merely a representative acting on behalf of the grantor; consequently, the grantor remains liable for the proxy's acts. Nonetheless, the grantor will have the right to claim damages if the proxy breaches his/her obligations.
Regarding the extent of the powers, the powers contained in a power of attorney depend on the specific wording, which is usually drafted by the grantor itself. A power of attorney may be drafted as a "general power of attorney," authorizing the person to carry out transactions for the account and on behalf of the company in various areas; or in contrast, it may be drawn up just to grant precise powers for specific matters. The proxy may be authorized to represent solely, or restricted only to act with joint signatures of other proxies.
Execution of a power of attorney is completed by having the duly signed power of attorney document certified by a notary public if it is being issued in Turkey. The signature circular of the company, evidencing the authority of the real person signatory to issue the said power of attorney on behalf of the company, must also be presented to the notary public. If the power of attorney will be issued abroad, it has to be notarized and apostilled/legalized. In the case that a power of attorney is granting authority to act before the land registries, it will need to be executed by the notary public in a specific statutory form. There is again a special format requirement for individuals, if they wish to issue power of attorneys on inheritance or marital matters.
The issuance process may differ where a joint-stock or a limited liability company is issuing a power of attorney to authorize the proxy before banks. With respect to joint-stock companies, the board of directors must decide on the issuance and content of the power of attorney. For limited liability companies, board of directors and general assembly resolutions on this matter would be required.
The contractual relationship arising from a power of attorney can be terminated by either of the parties, unilaterally. In order to duly revoke a power of attorney, a letter of dismissal must be executed by a notary public and must be sent to the other party, if the power of attorney has been issued in Turkey before the notary public. If a power of attorney concerns a party residing abroad, the notarized document will have to be sent through consulates as per the Notification Law No. 7201. In order to avoid a potentially lengthy process, even more so if it involves persons living abroad, the common practice is to insert a validity period in powers of attorney. A power of attorney would also automatically terminate upon completing the obligations contained, and upon death, incapacity, or bankruptcy of the parties. Nevertheless, a power of attorney will be deemed valid against bona fide third parties who could not know of such termination.
II. Registered Authorized Signatory / Signature Circular
The second option for companies is to appoint a registered authorized signatory with limited powers ("authorized signatory"), as stipulated under the Turkish Code of Commerce No. 6102 ("TCC"). In order to appoint an authorized signatory, which is subject to registration before the trade registry, the company's articles of association must contain wording to explicitly allow such appointment. These persons will be authorized to act in accordance with the internal directive of the company, which shall set out the limits for various signatory categories.
The appointment process is as follows: first, the board of directors must issue an internal directive, setting out the scope of powers assigned to the authorized signatories, indicating whether they are authorized to act solely or jointly. The internal directive should not name the persons to whom the powers are assigned to, but only the powers assigned. The board of directors' resolution containing the internal directive must be notarized, registered with the relevant trade registry, and announced in the trade registry gazette. Secondly, board of directors in joint-stock companies and board of directors and general assembly in limited liability companies must resolve on appointment of the authorized signatories in accordance with their internal directive. This resolution must also be notarized, registered with the relevant trade registry, and announced in the trade registry gazette. In addition, the authorized signatories will be required to submit their signature declarations to the trade registry. Finally, the company has to issue a signature circular showing the personal details as well as the signature specimens of all of its authorized signatories for convenience.
The revocation of powers must also be registered with the trade registry, and announced in the trade registry gazette in order to be binding on third parties. It is also worth noting that in practice, the signature circulars are deemed to expire at the end of the office term of the authorizing board of directors, which is a maximum of 3 (three) years for joint-stock companies and could be unlimited term in limited liability companies. Therefore, following the election of a new board of directors, it would be necessary to resolve on the re-appointment of authorized signatories and re-issuance of a signature circular, even if the authorized signatories remain unchanged.
III. Conclusion
Although serving similar purposes, granting authority through a power of attorney and by appointing an authorized signatory differ, mainly in the procedures and validity periods. Appointment of an authorized signatory can be a lengthy procedure whereas a power of attorney can be executed almost immediately. Companies will need to make a decision on a case-by-case basis and proceed with the more suitable option by considering the matters covered in this article.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2021. A link to the full Legal Insight Quarterly may be found here.
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.
