Corporate Governance and Directors Duties in Turkey Overview

Following amendments to Article 40 of the Turkish Commercial Code (CC), the Ministry of Trade amended its Communiqué on Execution of Articles of Association before trade registry directorates.

The communiqué stated that the signatures of merchants who are real persons and the authorised signatories of merchants that are legal entities will be obtained electronically from the databases of public institutions and organisations and recorded in the Central Registry Number System (MERSİS) by the trade registry directorate during the registration process.

If there is no record of a signature in the relevant database or the relevant records are not obtained, a specimen signature can be physically provided before a notary public, except the registration process of limited liability companies.

A fourth paragraph was added to Article 64 of the CC authorising the Ministry of Trade to require share ledgers, board of director's resolution books and general assembly resolution books to be kept electronically.

No further announcement has been made yet by the Ministry of Trade regarding the procedure and the principles to be followed regarding electronic company records.

Under the Law on Prevention of Distribution and Financing of Weapons of Mass Destruction No. 7262 (published in the Official Gazette on 31 December 2020), bearer shares and bearer shareholders in joint stock companies must be notified and recorded to the Central Registry Agency (Merkezi Kayıt Kuruluşu). This law intends to enhance transparency by keeping records of the information about bearer shares and their shareholders and the transfer process at the Central Registry Agency.

Companies that issue bearer share certificates must notify the Central Registry Agency of the owners of such certificates and their shares before they are distributed to the relevant shareholders. This means that owners of bearer share certificates can exercise their rights arising from their shareholding against the company, if:

The transferring of bearer share certificates is only valid if the transferee notifies the Central Registry Agency of the transfer. The date of notification to the Central Registry Agency will be taken as the basis for claiming the rights arising from holding bearer shares (Article 489, CC).

In addition to suspending shareholding rights and invalidating share transfers using bearer share certificates, administrative fines will be imposed on those who fail to fulfil application and notification obligations.

The Communiqué Amending the Communiqué on the Procedures and Principles Regarding Implementation of Article 376 of the CC was published in the Official Gazette on 26 December 2020 and entered into force on the same date.

Article 3 of this communiqué stipulates that if a company has lost at least two-thirds of its share capital and legal reserves, its share capital can be decreased by up to the minimum share capital amount, if at least half of the sum of the share capital and legal reserves are preserved in equity.

This communiqué also enables companies that fall within the scope of Article 376 of the CC to increase and decrease their share capital in the same general assembly meeting (GaM) without being bound by any requirements, if the following conditions are fulfilled:

The obligation to prepare the attendance list was abolished for GaMs of joint-stock companies with single shareholders (amendments made to the Regulation on the Procedures and Principles of the GaMs of Joint Stock Companies and the Ministry Representatives to be Present at These Meetings).

In addition, the requirement for the attendance of ministry representative at GaMs of joint-stock companies with single shareholders was also abolished, except where establishing or amending articles of association (articles) are subject to the ministry's permission (for example, banks, financial leasing companies, and so on).

For all corporate governance issues that are subject to registration before the trade registry directorates (including establishment), online application on the Central Registration System (Merkezi Sicil Kayıt Sistemi) (MERSIS) is a mandatory step before submitting the hard copy documents to the competent trade registry directorate by hand.

One of the aims of introducing MERSIS was to expedite the registration process, but MERSIS is now considered as an additional step in the registration process (as the documents still must be submitted in hard copies).

The shareholders or the authorised signatories are appointed through the online platform first and then the required documents are submitted to the trade registry by hand.

If a natural person who is a Turkish citizen is being registered as a shareholder or appointed as an authorised signatory of a business, they must approve the registration or appointment in the online system even if they were appointed previously.

An amendment to Article 543 of the CC aims to provide a faster liquidation process. Once a company enters into liquidation, three announcements are made at one-week intervals at the Turkish Trade Registry Gazette to inform the creditors that the company is entered into liquidation and will be dissolved, and to provide time for the creditors to submit their claims.

Once these announcements are made, and the debts (if any) are paid, the waiting period of six months to allow the distribution of the company’s assets has been reduced to three months. This means that the liquidator can distribute all the assets in three months after the last announcement and dissolve the company.

To prevent tax evasion and ensure financial transparency, the Turkish Revenue Administration under the Ministry of Treasury and Finance issued General Communiqué No. 529 on Tax Procedure Law (UBO Communiqué), which imposes an obligation to make an ultimate beneficial ownership (UBO) declaration on a wide range of entities.

The UBO Communiqué represents the UBO declaration as an obligation to be performed regularly. Relevant parties, including corporate taxpayers, are required to submit their UBO information annexed to their provisional and annual corporate tax returns by the effective date.The effective date for all taxpayers except corporate taxpayers is 31 August. All companies are subject to the obligation to declare UBO status. This obligation also applies to branches.

The UBO Communiqué defines the UBO as a natural person or persons who ultimately have control or the ultimate influence over a legal entity.

For companies, the UBO is defined as a real person or persons holding more than 25% of the shares of that company.

If the UBO is uncertain or cannot be determined or there is no natural person shareholder with such a share, the UBO can be considered to be:

The UBO notification must include the person(s)':

Notifications must be made to the Internet Tax Office by filling in the "declaration form for ultimate beneficial owner". Submission of physical declaration forms (either by hand or by post) are not valid. Forms can be sent in the relevant period through certified public accountants with a brokerage and liability agreement concluded or through sworn-in certified public accountants with an income or corporate tax return certification agreement (full certification agreement).

Sanctions will be imposed on those who submit an incomplete or misleading UBO notification or who fail to declare at all, under the relevant provisions of the Tax Procedure Law No. 213.

The main forms of corporate entity used in Turkey are the:

The LLC and JSC are the preferred company forms in Turkey for both foreign and local entrepreneurs. The minimum capital requirement for a JSC is TRY50,000 while the capital requirement for establishing an LLC is TRY10,000.

As the CC is structured around JSCs and many provisions applicable to JSCs also apply to LLCs, the answers in this article relate to JSCs unless indicated.

The main corporate legislation includes the:

The Ministry of Trade is the main authority for the enforcement of the CC and its secondary legislation. Disputes arising from CC are mainly resolved before the commercial courts.

The Capital Markets Law and Capital Markets Communiqués are enforced by the Capital Markets Board. The Capital Markets Board is the regulatory and supervisory authority in charge of the securities markets in Turkey. It can impose administrative sanctions on companies or individuals for non-compliance.

The Turkish Industry and Business Association (Türk Sanayicileri ve İş İnsanları Derneği) (TUSIAD), which is an independent, voluntary non-governmental organisation, has an important role in the formation and development of corporate governance principles. TUSIAD issued the first Corporate Governance Best Practice Code in Turkey in 2002.

The CC regulates the main principles of corporate governance for both public and non-public companies, including establishment, board composition, audit, sanctions and so on.

Various sanctions are provided for by the CC for non-compliance with its provisions. The sanctions include both judicial fines and prison terms.

Amendments are made to the CC from time to time reflecting the needs of companies in the changing business environment, however there are currently no plans to reform the CC in the near future.

The CG Communiqué regulates in detail corporate governance principles applicable to public companies. Under the CG Communiqué, public companies with shares traded on the stock exchange are subject to its mandatory Corporate Governance Principles (CG Principles).

The CG Communiqué has three categories of implementation, depending on the average market value of the company and its shares. Category 1 companies must comply with all mandatory corporate governance rules while there are some exemptions for companies that fall into Category 2 and Category 3.

The main topics covered under the CG Principles are:

Public companies must state whether they comply with corporate governance principles in their annual reports.

If public companies do not comply with the CG Communiqué, the Capital Markets Board can take enforcement action such as filing a lawsuit or seeking an interim injunction to determine and cancel unlawful transactions that are contrary to the principles.

See Question 3.

There are no legal requirements for companies in relation to corporate social responsibility (CSR). However, many larger Turkish companies choose to take part in CSR projects and to co-operate with non-governmental organisations. In practice, reputable companies (especially large or publicly held companies) disclose their social responsibility projects on their website and through the media.

With the growing awareness of environmental, social and governance (ESG) issues globally, such as climate change and equity and diversity, investors are demanding higher standards for companies to operate in a sustainable environment . The authors expect further guidelines and legislation to be set for companies to establish and comply with CSR policies.

The board structure for both JSCs and LLCs is one-tier.

The management body of a JSC is a BoD containing at least one director. An LLC is managed by a board of managers consisting at least one manager.

Natural persons and legal entities can be board members in both JSCs and LLCs. If a legal entity becomes a board member, a natural person representative to represent that legal entity must also be elected who can attend the board meetings and vote on behalf of the legal entity. For a JSC, the board members do not have to be the shareholders. However, in an LLC, at least one of the shareholders must be appointed as a manager to the company.

Employees do not have a right to be represented in the board.

The board must be composed of one or more members under the CC. The number must not be less than five for companies subject to the Corporate Governance Principles (CG Principles, 4.3.1).

Board members must have full capacity with power of discernment.

Board members must be older than 18 years.

There are no nationality restrictions in the CC.

Legal entities appointed as a director must not be bankrupt.

There are no gender restrictions in the CC. However, the CG Principles require companies to set a target ratio for female board members, which should not be less than 25%, and to create a company policy for achieving that target (Article 4.3.9, CG Principles).

Although there is no provision in the CC, both non-executive directors and independent directors are recognised and required by the CG Principles.

Under the CG Principles, a majority of the board's members must consist of non-executive members. In addition, the number of independent board members cannot be fewer than one-third of the total number of BoD' members, and there must be at least two independent board members (Article 4.3.4, CG Principles).

The CG Principles set out specific requirements for independent members (Article 4.3.6, CG Principles). The independence requirements state that members must:

The roles of individual board members are not restricted. One person can be both the chairman and chief executive.

In the company establishment process, directors are appointed under the articles of association (Article 359, CC). Afterwards, the general assembly appoints the directors. Both the articles of association and relevant GaM must be registered with the relevant Trade Registry and announced in the Trade Registry Gazette.

Directors can be dismissed at any time with a GaM if either of the following occurs:

In JSCs, directors can be appointed for a maximum three-year period. The same director can be appointed again, unless otherwise specified in articles (Article 362, CC). However, in LLCs, directors' terms of appointment are not subject to time restrictions.

Under the CC, directors do not have to be employees of the company. However, directors can be employees, shareholders or third parties.

Shareholders have a right to receive information and to investigate the company's annual reports and financial statements (Article 437, CC). Directors must make an annual activity report and financial report available in company's central and branch offices for shareholders' inspection at least 15 days before the annual GaM. Every shareholder has a right to receive a copy of the statement of income and balance sheet.

In addition, during the GaM, shareholders can request information from directors concerning company operations, or from auditors concerning audit results.

Directors can own shares in the company, but there is no requirement in this regard.

In an LLC, at least one of the shareholders must be appointed as manager with full authority to represent the company (see Question 6).

The articles of association or a GaM can grant financial rights to directors, such as:

The general assembly of shareholders determines directors' remuneration, and this is one of the non-transferable duties of the general assembly.

The GaM deciding on the directors' remuneration does not need to be disclosed.

Shareholder approval is required, as the general assembly of shareholders determines directors' remuneration, and this is one of the non-transferable duties of the general assembly.

Directors' remuneration can vary depending on the sector in which the company is operating, the size and field of activity of the company.

There is no specific provision on the length of the notice for board meetings. However, it is possible to regulate this in the articles of association.

Every board member can call the board for a meeting. Unless determined otherwise in the articles of association, the meeting quorum requires a majority of the members to be present and the votes of a majority of the members present are needed to pass a resolution.

In a JSC, if none of the board members requests a physical meeting, a decision by circulation among all board members can be taken (Article 390, CC). In this case, written approvals of at least majority of the members are needed.

The BoD is responsible for all company business and transactions required for realisation of the company's operations, save for the non-transferable powers granted to the general assembly by law or the articles of association.

Under the CC, the following issues are non-transferrable powers of the general assembly (Article 408, CC):

Under the CC, in principle, signature authority must be exercised jointly by any two of the board members, unless otherwise stated by the articles of association or the BoD consists of only one member. However, the BoD can transfer all the management rights of the company to one or more executive members, or to a third party as the manager. In such a case the company regulates an internal directive but this internal directive does not need to be registered and announced by the trade registry.

Apart from the management rights, the BoD can transfer its representation authority to one or more executive members or a third party as the manager. In principle, a restriction on a director's power of representation has no effect against third parties acting on that representation in good faith, unless:

(Article 371, CC.)

In addition, the BoD can appoint non-representative members of the BoD or persons bound to the company by a labour contract, as commercial representatives with limited authority or as other commercial assistants. This must be explicitly reflected in an internal directive issued in accordance with Article 367; however, this time the internal directive must be registered and announced.

Although there is no requirement to do so, it is possible for BoD to delegate responsibility for specific issues under the CC (see Question 16).

The principal duties of directors are:

In general, for a director to be personally liable, the following conditions must be met:

(Article 553, CC.)

Directors who have assigned their duties (to the extent legally possible) arising from the law or the articles of association do not bear any liability for the acts and decisions of the assignee director (unless it is established that they failed to show reasonable care in the selection of the assignee officers).

In relation to directors' negligence, the required standard of care is that given by a prudent director, who acts cautiously and considering the interests of the company in good faith.

A judicial fine can be imposed for a breach of duty under the CC. In certain cases, a prison term can be imposed on the director or they must indemnify the company against the losses that resulted from their acts.

There is no umbrella legislation regulating white-collar crimes. However, the general regulations relating to white-collar crimes are mainly found in the Criminal Code.

Under the Turkish Constitution and the Criminal Code, criminal liability is personal and legal entities cannot be sentenced to criminal sanctions (unlike individuals). Therefore, directors who are involved in white-collar crimes such as theft, fraud and bribery can be held individually responsible under the relevant provisions of the Criminal Code. However, if the crime is committed for the benefit of the legal entity, the entity may be subject to some measures such as the cancellation of permission to operate or confiscation of profits received due to the crime.

In securitisation processes, in case of a loss caused by false, fraudulent, fake and untrue documents, statements, commitments and warranties, the director who has prepared the relevant document or made the relevant declaration is liable (Article 549, CC).

The Capital Markets Board can take any measures and request preliminary injunctions or provisional attachments against individuals who illegally issue or attempt to issue capital market tools as compensation for sold and for-sale securities (Article 91, Capital Markets Law).

After a determination of liability, the Capital Markets Board issues a written notice to the issuers within 30 days for mitigation of the consequences and refund of cash and other assets to right holders.

If the consequences resulting from this illegal issuance are not totally eliminated within one year starting from the date of the written notice, the Capital Markets Board can file a lawsuit for refund of cash and other assets to right holders or for the liquidation of the company.

If a company becomes bankrupt due to the management failures by its directors, the shareholders or the creditors of the company can hold the directors or officers liable for their losses under the Code on Enforcement and Bankruptcy. The relevant criminal sanction is applied to the directors, liquidators or the auditors who committed the act defined in the crime.

If there are signs that the company may be insolvent, the directors must prepare an interim balance sheet (Communiqué on the Procedures and Principles Regarding the Implementation of Article 376 of the CC) (Article 376 Communiqué). Signs of insolvency can be found in the annual and interim financial statements, audit reports (if any), reports of the early detection committee and the findings of the directors.

If the balance sheet indicates that the company is insolvent, the directors must apply to the court to decide the company's bankruptcy if the following are present:

Provisional Article 1 of the Article 376 Communiqué prevents foreign exchange losses arising from the foreign currency liabilities that are not yet fulfilled and half of the total personnel expenses, depreciation and expenses arising from leases in 2020 and 2021 from being considered in the calculations regarding the loss of capital or insolvency under Article 376 of the CC until 1 January 2024.

The directors in charge of management and representation can be be subject to a prison term of up to three months on a complaint by the creditors for not requesting the bankruptcy of the company when required to do so.

In addition, under the Code on Enforcement and Bankruptcy, directors who do not pay the company's debts partially or fully with the intention of damaging creditors' rights can face a prison term of between six months and two years, and a judicial penalty of up to 5,000 days, on a complaint by the creditors.

Negligent and fraudulent bankruptcy is defined under the Code on Enforcement and Bankruptcy, which refers to the Criminal Code regarding the sanctions applied. The following actions can constitute negligent bankruptcy:

Transactions aiming to damage the creditors' rights constitute fraudulent bankruptcy. These include:

The sanctions under the Criminal Code are:

Legal entities must ensure that they have taken the necessary environmental measures in respect of their commercial activities in accordance with the Environment Code (2872).

Requirements under the Environment Code include:

The Environment Code sets out administrative fines for non-compliance with these duties by companies. The companies can claim against the liable directors and officers for those losses under the general principles of liability (see Question 18).

Both natural and legal persons, institutions and organisations without legal capacity who hire employees are considered to be employers (Law on the Occupational Health and Safety (6331)). In addition, representatives of an employer who act on behalf of the employer and take part in the governance of the work and workplace, have the responsibilities and duties of employers, including in relation to:

Administrative fines can be imposed on the employer or employer representative for non-fulfilment of these responsibilities.

An administrative fine of up to 10% of an undertaking's annual gross revenues can be imposed for an infringement of competition law (Article 16, Law on the Protection of Competition No. 4054). In addition, an administrative fine of up to 5% of the penalty imposed on the undertaking can be imposed on managers/directors of the undertaking who are found to have a decisive influence in an infringement.

Liability for tax debts. There is also a special provision for the tax debts, which are included within the scope of public receivables (Article 10, Tax Procedural Law No. 213 (Tax Law)). Under Article 10, the total amount of tax and its receivables that cannot be obtained in whole or in part from the assets of the taxpayer company will be collected from the legal representatives who acted in breach of their legal duty to pay tax debts on behalf of the company.

Despite the current practice, the Council of State previously ruled that for a legal representative to be held personally liable for tax debts, they must have had an actual power of representation for tax issues and the capacity to pay the tax debts of the company (which would require having management authority). The Council of State's General Assembly on Unification of Judgments recently decided that tax debt that is due and cannot be collected (in whole or in part, or which is uncollectible from the company itself) can be collected from the shareholders of an LLC directly in proportion to their share capitals. In such a case, there is no need to collect from the legal representatives first.

Liability for Social Security Institution (SSI) Receivables. The Social Security and General Health Insurance Law No. 5510 (Law No. 5510) sets out special provisions regarding Social Security Institution (SSI) receivables to the effect that SSI receivables have priority before other public debts. If the SSI receivables are not paid without just cause, senior executives or authorised signatories of the company (including members of the BoD and its legal representatives) are jointly and severally liable together with the company itself (paragraph 20, Article 88, Law No. 5510).

The Constitutional Court recently ruled that holding members of the BoD that do not have any representation authority, jointly and severally liable with the joint stock company for the SSI debts does not violate proprietary rights of the concerned member of the BoD.

Employment-related liabilities. Directors can also have employment-related liabilities under the Labour Code. Companies can be held liable for losses if there is a breach of any of the obligations or responsibilities imposed by the Labour Code and can be punished with administrative fines if its general provisions are breached. If a company is punished with administrative fines, it has a right to claim against the relevant directors who have caused the loss under the general liability principles (see Question 18).

Criminal liability. If an employee is injured or dies due to a work accident that occurred under the supervision of an employer's representative (directors or officers), the representative can also be criminally liable under the Criminal Code.

Liability for data protection. Directors can have data protection related liabilities. Under Personal Data Protection Code No. 6698, companies can be punished with high administrative fines if they:

If a company is punished with administrative fines, it has a right to claim against the relevant directors who have caused the loss under the general liability principles (see Question 18).

Directors can delegate their duties (see Question 16 and Question 17). Therefore, their liability can also be restricted in the same degree as the delegation. However, the delegation of duties does not absolve the director of liability if the director has failed to show reasonable care in the selection of the assignee officers. Also, a restriction does not eliminate liability towards third parties acting in good faith, unless both of the following apply:

A company can indemnify a director against liabilities. The general assembly can also decide to release directors from liability. The approval of the balance sheet results in the release of the members of BoD, unless indicated otherwise in the general assembly decision. However, if the balance sheet is not properly provided or intentionally obscures the company's real conditions, the approval does not result in a release (Article 424, CC).

It is possible to obtain insurance against directors' personal liability arising from the performance of their duties. The company can pay the insurance premium.

In public companies, if the damage is insured at a price exceeding 25% of the company's capital and the company is secured, this must be announced in the Capital Markets Board Bulletin. In addition, if the shares of the company are listed on a stock exchange, this must also be announced in the stock exchange bulletin (Article 361, CC).

The CC sets out a special liability for companies controlling other companies in its group:

Article 369 of the CC sets out a duty of care and duty of loyalty for members of the BoD. The CC requires the members of the BoD to act as cautious directors while performing their duties and to protect the interests of the company in accordance with the principle of good faith.

The CC provides certain restrictions concerning the relations of the members of the BoD with the company in light of the duty of care and duty of loyalty:

There is a general prohibition on transactions between directors and the company (see Question 28). This restriction applies for all types of transactions.

There is no restriction in the CC on the purchase or sale by a director of the shares and other securities of the company of which they are a director. However, Article 106 of the Capital Markets Law restricts the purchase or sale of such shares and other securities by a director. Directors can be subject to a prison term of between three and five years, or a judicial fine, if they:

Companies that are subject to independent audit (see Question 39) must:

If a company fails to do so, the resolutions will be void and the relevant directors are subject to judicial fines for delays of between 100 and 300 days at TRY20 to TRY100 per day.

Article 2.1 of the CG Principles also requires certain issues to be disclosed on the website of the company.

In addition, certain documents such as annual reports and financial statements must also be disclosed in the Public Disclosure Platform, which is founded by the Communiqué of Public Disclosure Platform.

The Capital Markets Board also requires companies quoted on the stock exchange to disclose their financial reports, special conditions and other certain issues on the Istanbul Stock Exchange and Central Securities Depository.

The general assembly of shareholders can hold ordinary or extraordinary meetings (Article 409, CC). The ordinary GaMs must be held within three months following of the end of each fiscal year. Extraordinary GaMs can be convened when required.

The person who calls the general assembly of the shareholders for a meeting decides on the agenda. Issues that are not included in the agenda cannot be discussed (Article 413, CC). The minimum agenda of the ordinary meeting must include:

(Article 409, CC.)

The GaMs can also be held electronically. The right holders who have the right to attend the GaMs can also attend these meetings electronically (Article 1527, CC). The company can either:

The application of the system of electronic participation and voting in GaMs is mandatory for companies with shares traded on the stock exchange.

Under the CC, shareholders must be invited to the meeting as set out under the articles of association, through an announcement published on the company's website (if the company is required to have a website) and in the Turkish Trade Registry Gazette. This announcement must be made two weeks before the GaM (Article 414, CC). The CG Principles require the notice to be made on the company website and on the Public Disclosure Platform at least three weeks in advance of the meetings (Article 1.3.1, CG Principles).

A notice must be sent by registered letter with return receipt to the shareholders who are recorded in the share ledger or who have proved their shareholding with share certificates or other documents in advance.

If all shareholders or their representatives are present in the meeting and no objection is raised, the GaM can be conducted without notice. If a meeting is convened without notice, an item can be added to agenda with the unanimous votes of the shareholders (Article 416, CC).

Participation via teleconference is not possible.

The meeting and voting quorum requirements are regulated under the CC. In principle, the GaM can be convened with at least one-quarter of the shareholders or their representatives, and a majority of the votes present is needed for a resolution (Article 418, CC). If this meeting quorum is not reached during the first meeting, no meeting quorum is provided for the second meeting.

However, there are aggravated quorum requirements for certain issues:

(Article 421, CC.)

There are aggravated quorum requirements for certain resolutions (see Question 33).

Generally, the BoD can call a meeting. If the BoD cannot be gathered to call the general assembly for a meeting, a shareholder can also call the general assembly for a meeting with a court order (Article 410, CC). In addition to this general right for all shareholders, minority shareholders (shareholders holding at least 10% of the company's share capital for non-public companies, or at least 5% for public companies) can request the BoD to call the general assembly for a meeting. If the general assembly is called for a meeting, minority shareholders have a right to request certain issues to be included in the meeting agenda.

If the BoD refuses a minority shareholder's request for a meeting or an issue to be included in agenda or does not provide a positive response to this request within seven days, minority shareholders can apply to the commercial court for enforcement of their request.

Minority shareholders have a right to receive information and to investigate certain financial documents of the company (Article 437, CC) (see Question 12). If this right for information and investigation is exhausted, shareholders can request a special audit from the general assembly even it is not covered in the agenda of the GaM (Article 438, CC).

The BoD of companies with shares traded on a stock exchange must set up a committee for early detection of risks related to the existence, development and continuance of company, and for applying required measures and remedies in this regard (Article 378, CC). In other companies, this committee is set up if it is deemed necessary by the auditor.

In addition, Article 4.5.12 of the CG Principles also requires a committee to be formed for early detection of such risks.

The BoD is responsible for the preparation of balance sheets and financial reports, and their submission to the general assembly for approval. Unless otherwise provided in the general assembly resolution, approval results in release of directors, managers and auditors from any associated liability (Article 424, CC) (see Question 25). However, if there are missing issues in the balance sheet, or the balance sheet deliberately includes issues which conceal the real situation of the company, the approval does not result in release and the directors can be subjected to criminal liability.

The conditions for determining the companies subject to independent audit are set out by the Decision of Council of Ministers (Article 397, CC). According to the Decision on the Determination of Companies Subject to Independent Audit, the companies in List (I) in the annex for the decision are subject to independent auditing.

From 1 January 2023, the companies whose capital market instruments are not traded on a stock exchange or other organised markets but are deemed publicly listed under the Capital Markets Board are subject to an independent audit if they have at least two of the following (either itself or together with its affiliates) in two subsequent fiscal years:

The companies specified in List (II) are subject to independent audit if they have at least two of the following (either itself or together with its affiliates) in two subsequent fiscal years:

Companies that do not meet at least two of the criteria set out in List (I) and List (II) must retain independent auditors if they have at least two of following (either itself or together with its affiliates) in two subsequent fiscal years:

The audit must be made according to Turkey Auditing Standards, which are established by the Public Oversight Accounting and Auditing Standards Authority.

The company's auditor must be appointed by the general assembly. In a company group, the group auditor must be appointed by the general assembly of the controlling company.

The auditor must be appointed in every fiscal year and before the end of the fiscal year. After the appointment, the BoD must register the relevant general assembly resolution with the Trade Registry and announce it on the Trade Registry Gazette and company's website immediately.

If there is a justified reason, especially in case of a doubt concerning auditor's impartiality, the court can assign another auditor at the request of BoD or minority shareholders. For a minority shareholder to request the assignment of an auditor:

If the auditor is not appointed within the first four months of the fiscal year the BoD, directors and every shareholder can request the court to appoint an auditor.

If an auditor cannot be appointed until the fourth month of the activity period of a company for which the Savings Deposit Insurance Fund has been appointed as a guardian, the auditor will be appointed by the Minister to which the Savings Deposit Insurance Fund relates to. The Minister can delegate this authority to Fund Board.

An auditor can terminate the auditing contract only if there is a justified reason or a court action is filed for removal of the auditor (Article 399, CC).

Company auditors must be either:

(Article 400, CC.)

A person cannot be appointed as an auditor if they:

In addition, an auditor who has been appointed as an auditor for seven years in a ten-year period, cannot be appointed again for at least three years (Article 400, CC).

The company's auditor or its affiliates cannot provide consultancy services to the company other than the tax consultancy and tax audit services (Article 400/3, CC).

There is no provision related to limitation or exclusion of liability.

There are no provisions relating to company secretaries under Turkish law.