Introduction
Pursuant to Article 408 of the Turkish Commercial Code No. 6102
("TCC"), which entered into force on July 1, 2012, the
members of a joint stock company's board of directors shall be
appointed by the general assembly. This authority is one of the
non-transferrable authorities and duties of the general assembly.
However, Article 363 of the TCC is an exception to this provision
and enables the board of directors to appoint a member to the
board. As per this article, in the event any vacancy arises on the
board of directors for any reason, the board of directors may
appoint, temporarily, a member who meets the legal requirements and
submit this member to the next general assembly for approval. The
member appointed performs his duty until the general assembly to
which he is submitted for approval convenes and completes his
predecessor's tenure if he is approved.
However, Article 408 of the TCC should be considered while Article
363 of the TCC is implemented; changing the board of directors by
appointing more than one member to the board, in the event more
than one vacancy arises, may be interpreted as the transfer of the
general assembly's authority to appoint members to the
board.
The combined implementation of these two provisions was examined
in the correspondence of the General Directorate of Domestic Trade
of the Ministry of Customs and Trade dated 22.10.2012 and numbered
6799 ("Opinion of the Ministry")1. The
appointment of a member to the board of directors pursuant to the
Article 363 of the TCC shall be examined and the Opinion of the
Ministry shall be evaluated.
The Opinion of the Ministry
In the Opinion of the Ministry, articles 363 and 408 of the TCC
are evaluated as follows:
"...it is understood that consecutive resolutions for the
appointment of members replacing the resigning members of the board
of directors are adopted at different times on the same day that
members have resigned. It is also understood that newly appointed
members participate in the resolution regarding the appointment of
other members prior to the registration of the resolution by which
they were appointed.
In this respect, it is not appropriate to replace all members
of the board of directors pursuant to article 363 of the TCC since
the appointment of members to the board of directors is one of the
non-transferrable authorities of general assembly; new members may
be appointed pursuant to this article only in the event the quorum
is present, despite the vacancies, and the new members may
participate in the new resolutions following their
registration."
The Opinion of the Ministry refers to a case in which the board of
directors of a joint-stock company adopted sequential resolutions
on the same day at different times. The new member appointed
pursuant to the Article 363 in one of these resolutions
participated in the appointment of another member without being
approved by the general assembly and without being
registered.
The Opinion of the Ministry has two outcomes: (i) changing all
members of the board of directors as per Article 363 of the TCC is
not possible by virtue of Article 408 of the TCC; (ii) the members
appointed pursuant to Article 363 of the TCC may participate only
in the new resolutions following their registration. However, it is
not clear in the Opinion of the Ministry whether the phrase
"new resolutions" are relevant only to the resolutions
with respect to Article 363 of the TCC or to all resolutions to be
adopted by the board of directors.
It may be argued that Article 408 of the TCC should not be
rendered ineffective by virtue of Article 363 of the TCC. However,
the Opinion of the Ministry, which requires that new members of the
board of directors need to be registered and announced in order to
become a member and to be entitled to exercise the rights arising
therefrom, namely participating in the implementation of Article
363 of the TCC, should be further evaluated.
When a Person Becomes a Member of Board of Directors and What is the Legal Nature of Registration?
Members of the board of directors appointed by the general
assembly pursuant to Article 408 of the TCC shall become a member
of the board of directors upon acceptance of the membership.
Therefore, it is not necessary that a member of the board of
directors be registered to the trade registry for their appointment
as a member of board to be valid. However, as per Article 354/1(g)
of the TCC, members of the board of directors shall be registered
to the trade registry and announced in the trade registry gazette.
Nevertheless, this registration is not constitutive (i.e. the
registration does not affect the validity of the board member's
appointment), but rather declaratory2 (the registration
and announcement declare that said person became a member of the
board of directors). The function of registration and announcement
is to inform third persons3.
Even though the registration of new members of the board of
directors does not have a constitutive nature, the changes on the
issues which are already registered, such as the persons authorized
to represent and bind the company, must be registered and announced
to third parties in order to avoid problems arising from
representation of the company. Here again, registration serves to
inform third parties. Therefore, a company which did not register
and announce the new members of the board of directors may be bound
by the transactions made by the former member with a third person,
unless it is proved that the third person knew of the
changes.
However, the Opinion of the Ministry indicates that members
appointed to the board of directors pursuant to Article 363 must be
registered in order to participate in new member appointments and
grants a constitutive nature to the registration. This attitude is
not in compliance with the law and the doctrinal opinions referred
above which defends that the registration is not
constitutive.
Another issue is whether a member of the board of directors,
appointed pursuant to Article 363 of the TCC and approved by the
general assembly, but not yet registered, could participate in
resolutions with respect to new member appointments as per Article
363 of the TCC. A member approved by the general assembly must be
considered as a member appointed by the general assembly. Although
the Opinion of the Ministry is not clear in that regard, it would
be consistent with its opinion to require registration in such a
case, too.
Conclusion
As seen, the Opinion of the Ministry, which requires registration for participation in resolutions for the appointment of members to the board pursuant to Article 363 of the TCC, is not in compliance with the law and the doctrine referred above. In any case, Article 363 of the TCC should not be used for the purpose of disregarding the authority of the general assembly to appoint members to the board of directors.
Footnotes
1.
For the said opinion, please see:
http://www.ito.org.tr/wps/portal/tescil-ilan-kurulus?WCM_GLOBAL_CONTEXT=genelgeler.
(Access date: 25.01.2013)
2.
Poroy, Reha/Tekinalp, Unal/Camoğlu, Ersin;
Ortaklıklar ve Kooperatif Hukuku, Istanbul 2005, no. 557;
Pulasli, Hasan, Sirketler Hukuku Serhi, Ankara
2011, p. 898; Akdag Guney, Necla; Anonim Sirket
Yönetim Kurulu, Istanbul 2012, p. 15.
3.
However, Article 359 of the TCC obliges the legal entity member of
the board of directors and its representative to be registered to
the registry. The legal nature of such registration is
controversial in the doctrine. Although no explicit expression is
stated in the text of the article, the justification of the article
expresses that the registration herein is constitutive. According
to an opinion based on the justification, the registration made
pursuant to article 359 is constitutive. Please see
Pulasli, p. 898; Kirca, Ismail;
Anonim Sirketlerde Tuzel Kisilerin Yonetim Kurulu Uyeligi, Batider
2012/2, p. 53. According to another opinion, for a constitutive
registration, the constitutive nature must be explicitly stipulated
in the article; therefore registration of the legal entity's
representative is not constitutive. Please see Akdag
Guney, p. 17.
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