Main Responsibilities of the Board of Directors in Joint Stock Companies and the Managing Directors in Limited Liability Companies
Based on the statistical data published by the T.O.B.B.(the Union of Chambers and Commodity Exchanges of Turkey) each year, it is seen that Limited Companies and Joint Stock Companies are preferred over other company types. These two types of Companies are in an indispensable position in the functioning of the National Economy and in the Global Financial World, therefore, the knowledge about the directors/managers and their responsibilities are of a great importance.
The current table of the countrywide new commercial companies are as follows:
Duties, Authorities, and Obligations of the Board of Directors and Managing Managers
According to the Turkish Commercial Code, the “Board of Directors” and the management which is performing the remaining company activities; are authorized to make decisions on all kinds of business and transactions activities required for the realization of the business objective of the company, other than those left under the authority of the general assembly in accordance with the law and articles of association.
Some Of The Activities Are As Follow:
- Providing senior management of the company and giving instructions relating to management,
- Determining the company management organization,
- Accounting, financial supervision and establishment of the necessary order for financial planning as required by the management of the company,
- If there is no aggravating provision in the contrary to the Articles of Association (AOA); gathering with the majority of the total number of members and making decisions with the majority present at the meeting,
- All board members, company officials and committees being obliged to provide with information at meetings,
- Holding the records of the share register, the board of directors decision and general assembly meeting and negotiating books, organizing annual activity report and corporate governance statement and submission to the general assembly, organizing the general assembly meetings and execution of general assembly decisions.
According to the Turkish Commercial Code, the management and representation of the Limited Liability Company are regulated by the articles of organization. ‘Managing Members’, are authorized to perform and execute decisions on all matters related to management which are not left to the general assembly by law or the articles of organization.
Some Of The Activities Are As Follow:
- Providing senior management of the company and giving instructions relating to management,
- Determining the company management structure within the framework of law and the articles of incorporation,
- If necessary for the management of the company; accounting, financial auditing and financial planning,
- Taking care of all of the duties regarding management and protecting the company’s interests in the frame of honesty,
- Avoiding all activities that create competition with the company if it is not otherwise provided for in the articles of incorporation or if all other partners have not given written permission,
- Organizing the company financial statements, annual activity report and, where necessary, community financial statements and annual activity report.
Legal and Criminal Responsibilities of the Board of Directors and Managing Members
In addition to the duties, authorities, and obligations of the Board of Directors and Managing Members, there is also legal and criminal liability arising from the representations of the Company Management.
In both types of companies, the responsibilities of the representative and governing organizations are largely similar, but there are also distinctive differences.
According to Turkish Commercial Code: ‘Members of the Board of Directors and Managing Members are liable for damages arising from their own fault to both the Company and its shareholders as well as to the creditors of the company if they violate the obligations arising from the Law and the Articles of Association.’ This framework designated by the Law establishes the general responsibility of the representative and governing organization of the two companies.
When comparing two types of companies in terms of civil and criminal liability, two main differences are striking.
The differences are as follow:
- In Terms Of The Individual
- In Joint Stock Companies it is possible to make an optional choice of giving the authority of representation and management to one or a few of the partners or not giving it to anyone. By assigning a third person to the representation and administration organisation of the company, the partners will be exempted from administrative responsibility and freed from legal and criminal responsibility on an individual basis.
In Limited Liability Companies, it is also possible to give the representation and management authority to one or more of the partners or not to any of them. However, at least one partner has the obligation to have the management and representation authority of the company. This obligation eliminates the possibility of avoiding legal and criminal liability which comes with the concerned partner’s administrative competence.
- In Terms Of The Public Debts
- In Joint Stock Companies, the Board of Directors with the authority to represent and manage is responsible for the public debts. Therefore, any legal or criminal sanctions imposed due to public debt will be directed to the Board of Directors.
- In Limited Liability Companies, the partners are directly accountable for the public receivables which are not fully or partially collected from the company. The responsibility of the partners directly covers all their personal assets.
Limitations of the Board of Dİrector’s Responsibilities
The abovementioned responsibilities of the Board of Directors are limited within the scope of certain criteria. In practice, the Board of Directors transfers the management authority to one of its partners or one of its employees to establish a more professional management administration. In this way, all of the management authority (with the inalienable authority reserved) is transferred to the assigned person (s), to be responsible for the entire operation of the company.
By conferring management power, the Board of Directors is, with few exceptions, exempted from the responsibilities arising from the acts and decisions of the person (s) delegated to the Managing Authority.
These exceptions are as follows:
- To Investigate whether the person (s) to whom the management authority is to be given have the qualifications necessary to carry out the company’s activities.
- To supervise the decisions and actions taken by the management administration
- To prevent the actions and activities that would harm the partnership and to immediately withdraw the management authority if necessary
In case the Board of Directors does not fulfill the supervision obligations listed above, the management authority is jointly responsible for the damage arisen from the faulty actions of the person (s) who is given the management authority.
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