Liabilities Of The Board Members In A Joint Stock Company – Corporate/Commercial Law
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A. INTRODUCTION
Management and representation of joint stock providers are
carried out by the board of administrators. For this reason, the board of
administrators is deemed as one of most important organs of joint
inventory firms obtaining broadest illustration powers. In this
context, the enterprise is managed and represented by the board of
administrators for the daily life of a joint stock organization.
The board users have specific liabilities arising out of
general performance of their obligations of administration and
illustration of the enterprise. . In situation of violation of these
obligations with fault, pursuant to the provision of Turkish
Industrial Code No. 6102 (“TCC”) Posting 553/1 the
board users could be held liable for the damages they lead to to the
organization, the shareholders and the lenders of the
corporation.
B. Standard OBLIGATIONS ARISING FROM Law
The board customers are subject matter to the obligations established forth in
the TCC, on their election to the board of administrators. In addition
to the obligations in the TCC, it is doable to impose other
obligations on them through article content of affiliation of the company.
This short article will only contact upon some of the normal obligations
of the board arising out of the TCC and the regular of treatment that
should really be exercised by the board associates. We would like to not that
there are other obligations imposed by the pursuant to the
exclusive provisions of the TCC or current market distinct rules and
polices which could be applicable based on the exercise regions
of the company.
Senior Management and Supervision of the Business
Since the board of administrators is the government physique of the
enterprise, the board users are liable for taking part in the
management selections of the firm and supervising the
implementation of these selections. This obligation does not prolong
to an interpretation to mean selections about all varieties of
operations of the enterprise in each single depth are supplied or
supervised strictly by the board of administrators. As a issue of fact,
with the phrase “senior management” in the that means of TCC
375/1/a and the phrase “senior supervision” in the
indicating of TCC 375/1/e provides an plan about the extent of
involvement by the board of administrators in administration and
oversight.
Not Moving into into Transaction with the Firm and Not
Borrowing from the Organization
Pursuant to TCC 395/1, the board members cannot enter into a
transaction with the firm on behalf of on their own or everyone else
without the need of obtaining authorization from the general assembly normally,
the enterprise may declare that the transaction is invalid. On the other
hand, the aforementioned board member assert that the transaction is
invalid.
In accordance to the second paragraph of the similar posting, the board
customers aside from shareholders are prohibited from borrowing funds
from the firm. Similarly, it is clearly regulated that the
business can not supply surety, assurance and assurance for
non-shareholder board associates and are not able to consider more than the money owed of
these board associates. In case of a breach of this obligation, the
TCC allows the lenders of the company to straight start out financial debt
enforcement proceedings from the appropriate board users
pertaining to the respective quantities owed to the enterprise.
Non-contend with the Firm
Pursuant to the Report 396/1 of the TCC, the board members are
prohibited from instantly or indirectly carrying out the commercial
affairs that slide inside the scope of the firm’s area of
procedure. Board customers could carry out the aforementioned
transactions in accordance with the regulation only with the authorization of
the basic assembly or in case the place the content articles of association
of the business supplies for this kind of provision enabling the board
customers to contend with the corporation . Without having the permission of the
typical assembly, the board member who carries out industrial
affairs in the scope of the firm’s discipline of operation,
will breach this obligation.
Duty of Treatment and Obligation of Loyalty
Pursuant to Short article 369/1 of the TCC, the board associates are
obliged to fulfill their obligations with the care of a prudent manager
and to safeguard the pursuits of the business. Board associates are
obliged to comply with this obligation of care, equally when fulfilling
their obligations arising out of the law or the articles or blog posts of
association and for the duration of the management and illustration of the
firm. According to the rationale of Short article 369 of the TCC, a
“prudent manager” talked about in the Code ought to be
regarded as in the context of “small business judgment
rule” which term found its roots from the US commercial
law. In this context, merely the actuality that a final decision of the board
of directors turns out to be unfavorable to the firm, does not
give increase to the legal responsibility of the board of directors. If the board
members can demonstrate that they exercised due care envisioned from
a prudent company person, and gave a selection on entirely-informed
foundation, acquiring the expected specialized, fiscal and legal advice
and acted for the greatest pursuits of the enterprise in their impression
even if the end result of the selection is against the compan’s
added benefits , such a judgment are unable to be viewed as as violation of the
responsibility of treatment. Nevertheless, it really should be highlighted that the organization
judgment rule is a basic principle that is overseas to Turkish Legislation, as it
was derived from the Typical Regulation process. Accordingly,the higher court
judgments are predicted to shape application of this rule.
Posting 369/1 of the TCC also regulates the obligation of
loyalty. This obligation is imposed by the next part of such
short article: “to safeguard the interests of the firm in
accordance with the rule of honesty”. The board associates
are obliged to prioritize the interests of the company and to stay away from
actions that might harm the corporation although executing the management
and illustration of the company. In addition, the board associates
have obligations of confidentiality arising from their loyalty
obligations.
C. BREACH OF OBLIGATIONS AND Legal responsibility
If the board members violate their obligations arising from the
law or the posts of association with fault and the firm, the
shareholders or the lenders put up with destruction because of to this violation,
the board customers with fault are held liable. If the harm of the
firm has transpired, the company or each and every shareholder has the
authority to file an action for compensation. In this scenario, the
courtroom will make a decision on the quantity of the compensation entitled by the
organization. If the damage is caused specifically to the suitable
shareholder or creditor, the shareholde or creditors has the
authority to demand that the compensation be paid out right to him.
If additional than one board associates are dependable for the damage, the
responsibilities of these board members are established pro-rata to
their respective faults resulting in the damage.
The motion for lawful legal responsibility towards the board customers, need to
be filed just before the Business Courts of 1st Occasion where by the
principal area of business enterprise of the organization is found. The statute
of limitations for this motion is regulated in Write-up 560 of the
TCC as follows:
“The right to declare payment from those responsible
will become barred by prescription immediately after two many years from the day when
the plaintiff uncovered the injury and the responsibles, and in any
case 5 yrs from the date of occurrence of the act that
triggered the hurt. In so significantly, if this act necessitates a penalty in
the which means of felony regulation and is subject to a for a longer time statute of
limitations concerning Turkish Penal Code, this statute of
restrictions shall apply to the compensation circumstance.”
D. Summary
In scenario the board users of the enterprise violate their
obligations arising from the legislation and the articles of affiliation,
they are liable for the payment of the damages of the
corporation, shareholders or creditors because of to this violation. No matter whether a
fault is attributable to the board users ought to be established
according to the “business judgment rule” imported from
the prevalent law process to Turkish Law.
Originally Published 16 February 2022
The content of this article is meant to deliver a standard
information to the subject matter matter. Professional guidance need to be sought
about your particular instances.
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