Legal Glossary

The board of directors is the mandatory body that manages and represents a joint-stock company and consists of one or more persons appointed in the articles of association or elected by the general assembly. It is regulated in Articles 359 et seq. of the Turkish Commercial Code (TTK). Members are elected for a maximum of three years. Duties such as the senior management of the company, determining the management organization and establishing the financial order cannot be delegated by the board.

Compliance (uyum) is the term for the whole of the policies, controls and appointments aimed at ensuring that an institution carries out its activities in accordance with the legislation in force, regulatory decisions and its internal rules. Turkish law has no general statutory definition applicable to all companies. The most detailed regulation is in the field of combating money laundering and the financing of terrorism: Law No. 5549 and the Regulation on the Compliance Program impose on the listed obliged entities the obligation to establish a compliance program and appoint a compliance officer.

A demerger is a corporate-law transaction in which a capital company or cooperative transfers all or part of its assets to other companies in return for shares. It is regulated in Articles 159 et seq. of the Turkish Commercial Code (TTK). In a full demerger the demerging company ceases to exist; in a partial demerger it continues to exist. The shares are given to the shareholders of the demerging company or, in a partial demerger, to the company itself.

The general assembly is the organ in joint-stock and limited liability companies through which the shareholders exercise their rights regarding the company’s affairs and take the fundamental decisions left to it by law. In the Turkish Commercial Code (TTK), it is regulated in Article 407 for the joint-stock company and in Article 616 et seq. for the limited liability company. Powers such as amending the articles of association, electing the management organ and granting it release (ibra), and approving the financial statements belong to the general assembly and cannot be transferred.

A joint-stock company is a capital company whose share capital is divided into shares and which is liable for its debts only with its own assets. It is regulated in Articles 329 et seq. of the Turkish Commercial Code (TTK). Shareholders, as a rule, are obliged only to pay the capital share they have subscribed and are not personally liable for the company’s debts. Its main organs are the general assembly and the board of directors; it may be established by a single shareholder and may operate for any economic purpose not prohibited by law.

A limited liability company is a capital company whose share capital consists of the total of the shareholders’ capital shares and which may be established with at most fifty shareholders. It is regulated in Articles 573 et seq. of the Turkish Commercial Code (TTK). Shareholders, as a rule, are not liable for the company’s debts; they are obliged to pay the capital share they have subscribed and to perform the additional payment and ancillary performance obligations in the company agreement. Public receivables are an important exception to this rule.

A merger is a corporate-law transaction in which two or more commercial companies bring their assets together in a single company and the shareholders of the transferring company become shareholders of the acquiring company. It is regulated in Articles 134 et seq. of the Turkish Commercial Code (TTK). It can take the form of a merger by absorption or by formation of a new company; it becomes valid upon registration in the trade registry, and the transferring company ceases to exist.

Unfair competition refers to conduct and commercial practices that are deceptive or otherwise contrary to the principle of good faith and that affect relations among competitors or between suppliers and customers. It is regulated in Articles 54 et seq. of the Turkish Commercial Code (TTK). Disparagement, misleading statements, causing confusion, disclosure of business secrets and inducing breach of contract are the main examples; they may be the subject of actions for declaration, prevention, restoration of the prior status and damages.