Authors: Corporate Law Department, Prof. Dr. Ali Paslı, Att. Mustafa Şahin

Introduction

In joint stock companies, the board of directors occupies a central position as a mandatory corporate body vested with the authority to manage and represent the company, which is essential for the continuity of the company’s legal and economic existence. The broad scope of authority conferred upon the board of directors is not limited to commercial decision-making processes but also encompasses the obligation to ensure that the company’s activities are conducted in compliance with the law. Within this framework, a multifaceted liability regime has been established for board members, extending beyond civil liability and, in certain circumstances, supported by criminal sanctions.

Under Turkish law, the criminal liability of board members is not regulated in a systematic and consolidated manner within a single statute. On the contrary, such liability is dispersed across various legislative instruments, primarily the Turkish Commercial Code, as well as the Turkish Criminal Code, the Capital Markets Law, the Enforcement and Bankruptcy Law, and other sector-specific regulations. This fragmented structure renders it difficult in practice to foresee which acts or omissions of board members may give rise to criminal liability, and criminal risks are often identified only after the relevant conduct has already occurred.

This study examines the criminal liability of board members within the framework of the legal nature of such liability, the principal risk areas arising under the Turkish Commercial Code and other relevant legislation, and practical considerations derived from application.

I. Board Membership and the Legal Nature of Criminal Liability

Criminal liability is personal in nature in accordance with the fundamental principles of criminal law. Accordingly, for an act to be subject to criminal sanctions, fault and unlawfulness must be attributable to the relevant natural person. With respect to board members, the emergence of criminal liability depends not merely on their status as corporate organs but on the concrete establishment of control over the act, fault, causation, and the resulting harm.

The non-transferable duties and powers of the board of directors are expressly regulated under the Turkish Commercial Code No. 6102 (“TCC”), pursuant to which the company’s top-level management and supervision fall within the responsibility of the board of directors (TCC Art. 375). This regulation is of particular importance in terms of criminal liability, as failures to fulfil supervision and oversight duties may form the basis for liability.

In addition, the concepts of delegation of authority and de facto management play a significant role in the assessment of criminal liability. Although the Turkish Commercial Code allows for the delegation of certain duties, the board of directors retains ultimate responsibility with respect to non-delegable duties. In practice, this has led to the prevailing view that criminal liability may persist even where an internal division of duties has been established.

II. Criminal Liability of Board Members under the Turkish Commercial Code

Although the criminal sanction provisions under the TCC are not exclusively directed at board members, the concentration of management and representation authority within the board means that board members frequently constitute the perpetrators of such offences. The legislator has deemed judicial fines sufficient for certain violations, while prescribing imprisonment for more serious breaches.

A. Liability Arising from Incorporation, Capital, and Structural Transactions

Transactions such as the incorporation of a joint stock company, capital increases or decreases, mergers, demergers, and conversions directly affect the company’s legal existence and the interests of creditors. For this reason, making false statements or providing misleading information in documents prepared within the scope of such transactions has been criminalised.

Article 549 of the TCC provides for liability in cases where documents or declarations relating to such transactions are false or misleading. Moreover, representing capital as subscribed or paid when it has not been duly subscribed or paid constitutes a separate offence under Article 550 of the TCC. Where such acts are committed by board members, sanctions extending to imprisonment may be imposed.

B. Transparency, Audit, and Public Disclosure Obligations

The principle of transparency in joint stock companies is recognised as a fundamental mechanism for the protection of shareholders and third parties. In this context, the board of directors is subject to various reporting and disclosure obligations. In particular, the failure to prepare mandatory reports in group company structures, or the preparation of such reports in a misleading manner, is subject to criminal sanctions under Article 562 of the TCC.

Furthermore, board members may face the risk of judicial fines in cases involving obstructive conduct against statutory audits or breaches of the obligation to establish a company website and publish mandatory content thereon (TCC Arts. 1524 and 562).

C. Protection of Company Assets and Borrowing Prohibitions

The principle of capital maintenance constitutes one of the cornerstones of joint stock company law. As a corollary of this principle, restrictions have been imposed on the granting of loans to shareholders and certain related persons. Violations of these borrowing prohibitions under the TCC may result in the imposition of judicial fines on the relevant board members (TCC Art. 562).

III. Liability of Board Members under the Turkish Criminal Code

The criminal liability of board members is not limited to offences regulated under the Turkish Commercial Code; it may also arise in relation to certain crimes set forth in the Turkish Criminal Code. Among these, breach of trust constitutes one of the most frequently encountered risk areas in practice.

Pursuant to Article 155 of the Turkish Criminal Code No. 5237 (“TCCrC”), a board member who abuses the authority entrusted to them and causes damage to the company may be held liable for the aggravated form of the offence, facing severe sanctions. Depending on the specific circumstances of the case, offences such as fraud, embezzlement, and abuse of office may also come into play with respect to board members.

IV. Criminal Liability Arising from Occupational Health and Safety and the Duty of Care

Criminal liability of board members may arise not only from active conduct but also from omissions. The failure to implement occupational health and safety measures prescribed by legislation applicable to the company’s field of activity may give rise to criminal liability, particularly in cases involving workplace accidents.

In fatal or serious injury workplace accidents, company executives may be held liable for negligent homicide or negligent bodily harm (TCCrC Arts. 85 and 89). In certain cases, courts have even considered the applicability of probable intent. This underscores that board members are subject to an effective duty of supervision not only with respect to strategic decisions but also regarding the company’s operational activities.

V. Criminal Liability under the Enforcement and Bankruptcy Law

Under the Enforcement and Bankruptcy Law No. 2004 (“EBL”), certain offences give rise to direct sanctions against board members where the act is committed within the management of a legal entity. In this context, particular importance is attached to the failure to comply with court judgments and the breach of the obligation to request bankruptcy.

Where a company becomes over-indebted and the board of directors fails to request bankruptcy despite this condition, such conduct may severely prejudice creditors’ interests and may result in imprisonment for board members (EBL Art. 345).

VI. Board Members under Capital Markets Legislation

For board members serving in companies subject to capital markets regulation, the obligations imposed under the Capital Markets Law No. 6362 (“CML”) are of particular significance. Violations of the regulations and decisions of the Capital Markets Board may result in the imposition of administrative fines (CML Art. 103).

In addition, offences such as insider trading and market manipulation are criminalised under Articles 106 and 107 of the CML, and board members may qualify as perpetrators of these offences depending on the circumstances.

VII. Legal Personality and Administrative Fines

As a general rule, criminal sanctions are not imposed on legal entities under Turkish law. However, pursuant to the Misdemeanours Law, administrative fines may be imposed on legal entities in relation to certain acts. Where an offence is committed for the benefit of the company, administrative sanctions may be imposed on the company in addition to the personal criminal liability of the perpetrator (Misdemeanours Law Art. 43/A).

VIII. Conclusion and Evaluation

While board members possess extensive powers as the management and representation organ of joint stock companies, they operate under a correspondingly stringent liability regime. Criminal liability risks may arise not only from explicit unlawful acts but also from omissions and failures in supervision and control.

Accordingly, clearly defining the duties and authorities of board members, establishing effective internal control and compliance mechanisms, and ensuring continuous compliance with applicable legislation are of paramount importance in mitigating criminal liability risks.