In a family-owned food manufacturer, the founder had been sole authorised signatory and sole decision-maker from the start. Supplier contracts, credit applications, a regional manager’s appointment: everything ended on one desk. When two of his children joined, one in sales and one in production, the first crack opened somewhere simpler than strategy: no document said who could sign what. Corporate governance arrived there as a gap in authority, not a management fashion.
That gap is paid for in speed and in liability. Every decision returns to the founder, so the second generation carries messages, not responsibility. Exposure sits where the signature sits, while authority is exercised elsewhere.
The remedy does not start with a family constitution, which the Turkish Commercial Code (Türk Ticaret Kanunu, TTK) does not regulate and which cannot bind the company by itself; a shareholders’ agreement binds only its signatories. The build order runs the other way: the organs are put on a sound legal footing first, and the family arranges itself around them.
Family, ownership and management sit at separate tables
Three spheres of decision-making overlap at the same dinner table: family relationships, share ownership and the business. The law keeps them apart. A Sunday family meeting is not a general assembly (genel kurul), and the general assembly is not the board. TTK Article 365 leaves no doubt: a joint stock company is managed and represented by its board of directors.
A family council or an advisory board (danışma kurulu) is not an organ defined in the TTK. What is decided there does not bind the company, has no effect against third parties and does not displace the board’s responsibility. An understanding at the family council that no dividend will be paid means nothing until the general assembly resolves it.
Who should sit on the board?
A closed joint stock company need not appoint independent board members. That does not make an outside appointment pointless. A member from outside the family is the only one who reads the agenda without reference to the family hierarchy; that outside eye separates a board of directors (yönetim kurulu) meeting from a conversation over dinner.
The real question is not who gets a seat but how each block of shares is represented. TTK Article 360 allows the articles of association (esas sözleşme) to grant specified share groups representation on the board. Where siblings hold unequal stakes, that replaces a majority rebuilt at every general assembly with a settled balance. Under TTK Article 366(1) the board elects a chair and at least one deputy chair from among its members each year.
An internal directive does not spread authority, it marks its edge
The allocation of authority is put in writing through TTK Article 367. The board cannot on its own initiative delegate management, wholly or in part, to its members or to a third party. It needs two things: a provision in the articles of association permitting delegation, and an internal directive (iç yönerge) issued by the board. The directive defines the duties and shows who reports to whom and owes information to whom. Until delegation is made, management belongs to every board member.
The principle of mandatory provisions in TTK Article 340 allows the articles to depart from the Code’s rules on joint stock companies only where the Code expressly permits it, and Article 367 is such a permission. A frequent mistake is to draft the directive carefully and skip the amendment to the articles, leaving an organisation chart with no legal effect.
Delegation does not empty the board. TTK Article 375 keeps certain duties and powers with the board as non-transferable and inalienable: the ultimate management of the company and the giving of instructions, the determination of the management organisation, the accounting, financial audit and financial planning systems, the appointment and dismissal of managers other than branch managers, the supervision of those charged with management, and the books and the annual activity report. The directive does not give the founder’s authority away; it shows where it stops.
Delegation also works on the liability side. TTK Article 553 makes board members and managers liable to the company, its shareholders and its creditors for damage caused where they breach, through their own fault, obligations arising from the law or the articles. Organs delegating a duty or power on a statutory basis are not liable for the acts of the person taking it over unless they are proven to have failed to exercise reasonable care in selecting that person. That defence requires a lawful delegation.
Committees move oversight from a person to an institution
Under TTK Article 366(2) the board may set up committees and commissions to monitor the running of the business, to prepare reports on matters put before it, to have its decisions implemented, or for internal audit. That is the shortest route from an elder brother keeping an eye on things to a written remit.
- Audit and finance. Financial statements are examined here before they reach the board, and related party transactions and payments to family members are listed.
- Appointments and remuneration. The terms on which family members join, how they are appointed and what they are paid are tied to written criteria. Without this committee the pay debate falls onto the family table, where it never closes.
TTK Article 378 requires companies whose shares are traded on the stock exchange to establish an expert committee for the early detection and management of risk. In other companies it is set up immediately where the auditor considers it necessary and notifies the board in writing. It reports to the board every two months, and the report also goes to the auditor. Which companies fall within the scope of independent audit (bağımsız denetim) is set by criteria fixed by presidential decision. Inside that scope, the risk committee is no longer left to the board’s discretion.
In a family company the conflict-of-interest rule reaches almost everyone
TTK Article 393 bars a board member from taking part in deliberations where the company’s interest conflicts with the personal, non-company interest of the member, a descendant or ascendant, their spouse, or a blood relative or relative by marriage up to and including the third degree. In a family business that circle covers the whole family: a brother, a nephew, a son-in-law, a brother-in-law. Leasing property from a family member, or supplying through a sibling’s business, falls squarely under it. The article also demands a record: the reason for abstaining and the transaction concerned go into the board resolution.
Without the general assembly’s permission, TTK Article 395 bars a board member from transacting with the company on their own account or another’s; the same article prohibits borrowing from the company. TTK Article 396 governs the prohibition on competition: without that permission a member may not carry out, on their own account or another’s, a transaction within the company’s field of business, or join a company in the same line as a partner with unlimited liability. The company may then claim damages or treat the transaction as made on its own account. Those rights lapse three months after the other members learn of the breach and in any event one year after it occurs. In families where hard subjects go unspoken for years, those periods run out quietly.
What does a family member outside management actually hold?
The hardest part of governance in a family company is the shareholder outside management: the sibling who neither works in the business nor sits on the board, but holds shares and expectations. Telling that person to trust the others has no legal content.
TTK Article 437 grants the shareholder a right of information and inspection (bilgi alma ve inceleme hakkı). The financial statements, the annual activity report, the audit reports and the proposal on profit distribution are made available for inspection at least fifteen days before the general assembly. Information may be refused only on the ground that trade secrets would be disclosed or interests deserving protection endangered. The right cannot be removed or restricted by the articles or by a decision of an organ.
Where information is not enough, TTK Article 438 follows. If the right of information or inspection has already been exercised, the shareholder may ask the general assembly, even where the matter is not on the agenda, to have specified events clarified by a special audit. If the general assembly accepts, the company or any shareholder may apply within thirty days to the commercial court of first instance to have a special auditor appointed. The sequence matters: information first.
The third tool is in TTK Article 411, which gives shareholders representing at least one-tenth of the capital, or one-twentieth in publicly held companies, the right to call the general assembly and to put items on the agenda. The articles may set a lower threshold. When shares are distributed among siblings, that threshold fixes where minority shareholder rights (azınlık pay sahibi hakları) begin, and lowering it gives the branch left in the minority a durable voice.
The order of work runs as follows. The articles of association first: the provision permitting delegation, representation rights for share groups where wanted, and a reduced minority threshold, resolved at the same general assembly. Then the internal directive: who may sign up to which amount and who reports to whom. Then the committees, audit and finance before appointments and remuneration. The family council last: a council formed in a company whose organs do not yet work in law decides nothing. None of this is finished in one meeting, but it spreads the weight of the founder’s signature before the second generation is asked to carry it.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
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