In Turkish joint stock companies (Anonim Şirket - A.Ş.), members of the board of directors are personally liable to the company, shareholders, and corporate creditors for damages caused by the breach of their statutory or contractual duties (Article 553 of the Turkish Commercial Code - TCC No. 6102). However, modern Turkish corporate law avoids strict liability, creating a balanced governance structure grounded in the prudent manager standard of care (TCC Art. 369), differentiated joint liability (TCC Art. 557), and the discharge mechanism (TCC Art. 558).
For foreign multinational executives, non-executive board members, and private equity investors operating in Türkiye, director liability and discharge are primary areas of risk management. This guide explores the legal liability framework, the Business Judgment Rule, derivative actions, and statutory limitation periods.
1. The Standard of Care & The Business Judgment Rule (TCC Art. 369)
TCC Article 369 sets the standard for all board members: “Members of the board of directors and third parties managing the company shall perform their duties with the diligence of a prudent manager and protect the company’s interests in good faith.”
The Code contains no separate provision called the Business Judgment Rule; in legal scholarship the Art. 369 standard is discussed together with that rule. Because TCC Art. 553(1) ties liability to a culpable breach of duty, a director is not at fault merely because a commercial decision later produced a loss if:
- The decision was based on adequate and reliable corporate information,
- The director acted free of personal conflicts of interest,
- The decision was taken in the bona fide belief that it served the company’s best interests.
The line between commercial failure and culpable, unlawful management is the central axis of liability claims.
2. Differentiated Joint Liability (TCC Art. 557)
The 2012 Commercial Code abolished the legacy joint and several liability doctrine, introducing differentiated joint liability (farklılaştırılmış teselsül) under TCC Article 557:
| Liability Metric | Old TCC (Law No. 6762) | Modern TCC (Law No. 6102 Art. 557) |
|---|---|---|
| Joint Liability Model | Rigid / Absolute Joint & Several | Differentiated Joint Liability |
| Fault Attribution | All members presumed equally liable | Assessed strictly per member’s personal fault & role |
| Internal Regulations Defense | Limited protection | Full defense for delegated spheres under TCC 367 |
| Damages Allocation | 100% recourse against any member | Court allocates damages based on individual causation |
TCC Article 557/1 provides: “If more than one person is liable to compensate the same damage, each of them is jointly and severally liable with the others to the extent that the damage can be personally attributed to them, according to their fault and the circumstances.”
3. General Assembly Discharge (İbra) and Concealed Wrongs (TCC Art. 558)
The general assembly’s decision to discharge (ibra) board members at the annual general meeting constitutes a waiver by the company of claims against directors for the fiscal period.
The limit of the discharge is drawn by the wording of TCC Art. 558(2) itself: the discharge resolution removes the right of action only in respect of the disclosed material facts covered by the discharge. Accordingly:
- Rule of Disclosed Facts: Discharge only covers the material facts disclosed to the general assembly; a matter not disclosed in the financial statements, auditor reports or deliberations falls outside it.
- Concealed Irregularities: Fraudulent accounting, off-the-books transactions, or matters hidden from the general assembly are not disclosed material facts, so the discharge does not remove the right of action in respect of them.
- Other Shareholders: Every shareholder who did not vote for the discharge and did not acquire shares knowing of it retains the right to sue for six months from the discharge date (TCC Art. 558(2)).
4. Direct vs. Indirect Corporate Damage (TCC Art. 555)
- Indirect Damage (Damage to the Company): When board misconduct depletes corporate assets, shareholders and creditors may sue under TCC Art. 555, but the compensation must be awarded and paid directly to the company.
- Direct Damage (Personal Harm): Where board actions directly impair a shareholder’s personal assets (such as fraudulent misrepresentation inducing share sales), damages are paid directly to the plaintiff.
5. Statutory Limitation Periods (TCC Art. 560)
- Relative Period: 2 years from the date the claimant discovers the damage and the identity of the liable party.
- Absolute Period: 5 years from the date the wrongful act was committed.
Where the conduct constitutes a criminal offense under the Turkish Criminal Code (such as breach of trust or fraud) and the Turkish Criminal Code sets a longer limitation period for prosecuting it, that longer period also applies to the damages claim (TCC Art. 560/1). Where the company sits inside a group, a further layer applies on top of board liability: control brings reporting duties, a duty to compensate losses caused through the exercise of control, and exposure that can reach the controlling company and the persons behind it, as set out in parent company liability in Turkish groups of companies.
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