Liability of Foreign Board Members in Turkish Joint-Stock Companies: TCC Articles 369 and 553

1. A foreign board member enters a Turkish-law corporate office

Once appointed to the board of a Turkish AŞ, the individual exercises an office created by Turkish company law. The member’s citizenship and usual residence do not replace the Turkish Commercial Code.

A foreign parent can nominate the member and can expect group reporting, but the director’s statutory duties are owed within the Turkish company framework.

The appointment, acceptance, registration and representation authority should be documented accurately.

2. Article 369 uses the prudent-manager standard

Article 369 requires board members and persons entrusted with management to act with the care of a prudent manager. This is not a guarantee that every business decision will succeed.

The relevant question is whether the director informed himself or herself appropriately, considered material risks, used expert input where necessary and acted through a defensible process.

Board papers should therefore record the information considered before major decisions.

3. Directors must protect the company’s interests in good faith

A board member cannot treat the Turkish subsidiary merely as an asset of the foreign parent. The company has its own legal personality and interests.

Group strategy can be legitimate, but transactions that shift value away from the Turkish company without a lawful corporate basis can create liability and group-company issues.

Conflicts should be disclosed and managed under the applicable TCC rules.

4. A bad result is not automatically a breach

Commercial decisions involve risk. A product launch, acquisition or expansion can fail even when the board acted carefully.

Liability should therefore focus on process, information, conflicts and compliance rather than hindsight alone.

A board that documents alternatives and assumptions is in a stronger position than one that approves a major transaction without a record.

5. Management can be delegated only within the TCC framework

The board can delegate management where the articles and an internal directive provide the required basis, subject to non-transferable duties.

Valid delegation can change who has operational responsibility, but it does not eliminate every board obligation.

The scope of delegation should be precise, registered where required and communicated internally.

6. Delegation does not eliminate the duty to organise and supervise

A board that delegates day-to-day management should establish reporting and control systems. Ignoring obvious warning signs can create liability even where another manager executed the transaction.

Financial reporting, compliance, sanctions, tax, employment and related-party controls should reach the board at an appropriate level.

Minutes should show how serious issues were escalated and addressed.

7. Related-party and conflict transactions require special discipline

A foreign board member can be simultaneously employed by or loyal to a foreign parent. That commercial reality does not permit undisclosed self-dealing.

Transactions with the parent or sister companies should be arm’s length and supported by corporate interest, transfer-pricing and approval records.

Where the director has a personal interest, the applicable conflict rules and voting restrictions should be followed.

8. “The parent instructed me” is not a complete defence

A board member cannot automatically rely on instructions from group headquarters if carrying them out would breach Turkish law or the Turkish company’s duties.

The director should raise legal/commercial concerns, request written analysis and record dissent where appropriate.

Group-company law can regulate parent influence, but unlawful conduct remains subject to Turkish remedies.

9. Capital-maintenance decisions are high-risk

Unlawful dividends, disguised distributions, repayment of capital contrary to law or transactions prejudicing creditors can expose board members.

Board members should verify distributable profit, statutory reserves and financial conditions before approving payments.

Tax characterisation and corporate-law validity should be analysed separately.

10. Financial statements and statutory books are not merely accountant matters

The board has statutory responsibilities connected to financial reporting, annual reports and company records. Delegating bookkeeping to an accountant does not make the board irrelevant.

Directors should understand material accounting judgments, going-concern issues, related-party balances and audit findings.

Approving obviously false or unsupported accounts can become a liability issue.

11. Article 553 requires duty, fault, damage and causation

Article 553 is not strict liability for every company loss. Liability is tied to culpable breach of a legal or articles-based duty that causes damage.

The claimant must identify the breached obligation and loss. The director’s role and actual authority are therefore important.

A person should not be held liable for an area that was lawfully delegated and outside his or her responsibility unless another duty, such as supervision, was breached.

12. The company, shareholders and creditors can have claims in different circumstances

The company can seek recovery for direct damage to its assets. Shareholders can have rights concerning direct or reflective harm under the statutory framework, and creditors can have claims particularly where company assets are insufficient and statutory conditions are met.

The remedy and standing should be classified before suit.

A shareholder dispute should not automatically be drafted as a personal damages case if the loss belongs to the company.

13. Causation can break liability even where a procedural error existed

A breach must have caused the claimed damage. If the same loss would have occurred regardless of the director’s conduct, the causal link can fail.

In multi-director boards, causation should be examined individually according to votes, delegated functions and knowledge.

Expert financial evidence can be needed to quantify damage.

14. Turkish law applies differentiated solidarity rather than automatic equal liability

Where several persons contribute to the same damage, Turkish company law evaluates responsibility according to each person’s fault and the circumstances within the differentiated solidarity framework.

A director who opposed a decision and took reasonable steps can have a different position from the director who designed and executed it.

Minutes and written dissent can therefore be important evidence.

15. General assembly release is important but not limitless

A release decision can affect company claims within the legal framework, but its scope depends on disclosed facts and statutory rights of shareholders/creditors.

A release based on incomplete or misleading information can face challenge.

Directors should not treat an annual boilerplate release as complete immunity.

16. D&O insurance transfers financial risk but not the duty itself

Directors’ and officers’ insurance can cover certain defence costs and liabilities, subject to exclusions, policy limits and notification requirements.

Intentional misconduct, fines and specific statutory liabilities can be excluded.

Foreign board members should review whether the group D&O policy actually covers the Turkish subsidiary and Turkish proceedings.

17. Resignation stops future office duties but does not erase past conduct

A director who resigns remains potentially responsible for breaches committed during the term.

The resignation should be documented, notified and registered so third parties and company records reflect the correct end date.

Before leaving, the member should preserve lawful access to relevant records needed for future defence without violating confidentiality.

Conclusion

Foreign board membership in a Turkish AŞ is a substantive legal responsibility. Article 369 requires prudent, loyal management and Article 553 creates damages liability for culpable breaches. The strongest protection is an informed process, clear delegation, documented conflicts management and reliable board records.