The board of directors’ ability to delegate management authority depends on the fulfillment of the conditions stipulated in Article 367/1 of the Turkish Commercial Code (TCC). These conditions include the existence of a provision in the articles of association permitting delegation, the existence of an internal directive prepared based on this permission and containing the minimum content specified in Article 367/1, and the board’s decision to delegate authority referencing the directive. If these conditions are met, pursuant to Article 367/1 of the TCC, the board of directors may partially or fully delegate management authority to one or more board members or a third party.
It should be noted that the scope of the delegation and the determination of which powers can be delegated are as important as the existence of the above-mentioned conditions for delegation. The limits of delegation constitute the non-delegable and inalienable duties and powers of the board of directors stipulated in Article 375 of the TCC. According to this provision, the non-delegable and inalienable duties and powers of the board of directors are as follows:
1) High-level management of the company and issuing related instructions.
2) Determining the company’s management structure.
3) Establishing the necessary system for accounting, financial auditing, and financial planning to the extent required by the company’s management.
4) Appointing and dismissing managers and individuals with similar functions, excluding branch managers.
5) Supervising management personnel to ensure their compliance with the law, the articles of association, internal regulations, and the written instructions of the board of directors.
6) Maintaining share ledgers, board resolutions, and general assembly meeting and discussion ledgers; preparing and submitting the annual activity report and corporate governance disclosure to the general assembly; preparing general assembly meetings; and executing general assembly decisions.
7) Notifying the court of insolvency.
It is accepted in the doctrine that the scope of this provision is not limiting, and that certain duties and powers of the board of directors outside of Article 375 are non-transferable and inalienable due to the nature of their duties. For example, in accordance with Article 401 et seq. of the TCC, the board of directors’ authority to prepare and approve the financial statements and annual activity report, submit them to the auditor without delay, and allow the auditor to review any documents and documents related to the company they wish to review constitutes one of their non-transferable and inalienable powers. Similarly, according to Article 405 of the TCC, the board of directors is the authority for the company to file a lawsuit to resolve any disagreements arising from the auditor’s report. Furthermore, pursuant to Article 454/2 of the TCC, the board of directors’ authority to convene a special meeting of privileged shareholders if the decision taken at the general assembly meeting prejudices the rights of privileged shareholders is another non-transferable and inalienable power of the board of directors.
Subject to compliance with the limitations mentioned above, those who transfer management authority are authorized to make decisions regarding all matters and transactions necessary for the realization of the company’s business activities within the scope assigned to them pursuant to Article 374/1. Within this framework, the inalienable and indispensable duties and authorities listed in Article 375 of the TCC cannot be transferred pursuant to Article 367. However, the board of directors may delegate authority to managers in certain matters while performing these duties and exercising its authority. For example, pursuant to Article 375/1-c of the TCC, the board of directors is responsible for ensuring the establishment of the necessary order for accounting, financial auditing, and financial planning to the extent required by the company’s management. Due to the expertise required in these matters, the board may delegate authority for the preparation and decision-making stages related to these matters. This does not constitute the transfer of inalienable and indispensable authority; it is merely a delegation of authority to ensure the establishment of the necessary order in areas such as financial planning, which require specialized expertise.
Delegation of management authority is possible, either in whole or in part. In the full delegation of management authority, the authority to make decisions regarding all matters and transactions necessary for the company’s business is transferred to the managers without distinction. In the partial delegation, one or more of the company’s activities are transferred to the same or different individuals or to a committee. More clearly, in the full delegation of management authority, the board of directors exercises only its non-delegable and inalienable powers. In the partial delegation of management authority, the board of directors exercises not only its non-delegable and inalienable powers but also the authority to make decisions necessary for the company’s business in areas not delegated.
At this point, it is necessary to address the relationship between representation authority and the delegation of management authority. Representation authority refers to the board’s representation of the company to its shareholders in internal relations and to third parties in external relations. It is also possible for the board of directors to delegate its representation authority, but this transfer does not occur automatically with the delegation of management authority; it requires a separate delegation. More clearly, the delegation of management does not include the delegation of representation authority. This is because, according to Article 10 of the Turkish Commercial Code (TCC), The delegation of management regulated in Article 367 only concerns the delegation of decision-making authority regarding the company’s management. Therefore, when delegating representation authority, the board of directors relies not on Article 367 of the TCC, but on Article 370/2, which pertains to representation authority. In this case, unless the representation authority is separately delegated in accordance with Article 370/2, the representation authority will continue to reside with the board of directors.
[1] In this study, the following academic works were used: Demirel, D. (2017). Anonim Şirketlerde Yönetim Yetkisinin Devri. Hacettepe Hukuk Fakültesi Dergisi, 7(2), 211-250.