Limited Liability Companies are a type of capital company regulated under the Turkish Commercial Code. Capital companies have a separate legal personality and are considered distinct legal entities before the law. Opening a company in Turkey is carried out through registration in the trade registry. Although a registered company acquires a separate legal personality, there is still a need for real persons to represent the company. This is where company directors come into play. The role of a director in an LLC grants both rights and responsibilities to the directors. Therefore, the appointment and dismissal of directors are subject to certain conditions.

You may be interested in: Liability of LLC Directors in Turkey

LLCs are represented by one or more directors or a board of directors. A director, within the scope of their representative authority, manages the company, represents the company, and makes decisions that bind the company. A director may be one of the company's shareholders or an external appointee. The appointment of an external director is generally considered when the legal requirements necessitate certain qualifications in the company’s management. This article will examine the appointment of directors in LLCs, the appointment of external directors, the procedure for restricting director authorities, and the removal of an LLC director, while answering frequently asked questions.

Appointment of a Director in an LLC

The management and representation of the company are regulated by the company’s articles of association. With the articles of association, the management and representation of the company may be assigned to one or more shareholders or third parties. However, at least one shareholder must have the right to manage and the authority to represent the company. The company director can be either a real person or a legal entity. However, if the director is a legal entity, a real person must be appointed to represent the legal entity.

The appointment of directors in LLCs is governed by the Turkish Commercial Code and the Trade Registry Regulation. First, a general assembly resolution must be made on this matter. Unless otherwise provided in the articles of association, the general assembly is convened by the directors in accordance with Article 617 of the Turkish Commercial Code. The law stipulates that the general assembly must be convened at least fifteen days before the meeting date. However, this period may be extended or shortened to ten days through the company’s articles.

A general assembly may be held without a formal call for the appointment of a director in an LLC. For this, all shareholders or their representatives must be present at the general assembly and must not object to the meeting. In the general assembly, a resolution regarding the change of directors is made, and an application is submitted to the trade registry office with a petition signed by the company’s representatives.

If the appointed director is a legal entity, the decision to appoint a director must be made by the legal entity’s board of directors. In the resolution, the real person representing the legal entity must be specified, and the decision must be notarized and submitted to the trade registry office along with other documents.

Appointment of an External Director in an LLC

Directors in an LLC may be appointed from among the company’s shareholders or externally. However, the appointment of an external director is subject to additional conditions. Accordingly, a signed declaration from the external appointee indicating their acceptance of the position is required. Additionally, at least one of the company’s shareholders must serve as a director alongside the external director, with unlimited authority.

Procedure for Restricting Director Authorities in an LLC

The authority of directors in an LLC can be restricted through an internal directive. According to Article 629 of the Turkish Commercial Code, the provisions related to the scope of directors' representative authority, the restriction of authority, the determination of those authorized to sign, the form of signatures, and their registration and announcement, will apply as stipulated in the provisions concerning joint-stock companies.

The preparation of an internal directive concerning the delegation of representative authority depends on whether there is a provision in the company’s articles on this matter. If there is no provision in the articles, an amendment to the company’s articles must be made first. The internal directive only regulates the procedure and principles regarding the scope and limits of restricted representative authority.

According to the law, transactions carried out by authorized persons with third parties outside the company’s business activities are also binding on the company. The announcement of the company’s articles of association is not by itself sufficient evidence of this matter. However, if it is proven that the third party knew or, based on the circumstances, should have known that the transaction was outside the scope of business, the company may be released from liability. On the other hand, restrictions on representative authority, such as limiting it to the head office or a branch or requiring joint use of authority, are valid if registered and announced.

Dismissal of a Director in an LLC

The dismissal of a director in an LLC can occur either through a general assembly resolution or by court order following a shareholder’s application to the court. According to Article 630 of the Turkish Commercial Code, the general assembly may remove one or more directors from office or limit their management and representative authorities. For this, there must be an agenda item or just cause regarding the dismissal or the discussion of the directors’ liability at the general assembly. For example, the examination and discussion of financial statements can create an environment for discussing the directors’ liability. As a result, financial statements that do not satisfy shareholders may lead to the dismissal of the LLC director.

Each shareholder may request from the court the removal or limitation of the management and representative authority of directors for just cause. In dismissal cases, the lawsuit should be directed against the dismissed director, and it is not necessary to also sue the LLC itself. A director’s serious violation of their duties of care and loyalty or their loss of the necessary ability to ensure good management of the company is considered just cause. If the court determines the existence of just cause, it may order the dismissal of the director and appoint a trustee in their place.

CONCLUSION

The processes of appointing and dismissing directors in LLCs are of great importance in terms of the company’s management and representation. While the appointment of directors, whether from within or outside the company, is shaped by trade registry procedures and general assembly resolutions, the dismissal of directors is subject to the same rules. The provisions of the Turkish Commercial Code and the company’s articles ensure that these processes are carried out in an orderly and transparent manner. The dismissal of directors may be based on just causes, such as actions detrimental to the company’s interests or the loss of management capabilities. Through director changes, efficiency and professionalism in company management are also ensured.

Frequently Asked Questions

How do you appoint and remove directors?
After the company is established, a general assembly resolution is required for the appointment of a director. Once the resolution is made, the appointment decision is registered and announced by applying to the relevant trade registry office. A director can be dismissed either by court order or a general assembly resolution. If the general assembly does not decide on the dismissal, any shareholder can apply to the court to request the director’s dismissal.
Who can be a director in an LLC?
Both legal entities and real persons can be appointed as directors in an LLC. However, a real person must be appointed to represent a legal entity that is a director. Directors can be shareholders of the company or external persons who are not shareholders.
What is the maximum term for an LLC director?
There is no fixed term for the office of an LLC director. Therefore, a director continues in office until they are dismissed or resigned.

For your inquiries or legal assistance regarding this matter contact us at info@paldimoglu.av.tr.

Comment