Liabilities of Board Members in Turkey
We will explain the liabilities of board members in Turkey, birefly. In Turkey, board members of companies, including joint stock companies (A.Ş.) and limited liability companies (Ltd. Şti.), have certain legal duties and responsibilities outlined in the Turkish Commercial Code (TCC) and other relevant legislation. Failure to fulfill these duties can result in liabilities for board members. Here are the key liabilities of board members in Turkey:
Fiduciary Duty
Board members have a fiduciary duty to act in the best interests of the company and its shareholders. They must exercise due care, diligence, and loyalty in carrying out their responsibilities and making decisions on behalf of the company.
Duty of Care
Board members are required to exercise the care and skill that a reasonably prudent person would use in similar circumstances. This includes staying informed about the company’s affairs, monitoring its operations, and making informed decisions based on available information.
Duty of Loyalty
Board members must prioritize the interests of the company and its shareholders over their personal interests or the interests of other parties. They are prohibited from engaging in self-dealing, conflicts of interest, or actions that benefit them at the expense of the company.
Liability for Damages
Board members may be held personally liable for damages resulting from breaches of their fiduciary duties, negligence, or wrongful acts. If a board member’s actions or decisions cause financial harm to the company or its stakeholders, they may be required to compensate for the losses incurred.
Criminal Liability
In cases of serious misconduct or violations of the law, board members may face criminal charges and prosecution. Criminal offenses such as fraud, embezzlement, bribery, and insider trading can lead to imprisonment, fines, and other penalties.
Joint and Several Liability
In cases where multiple board members are involved in a breach of duty or wrongdoing, they may be held jointly and severally liable for the resulting damages. This means that each board member may be individually liable for the full amount of damages, regardless of their degree of involvement.
Indemnification and Insurance
Companies may indemnify board members against certain liabilities arising from their service on the board, subject to legal restrictions and conditions. Additionally, board members may be covered by directors and officers (D&O) liability insurance to mitigate personal financial risk.
BOD of JSC should consider the liabilites of board members while taking decisiona. It’s essential for board members to understand their duties and obligations under Turkish law and to act with integrity, prudence, and accountability in fulfilling their roles. Seeking legal advice and guidance can help board members navigate their responsibilities and minimize the risk of liabilities.
