Civil and Criminal Liability of Board Members (TTK art.553)

TTK art.553(1) provides that founders, directors, managers and liquidators are liable, both to the company and to the shareholders and creditors, for damages caused by their negligent breach of statutory or articles-based obligations. Liability requires the conjunction of (i) a breach of statute or of the articles of association, (ii) fault, (iii) damage and (iv) causation.

The burden of proof rests, in principle, on the claimant, who must prove the board member's fault, conduct, damage and the causal link. TTK art.553(3), however, concerns not the burden of proof but the limits of liability: no one may be held liable for breaches or irregularities outside his or her control, and that exemption cannot be set aside by invoking a duty of supervision or care.

TTK art.557 abandons the former concept of full joint and several liability in favour of a 'differentiated joint liability' model. Under this model, where multiple directors are liable for the same damage, each is jointly and severally liable to the creditor — externally — only to the extent that the damage is personally attributable to him or her, having regard to the degree of fault and the circumstances.

This model offers particular protection to directors with delegated functions and to independent directors. A director who proves that he or she did not participate in a decision outside his or her area and could not have detected the issue through reasonable supervision may avoid liability.

Under TTK art.560, the liability action is time-barred two years from the date on which the claimant learned of the damage and of the person liable, and in any event five years from the date of the damaging act. Where the conduct also constitutes an offence under the Turkish Criminal Code attracting a longer limitation period, that longer period applies.

On the criminal side, TTK art.562 et seq. impose judicial monetary penalties and prison sentences for offences such as failure to keep books, defective financial reporting, misrepresenting capital and issuing false documents. Tax-evasion offences under article 359 of the Tax Procedure Code (Law No. 213) can also engage the personal criminal liability of board members.

In corporate-law matters, resolutions, meeting notices, agendas, attendance lists, signature circulars, trade-registry application documents and the articles of association must be reviewed as a whole. In corporate transactions, most disputes arise not from the substance of the resolution but from defects in notice, quorum, representation and registration.

Transactions such as share transfers, amendments to the articles of association, mergers, demergers and liquidations are not completed by internal resolutions alone; notary, trade-registry, tax and accounting dimensions are also part of the process. The legal steps and financial obligations should therefore be planned together when drawing up the transaction timetable.

From the perspective of shareholders or directors, dissenting opinions, information rights, requests for special audit and records of release and liability may carry decisive evidentiary weight in any subsequent action. Minutes of meetings should therefore be prepared in clear and auditable form.