Professional board structure under new Turkish Commercial Code (2)

Picking up where I left off on Monday, where I was talking about the Communiqué Regarding the Designation and Application of Corporate Governance Rules, public companies trading on the İstanbul Stock Exchange (excluding banks) shall abide by the following rules: - At least one-third of the board members shall be independent.

 - A member who served for six years on the board cannot be appointed as an independent board member.

The criteria to be accepted as an “independent board member” are also determined in the communiqué, as follows:

1. No direct or indirect employment, capital or commercial relationship shall exist between the company, a person related to the company or to the legal entities having a management or capital interest by the shareholders directly or indirectly holding 5 percent in the company and the member or any spouse or persons with blood or affinity relationship (to the third degree) for the last five years.

2. The member shall not be appointed for the representation of a share group.

3. The nominated person shall not be working in the firms dealing with the business and organization of the company in whole or in part, especially audit firms or consulting firms; and shall not have been employed as a director at such companies for the last five years.

4. The nominated person shall not have been employed in an independent audit firm or shall not have been involved in the auditing service for the last five years.

5. The nominated person shall not have been employed in the companies that supply significant services or products to the company and shall not have served as a director at such companies for the last five years.

6. The spouse or any persons with blood or affinity relationship (to the third degree) with the nominated member shall not be a director of the company and shall not be a shareholder of the company having more than 5 percent of company shares or shall not hold the control of the management.

7. The nominated member shall not have been paid other than the remuneration and attendance fee.

8. If the member is also a shareholder, s/he shall not hold more than 1 percent of the issued share capital and such shares shall not be privileged.

Any person who does not meet the above criteria may also be appointed as an independent board member temporarily for one year, with the approval of the Capital Markets Board (SPK), provided that there is a valid ground to do so.

The Board of Directors is responsible for evaluating the independence of the nominated person and to report to the Shareholders’ General Assembly.

III -- Conclusion and our services

Important steps have been taken against problems faced in commercial life with the newly adopted rules and principles. All these innovations serve the purpose of facilitating the operation of the board, ensuring a more professional management and overcoming the difficulties that arise in daily business.

Given the fact that the companies require a more professional and transparent system of management henceforward, legal assistance and administrative guidance will become crucial for the implementation of new regulations in daily operations. We wish to provide you with timely and efficient solutions for the requirements under the new law and relevant regulations. The knowledge and experience of our team with its expertise and leadership is at your service as you prepare your company for future business opportunities in Turkey.

Within this scope, our law firm offers the services listed below to our clients operating in various sectors, in both domestic and international markets: Nominating the most suitable professional board member for the business;  Adopting in-house regulations and policies; Designing the company structure in accordance with the law in effect, setting priorities, determining responsibilities; Printing handbooks and procedures, training employees, updating programs; Preparing compliance programs by detecting unlawful practices and risk bearing law-related issues; Forming an organizational culture in the company or supporting the already existing one; Aiming to raise the company’s market value to the extent possible; Balancing the interests of shareholders and the company’s growth prospects; Resolving conflicts in this regard.

NOTE:Berk Çektir is a licensed attorney at law and available to answer questions on the legal aspects of living in Turkey. Please kindly send inquiries to [email protected] If a sender’s letter is published, names may be disclosed unless otherwise expressly stated by the sender.

DISCLAIMER: The information provided here is intended to give basic legal information. You should get legal assistance from a licensed attorney at law while conducting legal transactions and not rely solely on the information in this column.