Announcement of the Istanbul Chamber of Commerce on internal directive

The Istanbul Chamber of Commerce (ICOC) has recently published an announcement concerning the internal directive on representation authorities in joint-stock and limited liability companies whereby the ICOC, acting as the trade registry authority for corporate matters in Istanbul, establishes the principles for limiting authorities in corporations according to the Turkish Commercial Code (TCC).

The ICOC emphasises the importance of precisely defining and distinguishing between limited and unlimited representation authorities in a company's internal directive. This includes specifying the tasks and responsibilities assigned to each group, degree, or position within the organisation.

The summary of the key points from the ICOC announcement is as follows:

• The internal directive should clearly underline the scope and usage method of limited representation authorities. If unlimited representation authorities are also included in the internal directive, they must be explicitly stated and assigned to specific positions or groups.
• As per Article 371/7 of the TCC referenced in the announcement, a person cannot hold both unlimited and limited representation authority simultaneously. To illustrate, a person with unlimited representation authority jointly with another signatory cannot be appointed as a sole signatory with limited representative authority. Alternative methods can also be employed in determining the usage of limited representation authority. For instance, the signature of a person with joint unlimited representation authority can be set as a prerequisite for transactions to be made by a person with limited representation and this would not limit the unlimited representative's authority.
• A person cannot hold more than one type of signature authority from different groups or degrees as defined in the internal directive. In other words, a person cannot be a signatory for both Group A and Group B. However, the scope of Group A signature authority can be defined to include the tasks specified under Group B signature authority.
• It is feasible to grant joint and sole limited representation authorities to members of the same group or degree for limited representative authority. For instance, a representative in Group C could have joint signature authority with a person from Group A for transactions that fall below a certain threshold while also having sole authority to track applications at official institutions.

In conclusion, the recent announcement by the ICOC underscores the importance of accurately defining representation authorities in joint-stock and limited liability companies' internal directives. Companies should thoroughly review their existing internal directives and make necessary adjustments to ensure compliance with the TCC and the guidelines set forth in the announcement.

To better understand the specific impact of the announcement on your company's corporate governance practices, contact your CMS client partner or local experts: [email protected] and [email protected]