Corporate Governance Requirements for Companies in Turkey

Overview: Corporate Governance in Turkey

Corporate governance refers to the system by which companies are directed and controlled. Turkish commercial law establishes minimum governance standards for all companies, with additional requirements for larger companies and listed entities.

The primary source of corporate governance law is the Turkish Commercial Code (TCC) — LLC governance in Articles 576–644, and JSC governance in Articles 339–563. For listed companies, the Capital Markets Board (SPK) Corporate Governance Principles add another layer of requirements.

LLC Governance Structure

A Turkish LLC (Ltd. Şti.) has a simpler governance structure than a JSC:

Shareholders’ Assembly (Ortaklar Kurulu)

The shareholders’ assembly is the highest governing body. All partners collectively make decisions on the most significant company matters.

Matters requiring shareholder resolution:

Annual ordinary meeting: Must be held within 3 months of fiscal year end (by March 31 for calendar-year companies).

Managers (Müdürler)

The LLC is managed by one or more managers (müdürler). Managers can be:

• Shareholders of the company, or
• External appointments (non-shareholders)

The manager has day-to-day authority to manage company operations and represent the company externally. The articles define the scope of manager authority — individually authorized (one manager can bind the company alone) or jointly authorized (requires signatures of two or more managers for binding acts).

Non-delegable manager duties under TCC:

• Maintaining accounting books and records
• Preparing annual financial statements
• Organizing and calling shareholder meetings
• Ensuring compliance with shareholder resolutions

JSC Governance Structure

A Turkish JSC (A.Ş.) has a more formal governance structure with two mandatory bodies:

General Assembly (Genel Kurul)

The general assembly of shareholders is the supreme governing body. The ordinary general assembly must be held within 3 months of fiscal year end (March 31 for calendar-year JSCs).

Ordinary general assembly agenda includes:

• Review and approval of the annual financial statements
• Review of the board of directors’ annual report
• Profit distribution resolution (dividend declaration or carry-forward)
• Discharge (ibra) of the board for the past year
• Election or reconfirmation of board members (if terms expire)
• Selection of independent auditor (if audit required)

Extraordinary general assembly: Convened as needed for decisions outside the ordinary agenda — capital changes, articles amendments, extraordinary transactions.

Board of Directors (Yönetim Kurulu)

The board of directors (yönetim kurulu) manages and represents the JSC. Under the revised TCC (2012):

• Minimum 1 director for non-public JSCs (the traditional minimum of 3 has been removed)
• Directors can be individuals or legal entities (represented by a natural person)
• Directors do not need to be shareholders
• At least one director must be a Turkish resident capable of representing the company (the “domicile requirement”)
• Directors’ terms are determined in the articles (maximum 3 years per term for public companies)

Board resolutions: Decisions are made by simple majority of directors, unless the articles require higher majority for specific matters.

Profit Distribution

JSC First Legal Reserve

A JSC must set aside 5% of net profits into the first legal reserve (birinci tertip kanuni yedek akçe) until the reserve reaches 20% of the paid-up share capital. This is mandatory and cannot be waived by the articles.

Mandatory First Dividend (for JSCs)

The articles must specify a dividend distribution policy. For public companies, SPK regulations require a minimum distribution.

Non-public JSCs: No mandatory minimum dividend distribution — the general assembly decides each year.

LLC Profit Distribution

LLC profit distribution requires a partner resolution. The articles define distribution rules. There is no mandatory legal reserve requirement for LLCs equivalent to the JSC 5% rule.

Dividend Withholding Tax

Dividends paid to shareholders are subject to 15% withholding tax (or treaty-reduced rate for foreign shareholders). See our Corporate Tax guide for details.

Minority Shareholder Rights

LLC Minority Rights

Partners holding at least 10% of share capital have:

• Right to call a general meeting
• Right to request appointment of a special auditor
• Right to bring a dissolution action for just cause

JSC Minority Rights

Shareholders holding at least 10% of capital in a non-public JSC have:

• Right to call an extraordinary general assembly
• Right to add items to the general assembly agenda
• Right to request appointment of a special auditor
• Cumulative voting rights (for board elections)
• Right to oppose dividend distribution in favor of reinvestment (in certain circumstances)

For listed companies, SPK rules provide additional minority shareholder protections.

Shareholder Agreements

The TCC governs internal corporate governance through the articles of association. Shareholders’ agreements (hissedarlar sözleşmesi or ortaklar sözleşmesi) are also commonly used, especially in multi-shareholder companies or VC-backed startups, to agree on:

• Decision-making thresholds for specific matters
• Drag-along and tag-along rights for share transfers
• Non-compete obligations
• Information rights and reporting obligations
• Employment terms for founder-shareholders

Shareholders’ agreements are contractual and bind the signing parties, but they do not override TCC provisions or operate against third parties. They complement (rather than replace) the articles of association.

Public Company Corporate Governance

For companies listed on Borsa Istanbul (BIST), the SPK Corporate Governance Principles apply. Key requirements for listed companies include:

• Independent board members: At least 1/3 of board members must be independent
• Corporate governance committee: Mandatory for companies in certain indices
• Audit committee: Mandatory
• Nomination and remuneration committees: Required for larger listed companies
• Mandatory dividend distribution: SPK sets minimum payout ratios for profitable listed companies
• Public disclosure: Timely disclosure of material events through the KAP (Public Disclosure Platform)

Compliance Calendar

Corporate governance compliance requires regular attention:

See our Annual Compliance Requirements guide for the full compliance calendar.

Frequently Asked Questions

Does a single-shareholder LLC need to hold a formal general assembly? For a single-shareholder LLC, the shareholder makes all decisions by written declaration (yazılı karar) — no formal meeting is required. The written declaration must be documented and retained.

Can the board of a JSC make decisions by circulation (without a physical meeting)? Yes. Under TCC Article 390, the board can pass resolutions by written signature without convening a physical meeting, provided all board members sign the resolution. This is commonly used for routine decisions.

Do foreign shareholders and board members have the same rights as Turkish nationals? Yes. Turkish commercial law does not discriminate between Turkish and foreign shareholders or board members (subject to the domicile requirement for one director in a JSC). All shareholder rights apply equally.

When is an independent audit required for a Turkish company? Independent audit is required for companies meeting two of three size thresholds (annual net turnover over 150 million TRY, total assets over 75 million TRY, or more than 250 employees) for two consecutive years. Additionally, specific company types (banks, insurance, listed companies) require mandatory audit. See our Annual Compliance guide.