Under the Turkish Commercial Code numbered 6102, the principles regarding the distribution of authority between the general assembly and the board of directors have been tried to be determined by drawing a limit for some non-transferable powers for both bodies (Article 375/1 and 408/2 of the Turkish Commercial Code) and by prescribing a presumption in favor of the board of directors for other transferable powers (Article 374/1 of the TCC). In line with the principles regarding the distribution of authority between the bodies in joint stock companies, the general assembly is not a superior body over the board of directors, and the general assembly cannot intervene in matters within the jurisdiction of the board of directors. Besides, both bodies have the liberty to make regulations on matters within their jurisdiction. These regulations can be made with the internal directive of the general assembly and the internal directive of the board of directors, which are under the articles of association in terms of the hierarchy of norms. Likewise, the general assembly may regulate the matters that are in its authority and can be regulated in general and abstract terms through the amendment of the articles of association by amending the articles of association. Then, can the general assembly regulate the matters within the authority of the board of directors in the articles of association by amending the articles of association? Or does the authority to make regulations on these matters belong exclusively to the board of directors and can the relevant regulations only be included in the internal directive of the board of directors? Finally, since the provisions of the articles of association in the organization are not formed by the general assembly, can we mention that the matters remaining within the authority of the board of directors can be regulated unlimitedly with the articles of association in the organization? In the study, we tried to find an answer by evaluating these questions.
Articles of Association Distribution of Authority Internal Directive
In the study, it was aimed to determine whether the matters within the authority of the board of directors in joint stock companies can be regulated in the articles of association. In the doctrine, it is accepted that the articles of association are superior to the internal directive in terms of the hierarchy of norms. The fact that the relationship between the articles of association and the internal directive of the board of directors has been examined in this way only in the context of the hierarchy of norms may give the impression that every issue can be regulated in the articles of association, regardless of the principles related to the distribution of authority between the general assembly and the board of directors. No limit is foreseen for the arbitrary regulation area of the articles of association, which also supports this impression. Likewise, it is stated in the doctrine that the provisions of the arbitrary articles of association are the provisions of the articles of association that can be subject to a different legal transaction such as an internal directive, a decision of the board of directors, a decision of the general assembly, or a contract of the law of obligations. Nevertheless, the fact that the articles of association regulate the matters under the authority of the board of directors within the scope of arbitrary regulation may limit the freedom of movement and decision- making of the board of directors on these matters. Therefore, the boundary of the matters to be regulated between the articles of association and the internal directive of the board of directors should be mostly determined within the framework of the principles regarding the distribution of authority between the board of directors and the general assembly.
Per the principles regarding the distribution of authority in joint stock companies, the board of directors is authorized to make decisions in the field of non- transferable and indispensable authority. The board of directors is also authorized to make decisions on matters that do not fall within the scope of the non-transferable and indispensable authority but remain within the scope of the management authority. Although it may delegate its powers in this regard to one or more members of the board of directors or third parties, it cannot transfer them to the general assembly. Furthermore, Article 374/1 of the Turkish Commercial Code stipulates a presumption in favor of the board of directors in terms of the distribution of authority. However, although the board of directors is authorized due to this presumption, there are matters that are incompatible with the management authority of the board of directors and are suitable for the structure of the general assembly.
We admit that the hierarchical superiority of the articles of association over the internal directive is limited to the matters that the general assembly is deemed authorized to regulate. The general assembly may not interfere with the freedom of decision-making on matters within the authority of the board of directors by making amendments to the articles of association. This is because freedom of decision-making is a manifestation of the nature of the organ in material terms. Limiting the freedom of decision-making in the area where the board of directors is authorized prevents the management body from fulfilling this function. Likewise, this leads to the violation of the principles regarding the distribution of authority between the bodies in joint stock companies by making amendments to the articles of association. So, the general assembly cannot interfere through the articles of association with the freedom of the board of directors to make decisions on matters falling within the scope of its non- transferable and indispensable powers and management authority. We admit that the board of directors may make amendments through the articles of association in the field where it is authorized under Article 374/1 of the Turkish Commercial Code. This is because we accept that the general assembly, which has the right to authorize itself through the articles of association on matters within this scope (Article 408/1 of the Turkish Commercial Code), is also authorized a fortiori to limit the freedom of decision-making of the board of directors on these matters. A different evaluation should be made for the works and transactions that do not require the board of directors to make a strategic decision. It should be accepted that the articles of association may include regulations regarding the works and transactions of the board of directors of this nature related to the general assembly.
