In Turkish company law, there exists an organic relationship between the board of directors and managers, along with all other executive managers who are transferred the authority to manage and represent the company. However, there exists a longstanding debate in the literature over the legal nature of this relationship between the individual manager and equity companies. Determining the legal nature of this relationship becomes very important as to the determination of applicable rules to possible conflict among them. The concept of senior manager is not defined in the Turkish Commercial Code no. 6102 (TCC) and is also having been debated in the literature. It can be said that the senior managers consist of members of board of directors and managers as well as all managers to whom executive and management authority have been granted and transferred in accordance with law. Non-competition provisions regulated in codes are undoubtedly valid only during the period that managers occupy those positions in the companies. Nevertheless, parties can conclude non-compete agreement or determine a non-competition clause in their main and underlying contract, effective after the termination of the underlying contract. In case of a dispute arising out of the violation of this contractual competition prohibition, the legal nature of this dispute remains unclear along with the competent court that this dispute should be heard before. In our opinion, this dispute does not constitute to a commercial case since it is based on mixed contracts; not on art. 444 et seq. of the Turkish Code of Obligations no. 6098 (TCoO). As a result, even if this dispute should be heard by main civil courts de lege lata, main commercial courts should be competent to hear this dispute de lege ferenda.
Equity companies tend to sign non-compete agreements with their executive managers as they receive in time very sensitive information regarding the company and its business in practice, yet this specific agreement is not regulated under any law. Obviously not all managers can have commercial secrets, but only senior managers. Although there exists no definition of a senior manager in the Turkish Commercial Code no. 6102, there are other various definitions provided in other regulations, none of which seems to meet the meaning of the concept of senior managers in company law. In order to determine the meaning of the concept of a senior manager, it is possible to say if the duty he fulfils is important and he exercises his authority over the whole company, then he is deemed to be a senior manager. Considering these features, we can safely state that every member of the board of directors or managers, managers whom the authority to represent and to manage the company are transferred and granted (person-organ) constitute to senior managers.
The relationship between organs, both board-organ (board of directors in joint stock companies and board of managers in limited liability companies) and person- organs, and the company is of organic nature; yet there remains a longstanding debate regarding the relationship between individual senior managers and the company in the literature. Though there is no regulation regarding it, the second relationship between individual managers and the company is accepted to be contractual. The offer is deemed to be made by the general assembly of the equity company while the acceptance is made by the senior manager, upon which the contract is concluded. As seen, this contractual relationship is based completely on the contract, but not on the code and is different from the organ relationship.
Some different arguments have been made as to the legal nature of the contractual relationship between senior managers and equity companies. Especially the school arguing for the power of attorney agreement is widely accepted in the Turkish literature, as well as in the court decisions. They simply argue that the managers are representatives of the company. The other popular opinion argued for in the literature is based on service contracts, stating basically that senior managers provide their services for the company. We argue here that this contract includes characteristic features of both power of attorney agreement and service contract in an untraditional manner. Hence in our opinion, this contract is of the nature of mixed contracts, constituting to no typical contracts regulated under the TCoO. In case that there appears to be no provisions provided in the contract regarding a matter, the provisions of the typical contract regulated in the codes, which gives its essential character to the contract at hand, can be applied by analogy in a dispute.
In practice, equity companies most often provide non-competition clauses in their contract with senior managers as non-competition provisions regulated in the codes are only valid for a period during the occupation of such position. Yet, after the termination of this contractual relationship, it becomes quite important to prevent managers, especially senior ones at that, from exploiting the sensitive information, trade secrets for their own interest. Therefore, non-compete agreements have become popular tools to prevent senior managers from competing with the company in the same business field after they leave the company. However, this type of non-compete agreements are not typically regulated in the code, so we argue here that these agreements are also of mixed contracts. In this context, it is possible to apply by analogy the provisions regulated in the art. 444 et seq of TCoO, which provides non- competition of employee in service contracts. These articles seem to act as a “legal filter” for the non-compete agreements of senior managers. From this perspective, non- compete agreements signed between senior managers and equity companies should not provide for imbalance of interests of both parties; should not limit extremely and excessively the venue, the period of time and the business area of senior manager’s freedom to work. Otherwise, the agreement will be deemed to be void based on immorality.
As to all disputes arise out of non-compete agreement of senior managers, the competent court can also be determined based on its legal nature. According to the art. 4 of TCC to name a case as commercial, the dispute should be directly accepted as so by the TCC, or the parties should operate a commercial enterprise under their own name. However, because the senior managers are not merchants and they do not operate any enterprises, disputes regarding their duties are not of commercial nature. Therefore, in our opinion, commercial courts should not be considered here to be competent courts for these disputes. On the other hand, senior managers are not employees of the companies, unless otherwise agreed upon in the contract, so we state that labour courts should not be the competent courts, either. Still, one should not forget the importance of commercial sensitive information and the necessary expertise to determine trade secrets in commercial cases. We conclude here in this paper that the disputes arisen out of non-compete agreements of senior managers should be heard by main civil courts de lege lata, yet main commercial courts should be competent to hear this dispute de lege ferenda.
Joint Stock Company Limited Company (Limited Liability Company) Managers Non-Compete Agreement Senior Manager Management.
