The Parliament passed the Turkish Commercial Code Bill ("the New TCC”) on 13 January 2011 which sets new and enhanced standards for all Turkish company boards and management. The New TCC has been prepared as a reaction to a number of major changes in the local and global business environment as well as technological and legal developments such as:
• Globalization and its impact on the commercial, financial and capital markets,
• Fierce competition and Turkey's ambition to be a major player in the international markets,
• Developments in technology, particularly penetration of internet all over the world and impact on trading activities,
• Recognition of corporate governance principles as a good management practice all over the world and its impact on laws,
• Generally accepted standards (such as International Financial Reporting Standards, International Standards on Auditing, OECD Corporate Governance Principles) and their integration into laws,
• Recognition of Turkey as a candidate for full membership and harmonization of Turkey's legal system with the EU legislation during the continuing negotiations process.
The New TCC aims to respond all aforementioned changes and developments. In other words, the New TCC is providing a good ground for institutionalization and sustainability of Turkish companies and implementation of corporate governance principles (transparency, accountability, fairness and responsibility) and building public trust.
The new law consists of six main chapters: Enterprise Law, Company Law, Securities Law, Transportation Law, Maritime Commercial Law and Insurance Law. Particularly the Company Law section of the New TCC includes maybe the most radical changes in the whole Code which will have a significant impact on the Turkish commercial, financial and capital markets.
The New TCC will bring many new mechanisms and systems for all capital companies (Anonim Sirket and Limited Sirket). The focal point of the New TCC is the corporate governance system. Particularly transparency concept has significant impact on many items of the New TCC. The main changes introduced by the New TCC can be briefly summarized as follows:
• Non-delegable duties and powers of Board of Directors
• Delegation of duties and powers to management
• Composition of Board of Directors
• Incorporation of capital companies
• Internal controls system
• Internal audit mechanism
• Financial planning system
• Risk management
• Financial statements in accordance with International Financial Reporting Standards (IFRS)
• Annual reports
• Independent audit companies in accordance with International Standards on Auditing
• Group companies
• Electronic Board of Directors meeting and General Assembly
Taking into account the aforementioned changes, it is clear that the New TCC will have significant impact on companies from many perspectives. Therefore, understanding the substance of the law and its impact on your company will be the main challenge of board of directors and management in the coming period.
The New TCC will be effective gradually. It will take effect on 1 July 2012 except for IFRS conversion and internet related requirements which will be enacted on 1 January 2013 and 1 July 2013, respectively.
