• Right to Request Information and Examination of the Members of the Board of Directors
  • September 27, 2016
  • Law Firm: Erdem Erdem Law Office - Istanbul Office
  • Introduction

    One of the rights of the members of the board of directors in joint stock companies is to request information and examination. The examination of the company’s important information and documentation is indispensable for the fulfillment of the duties and responsibilities of the members of the board of directors. When the fact that not being aware of a certain company issue does not exclude a member of the board of directors from liability is considered, the importance of the right to request information and examination becomes prominent. The scope of the right to request information under Turkish Commercial Code numbered 6102 (“TCC”) is broader when compared to the abolished Turkish Commercial Code numbered 6762 (“aTCC”). As per Art. 392 of the TCC, the right to request information and examination of the members of the board of directors are regulated as during the meeting and outside the meeting. This provision also sets forth the procedure for the right to request information and examination, as well as legal remedies.

    In General

    Pursuant to aTCC Art. 331, the members of the board of directors had the right to request information from the representatives and managers appointed to represent the company and perform company works of the state of business and certain specific works and transactions. However, the examination of company books and documents was subject to the approval of the chairman of the board of directors. The new regulation introduced by the TCC categorizes the right to request information, and examination of the board members as limitless during the meeting, and is limited outside the meeting; however, no provision exists as regards the enjoyment of this right prior to the meeting. Below, the right to request information and examination is dealt with chronologically.

    Right to Request Information and Examination prior to the Meeting

    There is no explicit provision in the TCC regulating the right to request information of the members of the board of directors prior to the meetings. This right may also be considered within the scope of the right to request information outside the meeting; however, this should be dealt with separately due to its importance.

    In order for the board of directors’ members to fulfill their duties, and for the effective conduct of the board of directors meeting, they should be informed on the issues to be discussed at the meeting beforehand. The submission of the information and documents regarding the meeting agenda at the time of the meeting is not sufficient for complex board of directors’ resolutions to be taken on effectively. Therefore, this information and documents shall be brought to the attention of the members prior to the meeting, and if necessary, the chairman of the board shall brief the members on the issues to be discussed[1]. Hence, the right to request information and documents, and examination to be used during the meeting by the members of the board of directors in line with TCC Art. 392(1) as explained, below, shall be facilitated. If there is a provision in the articles of association as to how long before the meeting this information and documents shall be provided to the members of the board of directors, this shall be respected. In absence of such a provision, a period shall be allowed to the members based on the equal treatment principle for them to be able to prepare sufficiently. This period is closely related to the characteristics of the issues on the meeting agenda. The principle of good faith shall also be taken into account.

    Right to Request Information and Examination during the Meeting

    Each member of the board of directors shall enjoy the right to request information and examination freely and without any limitation during the meetings of the board of directors. This right shall be used at the board of directors meeting, and not through calling upon the managers, or applying to them. As per TCC Art. 392(1), any member of the board of directors may request information on any work or transaction of the company, ask questions and conduct examinations. The request of one of the members as regards the submission of any book, record, contract, correspondence or document to the board of directors, and examination or discussion thereof by the board or the members, or the request to obtain information from the relevant manager or employee shall not be rejected. Any information provided to the member of the board of directors shall be detailed, fit for purpose, and is to be sufficient.

    The right to request information is restricted with the company work and transactions, and does not cover the personal affairs of other members of the board of directors, unless such information is related to the company business. For instance, the non-competition obligation of one of the members can be considered within this scope.

    As per TCC Art. 392(2), the members of the board of directors shall have the right to ask questions to those responsible for the management of the company. These questions shall not be left unanswered. These persons are obliged to provide information at the meetings of the board of directors, if requested. The persons responsible for the management of the company include all other members of the board of directors, managing members, managers, commercial representatives, commercial agents, as well as servants and employees who are granted special authority within the scope of oversight of management, and those who perform company works within their personal authority so granted. However, the situation of those bound to the company by a contractual relation other than a labor contract such as agencies, commission agents, brokers and intermediaries shall be dealt with within the scope of their respective contracts.

    The right to request information and examination shall not be used collectively by the board of directors; it shall personally be enjoyed by each of the members because of their membership title. Consequently, this right shall be terminated once the membership comes to an end. The usage of this right enjoyed by each member of the board of directors shall neither be prevented, nor made more difficult in such a manner that exceeds the regulations of the TCC[2]. The enjoyment of the right to request information and examination shall not be rejected because it is not on the meeting agenda[3].

    Right to Request Information and Examination outside the Meeting

    Pursuant to Art. 392(3), each member of the board of directors shall request information from those responsible for the management of the company on the state of business and certain specific works, and provided that it is necessary for the performance of his/her duties; they shall request submission of the company books and folders for examination subject to the chairman of the board of directors’ approval. As per Art. 392(4), the chairman of the board of directors shall obtain such approval from the board of directors. In other words, in this situation, the scope of the right to request information and examination exercised during the meeting shall remain the same; however, approval of the chairman for the members of the board of directors, and the board of directors for the chairman shall be obtained. Such approval shall not be subject to any form.

    When granting the approval, the chairman of the board of directors shall exercise discretion. The limits to the chairman’s authority shall be determined by the principles of good faith and equal treatment. Within this scope, no difference is in question for the exercise of the right to request information and examination between the members and the chairman of the board of directors and between the members of the board of directors. Such equality shall not be eliminated through creating privileges. This provision is important since it indicates that the chairman is not superior to the other members (“primus enter pares”). The provisions of the articles of association granting more rights to request information to some of the members than others shall be invalid.

    The chairman of the board of directors shall not act arbitrarily and reject the request without evaluation, and shall also not be biased nor in violation of the principle of equal treatment. However, the authority of the chairman of the board of directors to grant such approval shall not be restricted, abolished, transferred or made subject to other approval.

    Rejection of the Request for Information or Examination

    Provided that the chairman of the board of directors rejects the request for information or examination by a member outside the meeting, as per Art 392(4), the issue shall be brought to the attention of the board of directors at a meeting to be held within two days. Such meeting may be held physically or electronically, or a resolution shall be taken through circulation. The member whose request was rejected may attend and vote at this meeting. Pursuant to Art. 390(1), the resolution is taken by the affirmative vote of the majority of the attending members. The chairman of the board of directors shall be bound by the decision of the board. However, if the exercise of the right to request information is contrary to the company’s interest, the chairman may apply to the court as per Art. 392(4) [4].

    Provided that the board of directors does not convene within two days, or the request is rejected, as per Art. 392(4), the requesting member shall apply to the commercial court of first instance of the place where the company’s headquarters is located and demand a review of the request. Pursuant to Art. 392(1), the same provision applies provided that the submission of the information or documentation is rejected, or the questions are left unanswered during the meeting. The court may give its decision by examining the file, and such decision is final. If the board of directors rejects a request of information and examination of the chairman, the chairman may apply to the court without the need to hold a second board of directors’ meeting.

    The Scope of the Right to Request Information and Examination

    As explained above, the right to request information and examination exercised during the meetings includes all works and transactions of the joint stock company. Within this scope, company books, records, contracts, correspondence and documents may be examined. The right to request information shall not be restricted nor rejected on the grounds of being “confidential,” nor as a “company or business secret.” In accordance with the preamble of TCC Art. 392(1), there are three reasons for this: (i) an untrusted person shall not be elected as a member, (ii) an aggravated duty of care is in question as per TCC Art. 369, (iii) leaking information is punishable by penal sanctions.

    In accordance with TCC Art. 392(3), the members of the board of directors may request information and examination on the “state of affairs” and “certain specific works,” subject to the approval of the chairman of the board of direction. Further elaboration of these concepts is necessary for the determination of the scope of the right to request information and examination.

    State of Affairs. This concept refers to the whole of the developments that occurred in the company for a certain period of time. The information of a business field or a transaction group falls within this scope. Examples given are the general information on the sales and earnings of the business, its profitability, its market share and competitive power. Whether the company met its previously determined goals and, if so, which of these goals has been achieved, the general economic and financial state of the company, the impacts of the unexpected situations over the company may also be listed among the information regarding the state of affairs.

    Specific Works. This concept refers to more concrete works and issues. For example, the works discussed in the previous meeting, a company acquisition, a lease contract to be executed for a branch office, or R-D activities to be conducted in a certain field fall within this scope[5].

    Further, in structures where more than one company are managed together, like holdings or groups of companies, the members of the board of directors of the parent company shall request information on the subsidiaries. TCC Art. 200 shall also be borne in mind.

    In addition, the right of the members of the board of directors to obtain copies of information and documents must be elaborated upon. The TCC is unclear regarding this issue. This shall be permitted through the articles of association or a resolution of the board of directors. However, this permission shall solely include copying the documents in order to work thereon, and not obtaining such copies for personal use[6].

    Conclusion

    As a conditio sine qua non, for the fulfillment of the duties and authorities of the members of the board of directors, the right to request information and examination is regulated under TCC Art. 392 in a broader sense than the aTCC. Accordingly, the members of the board of directors shall have the right to request information and examination during and outside the meetings. Although not explicitly regulated by the TCC, such right is considered to also include the submission of information and documents relating to the meeting agenda to the members of the board directors prior to the meeting. During the meeting, the members may request information and documents in an unlimited manner, shall ask questions to the persons and committees responsible for the management of the company, and examine company books. Outside the meeting, the right to request information and examination is exercised as regards the state of affairs and certain specific works, subject to the approval of the chairman for the members of the board of directors, and the board of directors for the chairman. If the request is rejected at the board of directors’ meeting held upon the initial rejection, the requesting member may apply to the court.



    [1] Hasan Pulasli, Yeni Türk Ticaret Kanunu’na Göre Yönetim Kurulu Üyelerinin Bilgi Alma ve Inceleme Hakki, Marmara Üniversitesi Hukuk Fakültesi Hukuk Arastirmalari Dergisi, Volume: 18, Number: 2,2012, p. 588.

    [2] Pulasli, p. 591.

    [3] Ünal Tekinalp, Sermaye Ortakliklarinin Yeni Hukuku, Vedat Kitapçilik, Istanbul 2015, p. 272, par. 12-101.

    [4] Tekinalp, p. 273 par. 12-102.

    [5] Hediye Bahar Sayin, Türkiye Barolar Birliǧi Dergisi Number: 124, 2016, p. 491.

    [6] Ömer Korkut, Erzincan Üniversitesi Hukuk Fakültesi Dergisi, V. X, N. 3-4, 2006, p. 523.