August 14, 2022


Let'S Talk Law

The Mother nature of the Legal Romantic relationship In between the Board of Administrators Member and the Corporation

The marriage among a joint inventory company and its board of directors [“Board”] is proven by the acceptance of responsibility by the Board member, who is elected by the normal assembly of shareholders or exceptionally by the Board [cooptation: see our article]. As a end result, a contractual marriage is established involving the company and the Board member.

Although the mother nature of the contractual partnership between the company and the Board member as very well as the repercussions linked to it is a controversial concern, there are fundamentally two differing viewpoints in jurisprudence and between lawful scholars relating to the sort of contract between the get-togethers: the employment agreement see and the proxy contract view. Proper determination of the mother nature of the authorized connection is very crucial in conditions of figuring out the debts and legal rights arising from the relationship and the treatment for the termination of the connection. It is even instrumental in phrases of finding the proficient court for the dispute. In this write-up of our sequence of article content on the Legal responsibility of Board of Directors Members, the discussion on the nature of the legal marriage between the Board member and the company and the great importance of these conversations in phrases of practice will be elaborated.

I. Type of Agreement Concerning the Board Member and the Corporation

A. Employment Deal See

An employment contract is an agreement that establishes basic rights and duties amongst an employee and an employer. In an employment deal, one of the functions [employee] undertakes to function as a dependent of the employer and the other a person [employer] undertakes to spend a salary. Therefore, the three fundamental factors of this type of deal are salary, employment, and dependency.

The principal argument powering the employment contract watch is that the lawful connection involving the Board member and the company is ongoing in this way and the deal is made up of the positive aspects of an employment contract this kind of as salary and go away. Critics of the watch frequently emphasis on the point that opposite to an work contract, salary is not bundled as an essential ingredient in the deal of the Board member and that Board members are thought of as employers because of to the operate of the Board as a physique of the corporation. Yet another stage is the factor of dependency in an work relationship. Dependency is the employer’s authority to give guidance and the  worker’s obligation to fulfill these. However, due to the -minimal- autonomy and authority they have in fulfilling their obligations, the Board customers do not receive immediate guidance in this way.

This see is opposed on the grounds that the Board member, who is licensed to signify the corporation, is acknowledged as a “person-body” and the “actual employer” [1]. Furthermore, the decision of the Court of Cassation Assembly of Civil Chambers dated 18.10.2021 and numbered E. 2017/3176, K. 2018/1470 emphasizes the actuality that the authorized characterization of each individual relationship must be evaluated in accordance to the situation in hand. In the final decision, the court docket said that it is appropriate to define the agreement as an employment contract if the man or woman does not depict the company or has no affect on the resolutions adopted on behalf of the corporation.

B. Proxy Deal Perspective

A proxy agreement is an settlement that enables and obliges the proxy to conduct a obligation of or act on behalf of the principal. Scholars in this look at argue that the liability of Board customers occurs from a proxy deal and consequently, they can be held liable towards the company like a proxy.

According to this watch, a proxy agreement among the Board member and the corporation is set up with the acceptance of obligation. There are a lot of conclusions of the Court of Cassation favoring this see. For instance, the choice of the Court of Cassation Assembly of Civil Chambers dated T. 07.07.2010 and numbered E. 2010/9-328, K. 2010/370 clearly states that the relationship in between the associates of the Board and the company is primarily based on a proxy contract, and consequently, the members really should be dependable to the company as a proxy.

II. Some Issues Relating to Perseverance of Agreement Form

A. Knowledgeable Courtroom in Situation of Dispute

In Turkish legislation, the knowledgeable court docket for the dispute is determined by the legal character of the relationship amongst the functions. Consequently, determining the nature of the legal romance concerning the Board member and the joint stock corporation also clarifies which courtroom has jurisdiction on the dispute.

The Labor Courts Regulation No. 7036, which regulates the jurisdiction of labor courts, sets out that a dispute must arise from the regulation or contract “due to an employment relationship” for a dispute to be read in labor courts [Art. 5/1-a]. As a result, if the relationship between a Board member and the company is deemed as an work agreement, prospective disputes will be underneath the jurisdiction of labor courts.

On the other hand, Artwork. 4/1-a of the Turkish Business Code [“TCC”] supplies that the lawsuits arising from the challenges controlled in the TCC are “absolute business lawsuits”. Provided that the obligations, authorities, rights, and responsibilities of the members of the Board of joint stock corporations, which have the title of body-man or woman, are regulated in the TCC, commercial courts will have jurisdiction more than the disputes, if the relationship amongst the two is accepted as a proxy contract.

B. Can a Board Member Declare Work Added benefits This kind of as Seniority or Detect Pay and Wage?

A different matter of debate is whether or not a Board member has the correct to request for compensation for work rewards this kind of as severance and detect spend upon termination. If the authorized connection is considered to be of work character, the Board member will be regarded as an personnel, and as a result, will be in a position to declare benefits arising from the employment romantic relationship.

If the watch of proxy agreement is prevailed, the Board member will be held liable as a proxy and will not have the rights and advantages arising from the employment partnership. In these situation, although the Board member will not have the suitable to ask for employment benefits, it is achievable to declare the legal rights established forth in the TCC and individuals arising from the proxy contract. For occasion, the general assembly of shareholders has the authority to dismiss the members of the Board. Nonetheless, if a Board member, for whom an attendance price has been decided, is dismissed before the expiry of the expression of business without the need of a justified motive, the member can ask for attendance rate for the remaining phrase of assistance based on unfair dismissal. 

III. In Conclusion

Deciding the lawful mother nature of the partnership concerning the Board member and the joint inventory company is vital in phrases of defining the strategy of termination, the skilled court docket as effectively as the debts and legal rights arising from the connection. Even while there are thoughts to the opposite, Turkish jurisprudence and legal scholars are inclined to describe the romance amongst Board associates and the corporation as a proxy contract. However, dependent on the scenario, it is also attainable to assert the connection to be an work contract, and in some cases it can even be argued that the unique possesses equally the title of an worker and a Board member.