DISMISSAL OF MANAGEMENT AND REPRESENTATION AUTHORITY OF COMPANY MANAGERS IN LLCS (JULY 2016)

I. Dismissal of Management and Representation Authority via Resolution of General Assembly

Company managers, holding the management and representation authority at limited liability companies, are entitled to take and execute resolutions regarding management of the company other than the subjects which are under sole responsibility of the general assembly due to Law or articles of association of company.

General assembly is basically entitled to dismiss the management and representation authority of company managers at limited liability companies. General Assembly, at any time can either dismiss the powers of company manager(s) or limit the representation and management authority of company manager(s) pursuant to Article 630/1 of Turkish Commercial Code. The mentioned right of general assembly cannot be assigned. No condition or period regarding dismissal right of general assembly can be determined under company’s articles of association. Besides, no justified reason is required for dismissal of company managers by general assembly as per TCC.

Decisions regarding dismissal of management and representation authority of company manager(s) and appointment of new company manager(s) are deemed related with negotiation of financial statements of end-year as per Articles 617/3 and 413/3 of TCC. Hence, general assembly is entitled to insert the item regarding dismissal of company manager on meeting agenda and take resolution accordingly. If general assembly has convened without meeting notice and the meeting agenda does not includes an item regarding dismissal of company manager, shareholders can unanimously decide and put an item on agenda regarding dismissal of company manager as per Articles 620 and 416/3 of TCC.

Unless otherwise foreseen by company’s articles of association, decision quorum of the general assembly for dismissal of company manager(s) is simple majority of the attendees.

II. Annul of Management and Representation Authority via court decision

The powers of company managers can be dismissed by court decision in limited liability companies differently from joint stock companies. All the shareholders are allowed to apply to court and demand dismissal of company manager due to justified reasons pursuant to Article 630/2 of TCC. The mentioned right of shareholders, which granted by TCC, cannot be restricted by general assembly resolution. Besides, shareholders are not allowed to waive from the mentioned right. No general assembly resolution is required in order to initiate a law suit regarding demand of dismissal of company manager or limitation of management and representation powers. However the claimant should keep its shareholding status during the law suit.

The most important duty assigned to company manager(s) under TCC is management and representation authority of the company. Hence dismissal of company manager’s management and representation power causes dismissal of the company manager.

The law suit to be filed with demand of dismissal of company manager or limitation of management and representation authorities must be based on a justified reason. Turkish Commercial Code exemplifies the justified reasons under Article 630/3 which are including but not limited to material breach of duty of care and duty of loyalty and material breach of obligations originated from Law and company’s articles of association or loss of significant management skills. Under any circumstances evaluation of the justified reasons are at sole discretion of court. However, appointment of new company manager(s) instead of the dismissed manager(s) is at sole responsibility of general assembly.

The law suit regarding dismissal of company manager(s) or limitation of management and representation authority of company manager(s) must be filed against the company before the commercial court of first instance in judicial area where the head office of the company is located.

The company should be represented by other company managers in such a mentioned law suit. In case there exists one company manager or the claimant demands for dismissal of all company managers’ powers, the court shall appoint at trustee as per article 427 of Turkish Civil Code numbered 4721. However, the company manager(s) whose powers canceled by general assembly decision or via court decision are allowed to claim for compensation as per Article 630/4 of TCC.