Ataşehir Corporate Lawyer - Duties, Powers and Liabilities of a Limited Liability Company Manager

Ataşehir Corporate Lawyer - Duties, Powers and Liabilities of a Limited Liability Company Manager Managers have an important position in limited liability companies in terms of conducting the company's daily activities, implementing commercial decisions, representing the company and managing its organisation. The Turkish Commercial Code regulates not only the representative powers of limited liability company managers but also their duties, non-transferable powers, duties of care and loyalty, prohibition of competition and the legal liabilities that may arise under certain circumstances. The management and representation of a limited liability company are regulated by the articles of association. Management and representation authority may be granted to one or more shareholders, all shareholders or third parties. However, at least one shareholder must have both the right to manage and the authority to represent the company. Managers are authorised to make and implement decisions concerning management matters that have not been reserved to the general assembly by law or the articles of association. Therefore, when the legal position of managers is assessed within the scope of an Ataşehir corporate lawyer, Istanbul corporate lawyer, Ümraniye corporate lawyer, Üsküdar corporate lawyer, Çekmeköy corporate lawyer, company law lawyer or limited liability company lawyer, the articles of association, the scope of the manager's representative authority, corporate decisions and the provisions of the Turkish Commercial Code must be considered together. Who Is a Limited Liability Company Manager? A limited liability company manager is the person responsible for performing the management and representation functions of the company. Under Article 623 of the Turkish Commercial Code, management and representation of the company are regulated by the articles of association. The articles may grant management and representation authority to one or more shareholders acting as managers, all shareholders or third parties. However, at least one shareholder must have the right to manage and the authority to represent the company. Accordingly, a limited liability company manager does not necessarily have to be a shareholder. A third party from outside the company may also be appointed as manager through the required legal procedures. Can a Limited Liability Company Have More Than One Manager? Yes. A limited liability company may have one or more managers. Under Article 624 of the Turkish Commercial Code, where there is more than one manager, the general assembly appoints one of them as chair of the board of managers. The chair does not have to be a shareholder. Where there is more than one manager, decisions are generally taken by majority. In the event of a tie, the chair's vote prevails. However, the articles of association may establish a different arrangement for decision-making by managers. What Are the Duties of a Limited Liability Company Manager? The duties of limited liability company managers are not limited to signing agreements on behalf of the company. Under Article 625 of the Turkish Commercial Code, managers have authority and responsibility for all management matters not reserved to the general assembly by law or the articles of association. Senior management of the company, establishment of the management organisation, establishment of accounting and financial planning where necessary, supervision of persons to whom management functions have been delegated, preparation of financial statements and the annual activity report, preparation of general assembly meetings and implementation of general assembly resolutions are among the principal duties of managers. What Are the Manager's Non-Transferable Duties and Powers? The Turkish Commercial Code expressly identifies certain duties and powers of limited liability company managers as non-transferable and indispensable. Under Article 625, these include senior management of the company and issuance of necessary instructions, determination of the company's management organisation, establishment of accounting, financial auditing and financial planning where required, and supervision of whether persons to whom parts of management have been delegated comply with the law, the articles of association, internal regulations and instructions. In addition, except for small limited liability companies, establishment of a committee for early detection and management of risks, preparation of financial statements and annual activity reports, preparation of the general assembly and implementation of its resolutions, and notification to the court where the company is over-indebted are among the non-transferable duties of managers. Must the General Assembly Approve the Manager's Decisions? As a rule, managers have authority to make decisions falling within their own area of responsibility and authority. However, the articles of association may provide that specified decisions taken by the manager or managers or individual matters must be submitted to the general assembly for approval. Under Article 625 of the Turkish Commercial Code, however, such approval by the general assembly does not automatically eliminate or limit the managers' liability. Therefore, the argument that “the general assembly approved it” does not necessarily release a manager from legal liability in every circumstance. What Is the Manager's Duty of Care? A limited liability company manager must exercise the necessary care when performing their duties. Article 626 of the Turkish Commercial Code requires managers and persons responsible for management to perform their duties with due care and to protect the company's interests in accordance with the principle of good faith. Accordingly, when making decisions on behalf of the company, a manager should consider the company's economic and legal position, conduct the necessary examinations and act in the company's interests. What Is the Manager's Duty of Loyalty? Managers owe a duty of loyalty to the company. The duty of loyalty requires the manager not to place personal interests ahead of the company's interests in a manner that harms the company. Under Article 626, managers must protect the company's interests in accordance with the principle of good faith and are also subject to the duty of loyalty applicable to shareholders. Protection of company secrets and safeguarding the company's interests are also important elements of this legal relationship. Are Limited Liability Company Managers Subject to a Non-Compete Obligation? Yes, the law regulates a prohibition of competition applicable to managers. Under Article 626 of the Turkish Commercial Code, unless otherwise provided in the articles of association or all other shareholders have given written permission, managers may not engage in activities competing with the company. The articles may provide for a general assembly resolution instead of written permission from the shareholders. Accordingly, a manager's involvement in another business operating in the same field or transactions that may conflict with the company's commercial interests must be assessed under the non-compete rules according to the circumstances. Must Managers Treat Shareholders Equally? Under Article 627 of the Turkish Commercial Code, managers must treat shareholders who are in equal circumstances equally. This principle is particularly important in limited liability companies with multiple shareholders. Different treatment of similarly situated shareholders without an objective justification may result in disputes under company law. What Is the Representative Authority of a Limited Liability Company Manager? Managers have authority to represent the company in dealings with third parties. Article 629 of the Turkish Commercial Code provides that the relevant provisions concerning joint-stock companies apply by analogy to the scope and limitation of managers' representative authority, designation of persons authorised to sign, signature arrangements, registration and announcement. It is therefore important to correctly determine the scope of the manager's representative authority when entering into agreements, conducting commercial relationships and carrying out legal transactions on behalf of the company. Can a Manager's Representative Authority Be Limited? It is possible to limit the management rights and representative authority of managers in limited liability companies. However, the internal effect of a limitation and whether it can be asserted against third parties are not necessarily the same issue. Because Article 629 refers to the provisions governing joint-stock companies regarding the scope and limitation of representative authority, the nature of the limitation, its registration and announcement and the circumstances of the particular transaction must be considered together. Can a Limited Liability Company Manager Be Removed? Yes. Under Article 630 of the Turkish Commercial Code, the general assembly may remove the manager or managers and may restrict their management rights and representative authority. Accordingly, the fact that a person has been designated as manager in the articles of association does not mean that the person can never be removed. The removal must be carried out in accordance with company-law procedures and the necessary registration formalities should be completed. Can a Shareholder Request the Court to Remove a Manager? Yes. Under Article 630 of the Turkish Commercial Code, each shareholder may, where just cause exists, request the court to remove or restrict the management rights and representative authority of managers. This rule is particularly important in limited liability companies where serious management disputes arise between shareholders. However, just cause must exist in order to request judicial removal or restriction of the manager's powers. What Constitutes Just Cause for Removing a Manager? Article 630 of the Turkish Commercial Code expressly recognises certain circumstances as just cause. A serious breach by the manager of the duty of care and loyalty or of obligations arising from other laws or the articles of association may constitute just cause. Similarly, loss of the ability required for proper management of the company is recognised as just cause. Whether just cause exists in a particular case is assessed according to the manager's conduct and its effect on the company. Can a Removed Manager Claim Compensation? Removal of a manager under company law and the financial consequences of the contractual relationship between the parties are separate matters. Article 630 of the Turkish Commercial Code expressly preserves the compensation rights of a removed manager. Accordingly, termination of the managerial position does not automatically eliminate any compensation rights arising from a contract or another legal relationship. Whether a compensation claim exists and its scope must be separately assessed according to the particular legal relationship. Does a Limited Liability Company Manager Have Legal Liability? Yes. A limited liability company manager's breach of duties arising from the law or the articles of association may create legal liability where the relevant conditions are satisfied. Article 644 of the Turkish Commercial Code provides that Article 553, which regulates the liability of founders, board members, managers and liquidators in joint-stock companies, also applies to limited liability companies. Accordingly, the assessment of a manager's liability requires examination not merely of the person's status as manager but of the specific breach of duty and its legal consequences. Is a Manager Personally Liable for Every Company Debt? No. A limited liability company has a separate legal personality. A manager does not automatically become personally liable for all of the company's private-law debts merely because they hold the position of manager. The Turkish Commercial Code similarly provides that shareholders are, as a rule, not liable for company debts and are principally required to pay their committed capital contributions and perform any additional payment and ancillary obligations stipulated in the articles of association. However, the manager's own unlawful conduct, special statutory liability provisions and special legislation concerning public debts must be separately considered. Is the Manager's Fault Important for Liability? In assessing managers' liability, factors such as breach of duty, fault, damage and the legal causal connection may be important in the particular case. The fact that a commercial decision later results in loss to the company does not by itself mean that the manager will necessarily be held personally liable. The information available to the manager when the decision was made, the examinations undertaken, whether the company's interests were considered and whether statutory duties were complied with must be assessed. Manager liability is therefore a company-law matter requiring individual assessment in each case. Does a Company's Loss Automatically Create Liability for the Manager? The fact that a company incurs losses in the course of its commercial activities does not by itself create legal liability for the manager. Commercial activity inherently involves economic risk. For a manager to be held liable, the connection between the loss and conduct contrary to duties arising from the law or the articles of association must be examined. A company's financial loss and a manager's legal liability are therefore separate issues. Can Disclosure of Company Secrets Create Liability for the Manager? Protection of company secrets is an important interest for the company and its shareholders. The Turkish Commercial Code requires limited liability company shareholders to protect company secrets and provides that this obligation cannot be removed by the articles of association or a general assembly resolution. Managers are also subject to a duty of loyalty. A manager's disclosure of trade secrets or protected company information to third parties contrary to the company's interests may, depending on the circumstances, constitute conduct giving rise to legal liability. Can a Manager Enter Into a Transaction With the Company on Their Own Behalf? A transaction between a manager and the company on the manager's own behalf, or representation of the company in a transaction in which the manager has a personal interest, requires careful assessment in terms of conflict-of-interest and representation rules. The nature of the transaction, the articles of association, the scope of representative authority and the relevant provisions of the Turkish Commercial Code must be considered together. The duties of care and loyalty become particularly important where the company's interests and the manager's personal interests conflict. Can a Manager Decide on Matters Reserved to the General Assembly? In limited liability companies, the areas of responsibility of the general assembly and the managers are distinct. While the Turkish Commercial Code separately regulates the non-transferable powers of the general assembly, it grants managers authority over management matters not reserved to the general assembly. Accordingly, a manager acting alone on a matter falling within the non-transferable authority of the general assembly may create a legal issue concerning competence. It is therefore important to identify in advance which corporate body is authorised to take significant company decisions. Must the Manager Convene the General Assembly? Under Article 617 of the Turkish Commercial Code, the general assembly of a limited liability company is convened by the managers. The ordinary general assembly is required to meet within three months following the end of each accounting period. Preparation of the general assembly is also among the managers' non-transferable duties under Article 625. Conducting general assembly procedures in accordance with the law and the articles of association is therefore one of the managers' important obligations. Is the Manager Responsible for Financial Statements? Preparation of the company's financial statements and annual activity report is among the managers' non-transferable duties and powers under Article 625 of the Turkish Commercial Code. Where necessary, preparation of group financial statements and the annual activity report also falls within this scope. Managers must therefore follow the company's statutory reporting and organisational obligations concerning its financial position. The fact that technical accounting work is performed by other persons does not automatically eliminate the manager's non-transferable statutory supervision and organisational duties. What Must the Manager Do If the Company Is Over-Indebted? Over-indebtedness of the company may create specific obligations for managers. Article 625 includes notification of the court where the company is over-indebted among the managers' non-transferable and indispensable duties. Article 633 further provides that the relevant provisions governing joint-stock companies apply by analogy in cases involving loss of capital or over-indebtedness of a limited liability company. Accordingly, where the company's financial position seriously deteriorates, managers should carry out the necessary legal and financial assessments in a timely manner. Is the Manager Liable for Torts Committed in Connection With the Company? Under Article 632 of the Turkish Commercial Code, the company is liable for torts committed by a person authorised to manage and represent the company while performing duties relating to the company. However, this rule does not prevent the assessment of the personal liability of the person who committed the tort under applicable general rules depending on the circumstances. The company's liability and the manager's personal liability may therefore be examined on separate legal grounds. Does Discharge Eliminate All Liability of the Manager? Discharge is a general assembly decision that may have important consequences when assessing managers' liability for a particular period of activity. However, the scope of the discharge, the transactions disclosed to the general assembly, the validity of the resolution and the legal position of the person asserting liability are important. Accordingly, the fact that a manager has been discharged should not automatically be interpreted as eliminating every form of liability against every person in all circumstances. Can a Liability Action Be Brought Against a Limited Liability Company Manager? Where the statutory conditions are satisfied, the legal liability of a limited liability company manager may be the subject of court proceedings. Article 644 of the Turkish Commercial Code provides that Article 553 and the related provisions governing the liability of joint-stock company managers also apply to limited liability companies. In a liability action, matters such as the duty breached by the manager, the resulting damage, fault and the connection between the breach and the damage are assessed according to the circumstances. What Is the Difference Between a Manager and a Shareholder? A limited liability company shareholder and a manager do not have the same legal status. Shareholding concerns ownership of an equity interest in the company. Management concerns participation in the company's management and representation body. A shareholder may also serve as a manager. However, subject to the statutory conditions, a third party who is not a shareholder may also be appointed as manager. The rights and obligations arising from shareholding and the duties and liabilities arising from management must therefore be assessed separately. Must a Change of Manager Be Registered With the Trade Registry? Changes in the management and representation structure of a limited liability company must be addressed through the necessary trade registry registration and announcement procedures. Appointment or removal of a manager and changes to representative authority may directly affect the company's relationships with third parties. Accordingly, following the relevant general assembly or other authorised corporate decision concerning a change of manager, the necessary trade registry formalities should be properly completed. Can a Dispute Between Shareholders Affect the Manager's Position? Disputes between shareholders in limited liability companies may sometimes directly affect the functioning of company management. Particularly where the manager is also a shareholder, a shareholder dispute and a management dispute may become intertwined. Removal of the manager, restriction of representative authority, annulment of general assembly resolutions, withdrawal or expulsion of a shareholder and dissolution of the company may arise as different legal remedies depending on the circumstances. Accordingly, not every shareholder dispute can necessarily be resolved solely by removing the manager. Can Limited Liability Company General Assembly Resolutions Be Annulled? Under Article 622 of the Turkish Commercial Code, the provisions concerning nullity and annulment of general assembly resolutions in joint-stock companies apply by analogy to limited liability companies. Accordingly, where resolutions of the limited liability company general assembly concerning management, representation or other corporate matters are alleged to be unlawful, annulment or nullity rules may apply depending on the nature of the resolution. Although separate from manager liability, this is an important legal mechanism in internal corporate management disputes. Limited Liability Company and Manager Liability Disputes in Ataşehir Limited liability companies operating in Ataşehir and throughout Istanbul may experience disputes between shareholders and managers concerning management, representation, corporate decisions, non-compete obligations, company losses and managers' liability. The provisions concerning management and representation in the articles of association become particularly important when a company grows, new shareholders join, managers change or commercial relations between shareholders deteriorate. Therefore, within the scope of an Ataşehir corporate lawyer, Istanbul corporate lawyer, Ümraniye corporate lawyer, Üsküdar corporate lawyer, Çekmeköy corporate lawyer, limited liability company lawyer or commercial law lawyer, the articles of association, trade registry records, general assembly resolutions and transactions carried out by managers should be considered together. Ataşehir Corporate Lawyer Assistance Legal assistance concerning limited liability company managers may include preparation and review of the articles of association, appointment of managers, determination of management and representative authority, changes of managers, preparation of general assembly resolutions, restriction of representative authority, removal of managers, non-compete obligations, duties of care and loyalty and assessment of disputes concerning managers' legal liability. In disputes between shareholders, the relationship between managerial status and shareholder rights and the legal mechanisms available to ensure continuity of company management should also be separately assessed. Conclusion Limited liability company managers are fundamental components of the company's management and representation structure. Managers are not merely persons who sign on behalf of the company; they constitute the management body responsible for senior management, organisation, supervision of the company's financial structure, implementation of general assembly resolutions and, in certain circumstances, taking necessary action regarding the company's financial position. The Turkish Commercial Code classifies certain managerial duties as non-transferable and indispensable. Managers must also perform their duties with due care, protect the company's interests in accordance with good faith, comply with their duty of loyalty and, subject to statutory conditions, refrain from competing with the company. A breach of these obligations may give rise to legal liability. However, the fact that the company suffers a loss or that a commercial decision does not produce the expected result is not by itself sufficient to impose personal liability on the manager. The manager's duties and obligations, the particular transaction, fault and resulting damage must be assessed separately in each case. The general assembly may remove managers or restrict their management and representative authority. In addition, each shareholder may, where just cause exists, request the court to remove or restrict a manager's management and representative authority. Accordingly, matters concerning limited liability company manager liability, duties of a limited liability company manager, powers of a limited liability company manager, removal of a manager, liability actions against limited liability company managers, Ataşehir corporate lawyer, Istanbul corporate lawyer, Ümraniye corporate lawyer, Üsküdar corporate lawyer and Çekmeköy corporate lawyer should be assessed according to the articles of association and the particular circumstances of the dispute.