Board Member Personal Liability in Turkish Joint Stock Companies (A.Ş.): Tax Debts, Social Security & TTK Art. 553 Defenses
Serving as a member of the Board of Directors in a Turkish Joint Stock Company (Anonim Şirket - A.Ş.) entails substantial fiduciary and statutory obligations. Under the Turkish Commercial Code (TTK Law No. 6102) and the Law on the Collection of Public Receivables (AATUHK Law No. 6183), board members can face severe personal liability—extending to their private global assets, bank accounts, and real estate—if the company fails to satisfy unpaid corporate taxes, customs fines, or Social Security (SGK) premiums. For multinational corporations and foreign directors appointed to Turkish subsidiaries, understanding the doctrine of differentiated joint liability (TTK Art. 557), delegation of executive authority via Internal Directives (İç Yönerge), and D&O insurance shields is vital to mitigate cross-border exposure.
1. Civil Liability of Board Members Under TCC Article 553
Under article 553 of the Turkish Commercial Code (TCC) No. 6102, board members are personally liable to the company, to the shareholders and to the company's creditors for the loss they cause where they breach, through their own fault, the obligations arising from the law and from the articles of association.
In place of the rigid joint liability of the former Commercial Code, Law No. 6102 introduced the principle of 'differentiated joint liability' (TCC art. 557). Where several board members are liable to compensate the same loss, each of them can be held answerable only to the extent that the loss is personally attributable to them, judged by their own degree of fault and by what the circumstances of the case required.
| Type of liability | Statutory basis | Scope and conditions |
|---|---|---|
| Liability to the company and the shareholders | TCC arts. 553 & 555 | Culpable breach of the duty of care and loyalty (TCC art. 369), loss of capital and direct loss. |
| Personal liability for tax debts | Law No. 213 (Tax Procedure Law) art. 10 & Law No. 6183 (AATUHK) rep. art. 35 | Liability with the whole of one's personal assets for tax, penalties and default interest that cannot be collected, wholly or in part, from the company. |
| Personal liability for SGK premium debts | Law No. 5510 art. 88 & Law No. 6183 (AATUHK) | Joint liability of senior managers and board members for unpaid insurance premiums, unemployment fund contributions and administrative fines. |
The civil liability of board members in joint stock companies rests on breach of the duty of care and loyalty (TCC art. 369) within the framework of art. 553. The Commercial Code requires board members to protect the company's interests in accordance with the rule of good faith and to run the business with the care of a prudent manager.
An objective standard of care applies when the degree of fault is assessed: a director's personal abilities, or their inexperience, cannot be turned into a defence. Under the business judgment rule, however, risky commercial decisions taken on an adequately informed basis, free of any conflict of interest and in good faith in the company's interest do not give rise to liability even if they later produce a loss.
Under the rule of differentiated joint liability in TCC art. 557, the court determines separately, for each defendant director, their fault in the specific case, their role in the decision-making process and the limits of their authority. A board member who works in technical engineering and has no responsibility for the finance function cannot, for example, be charged with the whole of a loss arising from accounting fraud.
Under TCC art. 555, shareholders and company creditors have the right to sue in respect of indirect loss, but the damages awarded are paid to the company as a legal entity rather than to the claimant. If the company is bankrupt, the right of action belongs in the first place to the bankruptcy administration; if the administration does not sue, each creditor may pursue the claim, with recourse to the estate.
2. Personal Liability for Tax and Public Debts: AATUHK Repeated Article 35 and Tax Procedure Law Article 10
Two different statutory regimes apply to the unpaid tax debts of joint stock companies:
- Tax Procedure Law No. 213, art. 10 (fault-based): The tax debt is collected from the assets of the legal representatives who failed to perform the tax obligations of the legal entity. This provision requires the director to have been at fault in not performing that duty.
- Law No. 6183 (AATUHK), repeated art. 35 (representation liability without fault): Public receivables that cannot be collected, wholly or in part, from the assets of the company as a legal entity, or that are understood to be uncollectable from them, are collected directly from the personal assets of the legal representatives, meaning the board members. In practice this is the provision on which tax offices most often rely when placing electronic attachment (e-haciz) on directors' personal bank accounts.
The practical difference between the two regimes lies in what the tax office has to show. Under art. 10 of Law No. 213 the administration must establish that the legal representative was at fault in failing to perform the company's tax obligations. Repeated art. 35 of Law No. 6183 asks no such question: it is enough that the public receivable cannot be collected from the entity, or is understood to be uncollectable from it.
That wording also settles a point foreign directors often get wrong in both directions. Repeated art. 35 does not require, in every case, that the company's assets have actually been attached and exhausted; a search of the company's assets that turns up nothing capable of attachment will satisfy the test. What the administration may not do is skip the company altogether and serve the first payment order on the director.
Social security exposure runs through the same collection machinery. Under art. 88 of Law No. 5510, unpaid insurance premiums, unemployment fund contributions and administrative fines are recovered from senior managers and board members on a joint basis, and they are collected under the procedure of Law No. 6183. A director who is satisfied that corporate tax is being paid should therefore be reading the monthly SGK declarations with exactly the same attention.
When a payment order is finally served on a director's personal assets, the window is short. Article 58 of Law No. 6183 gives fifteen days to bring an action or object. The seven-day period that also appears in that article is the deadline of the body deciding the objection, not the debtor's — reading it as the debtor's window is a common and expensive mistake. For a director resident abroad the practical risk is that service is effected at the company's registered address in Türkiye and the fifteen days expire before the notice ever reaches them, which is why an address for service in Türkiye and a named local contact for tax correspondence are worth putting in place before they are needed.
3. Delegating Management: the Managing Director and Release from Liability
For foreign shareholders and for non-executive board members who take no part in the running of the business, the most effective protection against liability for public debts and against civil claims is delegating management and appointing a managing director (murahhas üye) or general manager.
Under TCC art. 367, management of the company may be delegated to one or more board members, or to a third party, provided that the articles of association contain a clause permitting it and that the board issues an internal directive (iç yönerge). Registering and announcing the internal directive itself with the Trade Registry is not required: TCC art. 367/1 provides only that, on request, shareholders and creditors who can show a protectable interest are to be informed about the internal directive in writing. What is registered and announced is the board resolution identifying the persons authorised to represent the company, under TCC art. 373.
Where the power of representation is delegated exclusively to the managing director by internal directive, the remaining board members, acting outside that field of duty and authority, cannot as a rule be held liable for public receivables or for operational fault.
TCC art. 553/2 puts the point in terms: a board member who has lawfully delegated a duty or a power to another person is not liable for that person's acts and decisions, unless it is proven that they failed to exercise reasonable care in selecting that person. The test goes to the selection alone, and the burden of proving it rests on the claimant — which is precisely why the choice of managing director, and the record of how that choice was made, deserve as much attention as the wording of the internal directive.
Foreign non-executive board members cannot be held liable for tax and SGK debts because they do not actually run the company's operations.
Wrong. Unless management has been delegated under TCC art. 367, which needs an enabling clause in the articles of association plus an internal directive, with the board resolution showing who is authorised to represent the company registered under art. 373, every board member remains personally and jointly liable for the company's unpaid tax and SGK debts.
A board member who resigns stops being liable for the company's earlier tax debts the moment the resignation is given.
Wrong. A director remains personally liable, in proportion to their term of office, for tax debts that accrued or will accrue in respect of the period during which they held office.
4. D&O Liability Insurance and the General Assembly Discharge
Two corporate shields are used to reduce the personal risk carried by board members:
- Discharge by the general assembly (TCC art. 558): A discharge resolution passed by the general assembly at the end of the financial year extinguishes the company's right to bring a liability action against board members in respect of the transactions of the discharged period. Irregularities concealed in the balance sheet, or not disclosed to the general assembly, fall outside the scope of the discharge.
- D&O (directors and officers) insurance (TCC art. 361): Where directors' professional liability insurance is taken out in an amount covering at least 25% of the company's share capital, the premium may be borne by the company in listed companies, in line with the corporate governance principles of the Capital Markets Board.
For board structuring, drafting the internal directive and director liability proceedings, you can speak to our corporate and M&A team.
Governs the board's duty of care, the delegation of management and the principle of differentiated joint liability.
Governs the personal liability of legal representatives for unpaid public and tax receivables of legal entities.
Personal risk checklist for board members
Steps a board member should take to protect their personal assets:
Frequently asked questions
Can the tax office attach a board member's personal bank account directly?
As a rule no: enforcement is first pursued against the company as a legal entity. Repeated article 35 of Law No. 6183 does, however, allow recourse to the legal representative's personal assets for the part of the receivable that cannot be collected, or is understood to be uncollectable, from the entity's assets. It is therefore not required in every case that the company's assets have actually been attached and exhausted; a search of the company's assets that produces nothing capable of attachment is also enough. Serving a payment order directly on the director before those conditions are met is unlawful.
How does resignation from the board take effect at the Trade Registry?
A director's unilateral declaration of resignation takes effect the moment it reaches the company. For it to be effective against third parties and against the tax office, however, the resignation must be notified to the company by notarial notice and then registered and announced at the Trade Registry.
