Joint stock companies constitute one of the fundamental pillars of modern commercial life. The management of these companies is carried out by the board of directors, which is the highest-level management body responsible for making strategic decisions, overseeing the company’s activities, and ensuring its representation. However, along with these broad powers, board members are obligated to protect the company’s interests and act in compliance with the law. Pursuant to Article 553 of the Turkish Commercial Code (“TCC”), board members are liable to the company, shareholders, and creditors. This liability arises when board members neglect their duties or abuse their authority. In such cases, a liability lawsuit may be filed against board members on behalf of the company. However, whether a general assembly resolution is required for initiating such a lawsuit remains a significant point of discussion.

1. Requirement of a General Assembly Resolution under the Previous Turkish Commercial Code

Under the previous TCC, it was explicitly stipulated that a liability lawsuit against board members could only be filed if a resolution for filing such a lawsuit was adopted by the general assembly. This provision emphasized the seriousness of board members’ liability and required the approval of the highest decision-making body of the company, the general assembly. The Court of Cassation also tended to dismiss lawsuits filed without a general assembly resolution on procedural grounds. However, instead of outright dismissing the lawsuit, the Court of Cassation allowed for the rectification of this deficiency by granting additional time. This practice aimed to ensure that companies were more fairly represented in legal proceedings.

2. The Status of the General Assembly Resolution under the New Turkish Commercial Code

The new TCC, which came into force in 2012, does not explicitly require a general assembly resolution for filing liability lawsuits against board members. This represents a significant change compared to the previous law. However, Article 479/3(c) of the new TCC states that voting privileges are not applicable in general assembly resolutions regarding release (discharge) and liability lawsuits. This provision creates the impression that the general assembly resolution still plays a role in the process of initiating a liability lawsuit. This ambiguity has led to different interpretations in legal doctrine and practice.

3. Doctrinal Debates and Diverging Opinions

The uncertainty in the new TCC regarding the requirement of a general assembly resolution has resulted in three main doctrinal views.

• The Opinion That a General Assembly Resolution Is Mandatory: Proponents of this opinion argue that Article 479/3(c) of the TCC implies that a general assembly resolution is required for initiating a liability lawsuit. According to this perspective, the general assembly is the highest decision-making body of the company and has supervisory authority over the board of directors, making a resolution necessary. Additionally, the general assembly’s authority to approve financial statements and evaluate the board’s annual report supports this interpretation.
• The Opinion That a General Assembly Resolution Is Not Required: This opinion holds that the absence of an explicit provision in the new TCC regarding the general assembly resolution indicates a deliberate abandonment of the previous requirement. Advocates of this interpretation argue that the lack of an explicit requirement in the law suggests that such a resolution should not be deemed necessary. This approach aims to accelerate and simplify the process of filing lawsuits against board members.
• The Opinion That the Necessity of a General Assembly Resolution Should Be Determined Based on the Circumstances of Each Case: According to this perspective, rather than establishing a strict rule, the necessity of a general assembly resolution should be assessed based on the specific circumstances of each case. If the board of directors is unable to decide on filing a liability lawsuit, a general assembly resolution may be sought as a declaration of intent for initiating the lawsuit.

4. The Court of Cassation’s Approach and Judicial Practice

Following the enactment of the new TCC, the Court of Cassation has continued its previous approach. It tends to consider a general assembly resolution as a procedural prerequisite for filing liability lawsuits against board members. However, rather than immediately dismissing lawsuits where this requirement is not met, the Court of Cassation allows the deficiency to be rectified within a specified period. If the deficiency is not remedied within the given time, the lawsuit is dismissed. This practice aims to ensure fair representation of companies in legal proceedings.

5. Conclusion

The question of whether a general assembly resolution is required for filing liability lawsuits against board members remains a subject of debate in both legal doctrine and practice. The absence of a clear provision in the new TCC has led to different interpretations. However, the Court of Cassation’s tendency to maintain its previous approach suggests that a general assembly resolution is still considered a procedural requirement.

For this reason, companies planning to file liability lawsuits against board members are advised to obtain a general assembly resolution beforehand to avoid procedural obstacles during litigation. Such a resolution will strengthen the legal basis of the lawsuit and facilitate a smoother litigation process. Additionally, companies should seek legal counsel and manage the process meticulously.

In conclusion, the role of the general assembly resolution in liability lawsuits against board members is significant from both a legal and practical standpoint. Considering the different doctrinal opinions and the Court of Cassation’s approach, companies should act prudently and ensure proper legal preparation in such proceedings.