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Liabilities of Company Executives Under Turkish Criminal Law
The importance of company executives in the business world is indisputable. However, this great responsibility also brings along legal obligations and various responsibilities within the criminal law framework. The topic of “The Responsibilities of Company Executives from a Criminal Law Perspective in Turkey” is of vital importance that everyone who takes on an executive role should carefully examine.
In this detailed article, we cover the responsibilities of company executives under Turkish criminal law, potential legal consequences, and information on how executives can prevent such issues. As the legal world constantly changes, having current and accurate information helps executives protect not only themselves but also their companies.
Responsibilities of Company Executives From a Criminal Law Perspective in Turkey
Natural and legal persons are distinguished according to Turkish Civil Code No. 4721. Accordingly; individuals are natural persons, whereas legal entities are organized groups of persons with an existence of their own and independent communities dedicated to a specific purpose.
According to Article 20 of the Turkish Penal Code No. 5237, titled “The Personal Nature of Criminal Liability“, criminal liability is personal, and no one can be held responsible for the actions of another. Additionally, criminal sanctions cannot be imposed on legal entities. Only the implementation of security measures foreseen by law is possible.
The general provision regarding security measures specific to legal entities is regulated in Article 60 of the law, and it is stipulated that the provisions of this article will only be applied in cases expressly mentioned by the law. In other words, for security measures to be applied to a legal entity, the law under which the crime is regulated must expressly stipulate that security measures will be applied to legal entities responsible for the commission of this crime.
As stated in the aforementioned provisions, criminal sanctions cannot be imposed on legal entities, and criminal liability is personal. Therefore, in the event of a crime committed through a legal entity, real persons within the legal entity may be held accountable for the crime based on their guilt. Any liability arising from criminal law that a company executive may face due to management activities will be examined under the criminal liability of the company executive.
When looking at the responsibility of a company executive, the criminal law principles we need to primarily base on are the principles of personal nature of criminal liability and fault, as mentioned above. Indeed, in modern criminal law, there must be a fault in the action carried out for a person to face criminal sanctions.
The main fault in criminal liability is intent. According to Article 21 of the Turkish Penal Code; the commission of a crime is dependent on the existence of intent. The intent is the deliberate and knowing commission of the elements stated in the legal definition of the crime. Exceptionally to this rule, the provision of negligence is regulated in Article 22.
According to the second paragraph of the aforementioned article, negligence is the commission of an act contrary to the obligations of care and diligence without foreseeing the result specified in the legal definition of the crime. However, as we mentioned, negligence is an exceptional situation. This is stated in the first paragraph of Article 22 as “Acts committed through negligence are punished only in cases expressly specified by law“.
In other words, for the negligent commission of a crime to be punished, the legal provision of that crime must expressly regulate negligent liability. In summary, in Turkish criminal law, the intent is fundamental. If a crime does not have a provision for negligent commission and there is no intent on the part of the perpetrator, punishment will not be possible.
As stated above, criminal liability is personal. That is, only the individuals who commit a crime will be held responsible. However, the Court of Appeals has developed a jurisprudence that the representatives and management organs of the company should be held responsible if it is not proven that company employees have violated the orders and prohibitions of their superiors.
However, this view almost introduces a presumption of liability against the company’s representatives and management organs, reversing the principle of liability, making it necessary not for the prosecution to prove their guilt but for them to prove their innocence.
Indeed, in modern criminal law, no one can be considered guilty unless their guilt is proven. This is also referred to as the presumption of innocence. This principle is also expressed in Article 38 of our Constitution as “No one shall be considered guilty until proven guilty by the court“.
In contrast to the opinion of the Court of Appeals, there are also decisions against this view, but recent decisions again point to the presumption of liability.
- In joint-stock companies, the founders, board members, managers, liquidators, and other company staff,
- In partnerships, managing partners and/or representative partners or company managers,
- In limited partnerships, due to the fact that there are both limited and general partners and only the limited partner has the authority to manage and represent the company,
- In limited liability companies, the managers,
- In associations, the board members,
- In state economic enterprises and their establishments, the institution’s manager or relevant personnel,
Can be held accountable in terms of company management. These individuals will be the perpetrators of the crimes committed on behalf of the company with the management powers they have. To be a perpetrator, these individuals must be directly involved in or participate in the acts that constitute a crime in the specific case.
In addition to committing the crime directly, these individuals with management authority can also commit a crime by making decisions, giving instructions, or deliberately abandoning their obligations. In cases where decisions are made as a board, board members who accept the decision that constitutes a crime will be responsible, whereas members who do not participate in the vote or who vote against will not be held responsible.
Again, even if they do not have management authority, individuals with representation authority can be held criminally liable when acting or failing to act on behalf of the company. However, in this case, the person who has transferred the representation authority in accordance with the law at the time of the commission of the crime cannot be punished.
If the person has authority but does not use this authority in the context of the act that constitutes the crime, there will be no criminal liability, and it will be necessary to determine who actually used the authority and who is the real perpetrator.
Regarding negligent crimes, company managers have obligations to prevent crimes. If they fail to fulfill these obligations, they may be held responsible for crimes committed through negligent behavior. This responsibility of the managers is essentially regulated in Article 369 of the Turkish Commercial Code as:
“Members of the board of directors and third persons responsible for management are obliged to perform their duties with the diligence of a prudent manager and to observe the interests of the company in accordance with the rules of honesty.”
Crimes that can give rise to the criminal liability of company managers are usually regulated by the Turkish Criminal Code, Tax Procedure Law, Enforcement and Bankruptcy Law, Turkish Commercial Code, Banking Law, and Capital Markets Law. Especially in the Turkish Criminal Code, crimes against life, including a large number of crimes, can bring the personal liability of company managers into question, but in this study, crimes with economic characteristics will be evaluated more.
In the Turkish Criminal Code, we encounter crimes that frequently bring this liability into question, especially after the ninth section of the second book. Among the crimes against private life and the private sphere, especially in crimes related to personal data; the liability of the managers of legal persons, who are data controllers, who unlawfully record, disclose, seize personal data, or do not delete the data they are obliged to delete in time, may be brought into question. The provisions of Law No. 6698 on the Protection of Personal Data regarding these legal persons being data controllers should also be taken into account.
Among the Crimes Against Property regulated in the Turkish Criminal Code, especially abuse of trust, fraud, fraudulent and negligent bankruptcy, and crimes of false information about companies or cooperatives; are some of the crimes committed by company managers for enrichment, some of which are called white-collar crimes today.
Especially, the crime of breach of trust, which can occur when company executives exploit the trust placed in them through trade or service relations to embezzle company assets, can also be termed as a corporate fraud crime.
Crimes Related to Economy, Industry, and Trade, such as bid rigging and disrupting contract performance, can bring into question the responsibility of company executives who engage in corrupt practices during the tender process. Also, within this section, the crime of disclosing information or documents that are trade secrets, banking secrets, or customer secrets can similarly bring into question the responsibility of a company executive, much like the crime of disclosing personal data that should be kept confidential.
Crimes Against the Reliability and Functioning of Public Administration, such as bribery and influence peddling, are crimes where the responsibility of the company executive who commits this crime alongside a public official will arise.
In the Turkish Commercial Code, crimes that can bring into question the responsibility of company executives include: illegally adding suffixes to the trade name or transferring the trade name against the law, engaging in unfair competition as per Article 55, committing other acts related to unfair competition as per Article 62, forging or falsely recording documents related to the company’s establishment, capital increase or decrease, merger, division, change of type, and issuance of securities, making false statements about the company’s capital or borrowing despite insufficient funds, engaging in fraudulent practices when valuing the company, collecting money contrary to the Capital Markets Board regulations, and finally not establishing a website.
Under the Enforcement and Bankruptcy Law, crimes such as unauthorized abandonment of trade, making false declarations of goods, not applying for bankruptcy, breaching a commitment, and reducing assets, can also establish the responsibility of the company executive.
Article 359 of the Tax Procedural Law defines smuggling crimes and stipulates that tax evasion can occur if certain optional actions listed in the law are carried out. The company executive may be held accountable if these specified optional actions are carried out.
In Article 160 of the Banking Law, the crime of embezzlement in banking is regulated. Bank executives who embezzle customer assets under their protection and supervision within the banking system will be liable for this crime, which is a reflection of the breach of trust crime stated in the Turkish Penal Code Article 155, within the banking sector.
Lastly, it can be observed that crimes regulated in the Capital Markets Law, such as market manipulation and insider trading, are especially committed by executives of publicly-traded companies, and these individuals are held accountable.
In the face of the criminal responsibilities of company executives, it is also very necessary and prudent for the current management to have accurately and comprehensively determined the company’s internal representation and binding authorities. This will be crucial in determining which executive can be held accountable for the criminal act and will also prevent many issues within the company.
Asset management companies, which are established pursuant to Article 143 of Banking Code No: 5411 of the Republic of Turkey, are authorised to manage the collection process of the receivables which a..