A joint stock company has a board of directors consisting of one or more persons appointed by the articles of association or elected by the general assembly (TCC.359/1). At the incorporation of a joint stock company, the first members of the board of directors are appointed by the articles of association (TCC.339/3). Since legal entities express their will through their bodies (TCC. 50/1), the board of directors, which is the administrative and representative body of the company, must be present at the time of registration, as soon as the company gains legal personality through registration with the trade registry (TCC. 355/1). After the establishment of a joint stock company, the election and dismissal of the members of the board of directors are among the non-assignable duties and powers of the general assembly (TCC.408/2, b).
In the event of a vacancy in the board of directors appointed by the articles of association or subsequently elected by the general assembly for any reason, the answer to the question of whether the board of directors may appoint to the vacant seat is regulated under TCC.363 entitled “Vacancy of the Board Membership”.
“TCC. 363- (1) Without prejudice to the provisions of Article 334, if a membership becomes vacant for any reason whatsoever, the board of directors shall temporarily elect a person who fulfills the legal requirements as a member of the board of directors and submit the same to the approval of the first general assembly. The member elected in this way shall serve until the general assembly meeting where he/she is submitted for approval and, if approved, shall complete the term of his/her predecessor.
(2) If one of the members of the board of directors is declared bankrupt or his/her capacity is restricted, or if a member loses the legal requirements for membership or the qualifications stipulated in the articles of association, the membership of such person shall automatically terminate without the need for any action”.
The conditions for the board of directors to make an appointment to the vacant board membership can be explained as follows.
1. Vacancy of One or More Positions in the Board of Directors for Any Reason
Resignation and death of a member of the board of directors may be given as examples of vacancies that are frequently seen in practice. In addition, if a member of the board of directors is declared bankrupt or his/her capacity is restricted, or if a member loses the legal requirements for membership or the qualifications stipulated in the articles of association, the membership of this person shall automatically terminate without the need for any action (TCC.363/2).
2. The Board of Directors has the Authority to Gather and Make Decisions as a Board-Body
In the event of a vacancy in one or more memberships, the remaining members must be present at the meeting and must fulfill the quorum for meeting and decision. Unless there is an aggravating provision to the contrary in the articles of association, the board of directors convenes with the majority of the total number of members and takes its decisions with the majority of the members present at the meeting (TCC.390/1). Accordingly, in the event of the death of one member of a two-person board of directors, the decision to be taken by the other member alone shall be null and void since it does not meet the meeting and decision quorum.
“First of all, the issue to be examined is whether the decision of the board of directors of the defendant joint stock company dated 22.01.2016 to make a temporary appointment to the board of directors pursuant to Article 363 of the TCC and the subsequent call of this board of directors to the ordinary general assembly meeting subject to the lawsuit is irregular or not… In the case in question, it is understood that the board of directors consists of two persons, and in cases where the board of directors consists of two persons, it is necessary to determine whether the remaining board of directors can make an appointment to the vacant membership in case one of the board memberships becomes vacant.
In the case at issue, the important point is whether the other member can take decisions in the event of a vacancy in the board of directors consisting of two members. Pursuant to Article 390 of the TCC, unless there is an aggravating provision to the contrary in the articles of association, the board of directors convenes with the majority of the total number of members and takes its decisions with the majority of the members present at the meeting. In this case, in the event that the board of directors is composed of two members, it will not be possible to make an appointment to the vacant seat, since the quorum for the meeting and the quorum for decisions cannot be achieved with the remaining member. (Kırca/Şehirali Çelik/ Manavgat, Anonim Şirketler Hukuku Cilt 1 -Temel Kavram ve İlkeler Kuruluş Yönetim Kurulu s.421). Likewise, it will not be possible for the remaining member to take a decision to convene a general assembly meeting. In addition, in this case, the company will have a lack of body (vacancy) as defined in Article 530 of the TCC. In the present case, in order for a two-person board of directors to convene and take decisions pursuant to Article 390 of the TCC, it is understood that two members must attend the meeting and take decisions unanimously.
For this reason, in the event of the death of a member, it is not possible for the other member to take a decision, and since the decisions to be taken will be null and void since they do not have constituent elements due to the lack of meeting and decision quorum, the decisions regarding the appointment of a new member to the vacant membership and holding a general assembly meeting are also null and void.
Therefore, it will be necessary to accept that the general assembly meeting convened with the null and void board of directors’ resolution is also null and void since one of its constituent elements is missing. In addition, since the call made by the board of directors, other than the resolution on the convening of the meeting, will also be null and void, the general assembly meeting convened with one of its constituent elements missing and will therefore be null and void.” (21th Civil Chamber of Ankara Regional Court of Appeal, Decision No. E. 2020/1319, K. 2022/1061, dated 22.9.2022).
In cases where it is not possible to convene a quorum, one shareholder may convene the general assembly with the permission of the court (TCC.410/2). Elections shall be held by the general assembly for the vacant member or memberships.
3.The Person Temporarily Elected as a Member of the Board of Directors Must Meet the Legal Requirements
Reasons that terminate membership also prevent election (TCC.359/4). Therefore, the member of the board of directors must not be bankrupt and must have full capacity (TCC.363/2). Laws and regulations such as the Banking Law No. 5411 (Art. 8, 23, 25), Insurance Law No. 5684 (Art. 4), and the Articles of Association of Borsa İstanbul Joint Stock Company (Art. 9) specifically regulate the qualifications and conditions for election of board members.
4. Submission of the Temporarily Elected Board Member to the Approval of the First General Assembly
The board of directors temporarily elects a person who fulfills the legal requirements as a member of the board of directors and submits it for the approval of the first general assembly meeting. The member elected in this manner shall serve until the general assembly meeting in which he/she is submitted for approval and, if approved, shall complete the term of his/her predecessor (TCC.363/2). For example, if the general assembly approves the person who is elected for a three-year term but becomes vacant after one year due to death, he/she will complete the remaining term of office (two years) of his/her predecessor (the deceased member). The general assembly is not obliged to give its approval; it may also elect another member.
5. The Person Temporarily Elected as a Board Member is not a Representative of a Public Legal Entity
The state, special provincial administrations, municipalities, villages and other public legal entities may be granted the right to have a representative on the board of directors of joint stock companies whose field of operation is public service, even if they are not shareholders, by a provision to be stipulated in the articles of association. The representatives of public legal entities in the board of directors may only be dismissed by them and shall have the rights and duties of the members elected by the general assembly (TCC.334). In the event of a vacancy in the board of directors of a public legal entity due to death or resignation, the relevant public legal entity is authorized to appoint a new representative.
6. No substitute member has been elected by the General Assembly
If the articles of association stipulates that a substitute member of the board of directors may be elected and the general assembly has elected a substitute member, the board of directors cannot appoint a substitute member for the vacant seat, and the substitute member shall be called(11th Civil Chamber of Court of Cassation, Decision No. E. 8252, K. 11723, dated 16.12.2002, Gönen Eriş, Ticari İşletme ve Şirketler, Cilt II, Ankara 2014, s. 2236).
7. The Board of Directors Cannot Dismiss the Person It Elected
In the event of a vacancy for any reason the Board of Directors is only authorized to temporarily elect a person who meets the legal requirements as a member of the Board of Directors and submit him/her to the approval of the first general assembly. It cannot dismiss the person it elects. The dismissal of the members of the board of directors is one of the non-assignable duties and powers of the general assembly (TCC.408/2, b).