Delegation of representative authority of board of directors in corporations

Representation is when a person takes a legal action on behalf of another person and legal consequences of this transaction have consequences in the legal sphere of the person on whose behalf and account the action is taken. Representation of the company in joint stock companies is granted to the board of directors. In joint stock companies, unless otherwise stipulated by the articles of association or if the board of directors does not consist of a single person, the representation authority is exercised with two signatures. However, by enacting a provision in the articles of association, it may be decided to represent the partnership with one person or more than two people. In the representation of the company, pursuant to Article 371/1 of the TCC, all kinds of transactions may be made on behalf and account of the company, within the framework of the purpose and the field of activity of the company. If those who are authorized to represent the company enters into business and transactions does not fall within the framework of the field of activity pursuant to article 371/2 of the TCC, these transactions bind the company for bona fide third parties. However, if it is proven that it is known or should be known that the acts of the company were outside the field of the activity, the company is freed from being bound by the transaction. By this article, the ultra vires principle, which states that the company could only operate within the scope of her field of activity and purpose, has been abandoned. Not every limitation has consequences for bona fide third parties in the limitation of the representation authority, however, it may be asserted against everyone, provided that the representation authority of the members of board of directors is limited to joint representation or main/branch office affairs, registered and announced. When it comes to the delegation of the representative authority, it is possible to do so to one or more executive members (delegating the representative authority to one of the members) or executive manager (third party), provided that at least one member of the board of directors has the authority to represent. Pursuant to article 368 of the TCC, at the same time, board of directors also has the possibility of appointing commercial representatives and commercial agents. 7th paragraph has been added to the article 371 of the TCC by the Law, No:6552. By the article, board of directors has been made possible to appoint the members of the board of directors who have representation authority and the persons affiliated with the joint stock company with a employment contract, as commercial agents with limited authority or other merchant assistants. In the TCC, No. 6102, the principle of joint responsibility was abandoned and 'differentiated joint responsibility' was adopted under the responsibility of the members of the board of directors. In this liability system, if the members of the board of directors incur a loss, each of the members of the board of directors is responsible for this loss suffered, taking into account their own degrees of fault and the individual mitigating reasons applicable to them. In the delegation of the representation authority, the members of the board of directors are responsible according to whether they exercise ordinary care in selecting an executive member and an executive director whose representation authority has been delegated, and whether they fulfill their obligation of supervision duly. The board of directors is responsible for any damage that may be incurred to company and third parties by the limited authorized commercial agent or by other merchant assistants who appointed pursuant to the article 371/7 of the TCC.