Turkish Commercial Code (“Code”) regulates some obligations for joint stock companies and limited companies that need to be fulfilled after the fiscal year is over. In addition, the Code regulates sanctions for some of those obligations if they are not fulfilled in due time. In this article, we would like to point out the important obligations of joint stock and limited companies after the financial year ends.
1-To Convene the Annual General Assembly Meeting
Annual general assemblies should be done within 3 months after the completion of fiscal year. If necessary, companies can organize extraordinary meetings during the fiscal year.
In these meetings the resolutions about financial statements, activity report, election and release of board members, dividend distribution and other related issues are taken. Except for the joint stock companies whose establishment and articles of association amendment transactions are subject to the permission of the Ministry of Trade, it is not obligatory to have a ministry representative at the general assembly meetings of joint stock companies with sole shareholder.
There is not any regulated sanction in the Code if the annual general assembly is not convened within 3 months following the end of fiscal year. However, since these meetings must be done according to the Code, it is advisable to hold them in due time.
2-To Appoint Independent Auditor
The companies which are subject to independent audit have to appoint an independent auditor at the general assembly for every fiscal year they are subject to. The companies which are subject to independent audit are determined according to the criteria in the Decision of the Council of Ministers numbered 2018/11597 “Decision on Determination of Companies Subject to Independent Audit”. In the case that such companies, do not make their financial statements and annual activity reports audited, these statements and activity reports are deemed not prepared. As a result of this, approval of the general assembly for these financial statements and activity reports will be invalid.
3-To Launch a Website and Announce Required Information and Documents
The joint stock and limited companies that are subject to independent audit have to launch a website within 3 months and announce the information and share the documents that are required by the Code. The penalty fine will incur for the board of directors/managers members of such companies in case they do not launch the website and announce the required information and documents in due time.
4-To Prepare the Annual Activity Report
The Annual Activity Report and financial statements are prepared and signed by the board of directors in joint stock companies and by the board of managers in limited companies. The report is approved by the general assembly. If the company is subject to independent audit, the independent auditor is required to review the Annual Activity Report in terms of its consistency with the financial tables.
The necessary content that needs to be included in the Activity Report is regulated in the “Regulation on the Minimum Content of Annual Activity Reports of Companies” The Annual Activity Report should be prepared in 2 months following the end of fiscal year. If the Annual Report is not prepared within 2 months or does not contain mandatory information, there is no direct sanction regulated in the Code.
5-To Prepare Affiliation Report in Group of Companies
According to the Code, a group of companies can be consisted of minimum three companies with at least one company having control over the other two. This controlling relationship can occur when a company owns the majority of the voting rights of another company or pursuant to an agreement concluded between the companies.
In the case that parent company – subsidiary company relationship, the board of directors of the subsidiary company has to prepare an Affiliation Report within 3 months after the end of fiscal year. Since the conclusion part of the Affiliation Report should be included in the annual activity report, the Affiliation Report should be prepared at the same time with the annual activity report. This report provides an insight about its relations with the parent company and other subsidiaries. The penalty fine will incur for the board of directors/managers in case this report is not prepared in due time and does not contain the mandatory issues stipulated by Code.
6-To Certify the Company Books
As per the Code, closing certification is mandatory for the general journal and the book of board of directors’ resolutions in joint stock companies and the book of board of managers’ resolutions in limited companies (if it is kept). If the book of board of directors’ resolutions, the book of board of managers’ resolutions, general journal, inventory book and general ledger has sufficient number of blank pages, the companies may use the same books in the following year with renewal certificate.
- Closing certification for general journal should be obtained from a notary public until the end of the sixth month in the following fiscal year and for the book of board of directors’ resolutions of joint stock companies and the book of board of managers’ resolutions of limited companies, should be obtained until the end of the first month of the following fiscal year.
- Interim approval (renewal certification) for the book of board of directors’ resolutions, the book of board of managers’ resolutions, general journal, inventory book and general ledger for the companies who wish to continue to use the same books in the following year, should be obtained from a notary public until the end of the first month of thefollowing fiscal year.
The penalty fine will incur for the companies in case the mandatory closing certification is not obtained in due time.
Av. Dilara KARTALOĞLU KILIÇ
TARLAN-BAKSI AVUKATLIK BÜROSU
AV. AYLİN TARLAN- AV. DERYA BAKSI