Sponsored briefing: Criminal liability of company directors

Mustafa Tırtır and Muharrem Kazak of Mustafa Tırtır Law Firm set out recent Supreme Court case law on liability for crimes committed during company activity

In the event of a criminal offence during the activities of a company, legal entities are not subject to criminal sanctions. Natural persons authorised to represent and bind the company are held criminally liable.

Therefore, in the case of crimes committed during the activities of companies, only the natural persons who commit or participate in the commission of these acts will be punished, not the companies. The important issue here is which natural person will be criminally liable for these criminal acts.

Pursuant to Article 20 of the Turkish Criminal Code (TCC) titled ‘Individuality of criminal responsibility’ and Article 38 of the Constitution, only company executives who have a role in the commission of the acts subject to the crime will be criminally liable. In other words, it is not possible to talk about the criminal liability of these persons just because they are shareholders of the company or just because they are on the board of directors, or even because they are the chair of the board of directors. This is also the established case law of the Supreme Court:

Determining who is at fault

The Supreme Court makes it clear that merely being a company partner is not sufficient for criminal liability. In a decision of the 12th Criminal Chamber of the Supreme Court, it is stated that it is necessary to determine which defendant is at fault and on what grounds. The text of the decision is given below (emphasis added):

‘The defendants are company partners, in the company that operates as a family business, the father of the other defendants is the company manager, the other defendant deals with the external affairs and accounting of the company, the defendants are partners and responsible managers of the limited liability company, taking into account that being only a company partner is not sufficient for criminal liability, it is imperative to determine which defendant is defective on what grounds and to determine and appreciate the legal status of the defendants according to the result.’¹

More than one legal representative

The Supreme Court has stated that if there is more than one legal representative of the company, the criminal responsibility belongs to the representative who knows the details of the offence and has a role in its occurrence, rather than the formal representative of the company.

‘In transactions carried out without the knowledge of the company executives, the persons who personally carry out the act will be liable.’
Mustafa Tırtır and Muharrem Kazak, Mustafa Tırtır Law Firm

The relevant decision of the 19th Criminal Chamber of the Supreme Court states (emphasis added):

‘When legal entities have more than one legal representative if the crime was not committed in the unity of action and opinion, the responsibility belongs to the representative who knows the details of the crime and has a role in its formation, rather than the form of the crime, taking into account the weight and limits in the division of the power of representation, depending on the principle of the individuality of punishment… But in any case, the validity of the defense and fact that the legal representatives did not know the acts of the personnel at the time of their commission should be evaluated and a conclusion should be reached by taking into account factors such as the legal entity’s field of activity in terms of business and location, communication density and possibilities, form and structure of organisation, size, scale, number of personnel distribution of duties, business volume and capacity, possibility of acting independently, financial structure, assets, safe and bank deposits, nature and subject of the act.’²

In a decision of the 15th Criminal Chamber of the Supreme Court, it is stated that the fact that the person is the chair of the board of directors of the company does not in itself mean that he/she participates in the crime (emphasis added):

‘In the event that the legal entity has more than one representative, the criminal responsibility will belong to the legal representative who knows the details of the crime and has a role in its occurrence, not the person responsible for the form of the crime, taking into account the weight and limits in the division of representation authority depending on the principle of the individuality of the punishment, and the fact that the defendant is the chairman of the board of directors of the company does not constitute evidence of participation in the crime in itself…’³

Likewise, in a decision of the 11th Criminal Chamber of the Supreme Court, it was held (emphasis added):

‘… criminal responsibility is personal, the fact that the defendant is one of the site managers does not indicate that he is criminally responsible for the crime committed, and it is necessary to clearly determine who is the person who committed the crime of breaking the seal…’⁴

Actions without company’s knowledge

The Supreme Court has stated that in transactions carried out without the knowledge, instruction and order of the company executives, the persons who personally carry out the act will be liable instead of the company representatives. According to the Court of Cassation, Article 20 of the Turkish Criminal Code states that company representatives, who are formally responsible for the offence, cannot be the perpetrators.

‘While determining the criminal liability of company executives, the company’s articles of association and decisions regarding the division of labour should be examined.’ Mustafa Tırtır and Muharrem Kazak, Mustafa Tırtır Law Firm

The aforementioned decision of the 11th Criminal Chamber of the Court of Cassation states (emphasis added):

‘Managers and legal representatives of legal entities and taxpayers or responsible persons may be the perpetrators of the crime of issuing false documents regulated in Article 359 of the Tax Procedure Code, as well as any third party may commit and participate in this crime. As a rule, in real person taxpayers, although the criminal responsibility belongs to the taxpayer who realised the tax-generating event, in some cases, tax responsibility and criminal responsibility may not overlap, in this case, in accordance with the principle of individuality of penalties, the addressee of the penalty should be the perpetrator who committed the crime. Likewise, since the persons who perform the action without the knowledge, instruction, and order of the representative (personnel, accountant) will also be responsible for the action committed, in accordance with the principle of individuality of penalties, the real perpetrators who organise the forged document should be investigated rather than the person responsible for the crime.’⁵

Duties and responsibilities

The Supreme Court states that while determining the criminal liability of company executives, the company’s articles of association and decisions regarding the division of labour should be examined and the duties and responsibilities in the company on the date of the incident should be determined. The decision of the 11th Criminal Chamber of the Supreme Court is given below (emphasis added):

‘… the liability of legal entities in terms of tax laws is regulated in Articles 10 and 333 of the Tax Procedure Code no. 213 and it is stipulated that the penalties stipulated in Articles 359 and 360 of the same Code shall be imposed on those who commit these acts and if legal entities have more than one legal representative and the crime is not committed in unity of action and opinion, the responsibility shall belong to the representative who knows the details and has a role in its formation, not to the formal responsible of the crime according to the weight and limits in the division of representation authority depending on the principle of the individuality of the punishment, the company’s articles of association and decisions regarding the division of labour, if any, should be brought and the duties and responsibilities of the defendant in the company on the date of the incident should be determined; the taxpayers who issued the invoices subject to the offense should be heard as witnesses, on the basis of which legal relationship they gave the said invoices to whom, whether they know the defendant according to the result.’⁶

‘Only the partner or manager who knows the details of the act and has a role in its formation can be held criminally liable.’ Mustafa Tırtır and Muharrem Kazak, Mustafa Tırtır Law Firm

In a similar decision of the Supreme Court, it was stated that it should be investigated whether the defendants, who do not have any titles other than being the chair of the board of directors and a member of the board of directors, were actually responsible for the production and, if any, the production manager, responsible manager and workshop chief of the factory should be determined. In the relevant decision, the 12th Criminal Chamber of the Supreme Court stated (emphasis added):

‘In the incident that took place in the metal factory in the Organised Industrial Zone where 270 workers worked, the victim [who was an] experienced worker, while putting sheet metal with his hand on the press machine, which did not have two-hand control but only worked with a foot pedal, absentmindedly touched the pedal with his foot and the press head descended and cut his two fingers. In the expert report prepared as a result of the discovery, attributing all the fault to the legal entity without specifying how the fault is attributed to the defendants concretely, without investigating whether the defendants, who do not have any title other than being the Chairman and member of the Board of Directors, are actually responsible for the production, and without determining the production manager, responsible manager, workshop chief of the factory, if any, and without determining the production manager, responsible manager, workshop chief of the factory, to establish a judgement contrary to the principle of individuality of penalties based on an inadequate expert report.’⁷

In another decision of the 12th Criminal Chamber of the Supreme Court, it was stated that the defendant, who had shares in the company due to the fact that it was a family business and who was officially the vice chair of the board of directors but was in charge of the intermediate services of the company, could not be held criminally responsible. The aforementioned Supreme Court ruling is given below (emphasis added):

‘At the end of the trial, a lawsuit was filed against MST, the chairman of the board of directors of the aforementioned company, on the charge of negligent homicide, and at the end of the trial, in the committee report prepared by three occupational safety experts, it was stated that there was no risk analysis in terms of preventing occupational accidents and that the employees were not trained against risks and dangers. With the statement that MST, the chairman of the board of directors of the company, and ST, the vice chairman of the board of directors, were primarily at fault in the incident by leaving the supervision of the work in the field to incompetent persons, MST was convicted of the crime, and a criminal complaint was filed against ST with the decision to the Public Prosecutor’s Office, and a lawsuit was filed against the defendant for negligent homicide by the Konya Public Prosecutor’s Office; the defendant declared that he had shares in the aforementioned company due to the fact that it was a family company, that he was officially the vice chairman of the board of directors on the date of the incident, that he was in charge of the intermediate services of the company… the defendant, who does not have any duty and authority other than being the vice chairman of the board of directors, cannot be held liable.’⁸

Pursuant to the above-mentioned Supreme Court decisions, Article 38 of the Turkish Constitution and the principle of individuality of penalties regulated in Article 20 of the TCC, only the partner or manager who knows the details of the act and has a role in its formation can be held criminally liable, not all of the legal representatives. The criminal liability of the members of the board of directors and even the chairman of the board of directors, who did not actually participate in the acts subject to the crime, did not know the details of the acts and did not play a role in their formation, will not arise. In some cases, the Supreme Court states that the person who directly commits the act will be criminally liable for the acts and transactions carried out without the knowledge and approval of the board of directors. In this scenario, the Supreme Court stated that persons who are not involved in the management of the company may also be prosecuted. To summarise, it should be noted that the Supreme Court strictly applies the principle of individuality of punishment in cases requiring criminal proceedings related to companies.