The Turkish Constitutional Court, with its decision numbered 2015/11192 promulgated in the Official Gazette dated 30.05.2019 and numbered 30836, ruled that non-executive board members are jointly and severally responsible from the Joint Stock Companies’ unpaid social security premium debts together with the Company itself.
- As per repeating article 35 of Law on Collection Procedure of Assets numbered 6183 (“Law no. 6183”), the public receivables, which cannot be collected fully or partially or uncollectible from the assets of the company are collected from the personal assets of the legal representatives.
- In Tax Procedure Law numbered 213 (“Law no.213”) it is regulated that due to companies being taxpayers and also tax responsible, the duties of the companies will be fulfilled by the legal representatives and in case these duties are not fulfilled, the tax and tax related receivables that are not partially or fully collected from the company are collected from the personal assets of the legal representatives. This provision is also applicable for the Turkish representatives of the taxpayers who are not resident in Turkey.
- According to article 88, paragraph 20 of
Social Security and General Health Insurance Law (“Law no. 5510”), if the receivables of Social Security Institution (“SSI”) are not paid without a valid reason; board members, senior executives or officials and legal representatives of the legal entity employer are jointly and severally responsible from the collection of these receivables.
Although it is regulated in the repeating article 35 of Law no. 6183 that the public receivables, which cannot be collected fully or partially or uncollectable from the asset of the company are collected from the personal assets of the legal representatives; as per article 88, paragraph 20 of Law no. 5510 which is a specific regulation when compared to Law no. 6183, in order to collect the unpaid social security premium debts of a company from the board members, it is not required to initiate the enforcement proceedings against the company first.
Constitutional Court Decision
- The Case
The Applicant (“Applicant”) is a shareholder of the T. Gıda Sanayi ve Ticaret A.Ş (“Company”). Applicant was elected as a Board Member by the General Assembly resolution dated 08.09.2009 and he continued his duty in 2011 as well.
The Social Security Institution issued a payment order to all Board Members of the Company, including Applicant, for the social security premium and default interest amounting to TRY 8.841 for the period between December 2009, and January – August 2010. Thereupon, Applicant filed an objection to payment order lawsuit against the SSI and claimed for the cancellation of the payment order. Applicant, in his lawsuit petition, claimed that the social security premium debt can be collected from the Company’s asset and he is not responsible for it.
As a result of the trial, the first instance court rejected the case on the grounds that Board Members are jointly and severally responsible from the social premium debts and its secondaries together with the employer as per article 88/20 of Law no. 5510, it is not required for the Board Members to have the authority to represent the Company in order for this responsibility to arise and therefore it is possible to collect the unpaid social security premium debts of a company from board members, without having to start enforcement proceedings against the company first. Although Applicant appellate the decision, Supreme Court (Civil Department no.21) rejected Applicant’s appeal claim with its decision dated 12.05.2015. Thereupon, Applicant filed an individual application within the Constitutional Court.
- Evaluation of the Constitutional Court
The Constitutional Court accepted that the debt which Applicant had to pay constitutes a property for him as per article 35 of the Constitution Law and also constitutes an interference with Applicant’s right to property. Thereupon the Constitutional Court evaluated that whether such intervention is unconstitutional in terms of legality, justifiability, and proportionality.
Court stated that the related legislation is article 88/20 of Law no. 5510.
Court stated that there is a public interest in securing the collection of public receivables and increasing the possibility of collection.
The court interpreted the principle of proportionality within three sub-principle as; convenience, necessity and proportionality and applied these principles to the concrete case. Within this scope Court decided that;
- it is convenient and necessary to collect these receivables from Board Members even if they do not have representation authority in order to ensure the collection of the premium receivables in full and in time and
- the interference is measured as Applicant had the opportunity to put forward all his allegations and defences in an effective manner at the trial stage.
On the other hand, although Applicant claimed that, according to the established case law of the Supreme Court, in order for him to be responsible from the SSI receivables he had to have the authority to represent the Company in the period when the premium receivable was accrued; Court stated that the case law that Applicant mentioned cannot apply to the case in hand since they cover the premium debts before Law no. 5510.
As a result, Constitutional Court ruled that Applicant being held responsible of the Company’s social security premium debts and default interest related to the term when Applicant was a Board Member, does not impose a heavy and extraordinary burden on Applicant; and therefore, the interference with Applicant’s right to property does not impair the fair balance that needs to be considered between the public interest and the proprietary right of Applicant and there is no violation of the right of property.