The Obligation to Retain a Lawyer in Limited Liability and Joint Stock Companies
THE OBLIGATION TO RETAIN A LAWYER IN LIMITED LIABILITY AND JOINT STOCK COMPANIES
1. Introduction
Conducting a company's legal affairs on a professional footing is not merely an optional choice; in certain circumstances it is a direct statutory obligation. For joint stock companies exceeding a particular capital threshold in particular, entering into a continuing agreement with a lawyer is mandatory.
The basis of this obligation is Article 35, paragraph 3 of Attorneyship Law No. 1136. The legislature has brought within the scope of this requirement not all types of company, but those meeting specified criteria.
2. Legal Basis and Scope
2.1. Joint Stock Companies
Under Article 35/3 of the Attorneyship Law, joint stock companies whose share capital exceeds a specified amount are required to retain a contracted lawyer.
As at 2024, the minimum joint stock company capital provided for in the Turkish Commercial Code is TRY 250,000. The threshold laid down in the Law is five times that amount.
Accordingly, joint stock companies with share capital of TRY 1,250,000 or more are obliged to enter into a continuing legal services agreement.
2.2. Limited Liability Companies
For limited liability companies, no capital-based obligation to retain a lawyer is provided for. That is to say:
Whatever the amount of capital, limited liability companies are under no obligation to enter into a continuing agreement with a lawyer.
This does not mean, however, that limited liability companies carry no legal risk. In practice, the fact that many limited liability companies conduct their legal transactions through financial advisers can give rise to serious risks of dispute and liability at later stages.
2.3. Building Cooperatives
Building cooperatives with 100 or more members are likewise obliged to retain a contracted lawyer.
3. The Nature of the Agreement and the Lawyer's Status
The most frequent error in practice is to assume that a lawyer employed within the company as an insured employee satisfies this obligation. What the legislation contemplates, however, is not an employment contract but an attorneyship agreement. Accordingly:
An "in-house lawyer" working within the company under a contract of service
does not satisfy the obligation to retain a contracted lawyer.
The lawyer contemplated by the Law is an independent, self-employed lawyer. There must be a "Continuing Legal Services Agreement" between that lawyer and the company.
A copy of this agreement must be submitted to the relevant bar association. Moreover, the fee payable may not be less than the item for "Fees Payable to Contracted Lawyers" set out in the Minimum Attorneyship Fee Tariff.
4. Breach of the Obligation and Administrative Fines
Joint stock companies that fail to comply with the obligation to retain a contracted lawyer are subject to an administrative fine for each month during which the breach continues.
The amount of the fine is twice the gross minimum wage determined for workers over the age of 16 employed in the industrial sector. As at 2024 this amounts to approximately TRY 40,000 per month.
The penalty process is conducted by the public prosecutors' offices upon a finding by the bar associations.
5. Mandatory Representation Before the Courts
The obligation to retain a lawyer and mandatory representation before the courts are distinct concepts. Under Article 35/1 of the Attorneyship Law:
Companies may be represented before the courts and enforcement offices only through a lawyer.
Proceedings may not be conducted by granting a power of attorney to a person who is not a lawyer.
This rule applies to both joint stock and limited liability companies.
An important point, however, is this: a company subject to the obligation to retain a contracted lawyer is not required to conduct its litigation through that contracted lawyer. The company may grant a power of attorney to another lawyer to conduct the proceedings.
6. Conclusion and Assessment
The obligation to retain a lawyer is not merely a formal requirement for companies; it is one of the fundamental instruments of corporate risk management.
For joint stock companies that have reached a certain size of capital in particular, this obligation is of great importance in terms of:
ensuring legal compliance;
conducting internal decision-making processes lawfully;
preventing the risk of administrative fines; and
managing commercial disputes at an early stage.