Recent Developments on Corporate Governance Compliance Reporting
The Capital Markets Board of the Republic of Turkey ("Board") has initiated preliminary discussions with companies in 2016 and has commenced its studies in respect of corporate governance compliance reporting. In June of 2018, the Board, together with the consultancy of an International Finance Institution, has launched the new practice for corporate governance compliance reporting, and prepared the pilot study in October of 2018. The Board issued a press release on 11 January 2019 with respect to its resolution dated 10 January 2019 and numbered 2/49. It is set forth under the referred resolution that the corporate governance compliance reporting made according to the Communiqué on Corporate Governance numbered II-17.1 ("Communiqué") shall hereinafter be performed as per the templates of the corporate governance compliance report and the corporate governance information form. This newsletter will mainly focus on the templates and the procedural requirements.
Although the templates, which require public disclosure of corporate governance compliance, looks as if a new practice, only a procedural change has been made. In other words, the Board formerly required companies to disclose their corporate governance compliance under activity reports. Instead of disclosure under activity reports, the Board has announced two separate templates to be used going forward, those being the corporate governance compliance report ("Compliance Report") and the corporate governance information form ("Information Form"), which serves the same application. While the template of the Compliance Report is used for the reporting of the voluntary corporate governance principles, the template for the Information Form is used for the information provided with respect to the implementation of existing corporate governance.
With the introduction of the Compliance Report template, the Board intends to determine the compliance level of the companies with the voluntary principles. The companies are to upload the form to the public disclosure platform and file it, but without changing its content, nor adding any new columns. The template includes sixty-four headings that correspond to the corporate governance compliance principles stated under the Communiqué. For each corporate governance compliance principle, the companies must state whether or not they comply with the respective principle by marking the election of ‘yes’, ‘no’, ‘partial’, ‘exempted’ or ‘not applicable’. If the company marks ‘no’ or ‘partial’ for the respective principle, then the company must enter an explanation for such incompliance.
On the other hand, the Information Form is a document that provides clear information as to whether the company complies with corporate governance compliance principles. There is no room to provide a further detailed explanation under the template, as provided. There are seventy-four queries to be answered in four separate sections, those being shareholding, public disclosure, stakeholders and board of directors. The respective information to be provided under the template is further stated under the activity reports. However, filing the Information Form and announcing it through the public disclosure platform does not abolish the requirement of stating such information under the activity report.
Once completed, both the Compliance Report and the Information Form are to be announced through the public disclosure platform. The Compliance Report and the Information Form must be announced within the notification period of the financial reports; however, in any event, at least three weeks prior to the general assembly meeting. For those companies that announce consolidated financial statements, the announcement period for the financial reporting is seventy days following the end of the financial year. For those companies that announce solo statements, the announcement date for the financial reporting is sixty days following the end of the financial year.
The Compliance Report and the Information Form are to be announced together with the board of directors’ resolution, whereby the board of directors resolves to approve the content of the Compliance Report and the Information Form, and decides to make public disclosure, accordingly. The audit committee or the member of the board of directors must further issue a responsibility statement, under which it is to be stated that the templates have been reviewed, and that they incorporate true and complete information. A further decision is to be obtained by the corporate governance committee resolving that the investigation of the Compliance Report and the Information Form have been monitored and completed by it.
Finally, a clear link to the Compliance Report and the Information Form should be inserted into the compliance statement that is attached to the activity report.
Since 2019 is the initial year for this application, the Board has decided to proceed with two alternatives. On the one hand, the companies will comply with the new procedure, and will use the recently introduced templates for corporate governance compliance reporting. On the other hand, the companies are allowed to proceed with the previous application for the compliance reporting, but in any event, the new reporting templates should be completed and announced, at the latest, within the period for the financial reporting.
If any change occurs on the disclosed corporate governance compliance between the two notification periods, then the companies are to make an announcement concerning the respective update.
Although the templates require public disclosure of corporate governance compliance, making it appear to be a new practice, only a procedural change has been made, in actuality. The Board has announced its decision, whereby it has resolved that the corporate governance compliance reporting made according to the Communiqué shall hereinafter be performed as per the templates of the Compliance Report and the Information Form. The Compliance Report and the Information Form should be announced within the notification period of the financial reports, together with the board of directors’ resolution and responsibility statement. A further resolution should be obtained by the corporate governance compliance committee. The Board further requires the companies to announce updates, if any, to the reports.