The Concept and Legal Nature of Release
As a word, release has different meanings such as “exoneration, exoneration, release from debt, consolidation, declaration that there is no more debt and credit”. In legal terminology, release is generally used to mean “the complete or partial relinquishment of a right by the creditor” or “the release of bodies from liability and waiver of possible compensation claims” in terms of civil and commercial law. In this respect, release is a means of termination of debt that is frequently used in legal entities.
The bodies performing transactions on behalf of a legal entity are obliged to account for their activities to the legal entity at the end of the accounting period. Especially in joint stock companies, cooperatives and other legal entities, the management bodies may be released from legal and financial liability by being discharged by the general assembly at the end of the relevant period.
Release Regulation in the Turkish Code of Obligations (TCO)
Under the Turkish Code of Obligations (TCO), release is regulated as one of the special cases that provide for the termination of the obligation without performance. According to the TCO, a release is a legal transaction in which the creditor releases the debtor from his/her debt by renouncing his/her right to receive.
This situation is realized through a “release agreement” that eliminates the debt. A release agreement is a contract between the creditor and the debtor that allows the creditor to waive the creditor’s right without fulfilling the debtor’s performance. The main point here is that the creditor partially or completely waives a receivable in the assets of the debtor and thus terminates the debtor’s debt obligation.
A release agreement is a dispositive transaction between the parties aiming to terminate a debt, the existence of which is beyond doubt, in whole or in part. However, in order for the release agreement to be valid, the parties must enter into this agreement with their free will.
Release in Joint Stock Companies
In joint stock companies, discharge means the approval by the general assembly of the acts and activities of the management bodies at the end of a certain accounting period. The general assembly approves the activities of the members of the board of directors and executives for the relevant period and releases them from legal liability for these activities.
With the release resolution, the company will not be able to assert any claims against the discharged persons for their activities and will not be able to hold them liable. This situation is of great importance for the members of the board of directors, because if they are not discharged, the partnership may file a liability lawsuit against them.
Release decision in joint stock companies;
Release in the material sense: It refers to the removal of the liability of the members of the board of directors.
Release in the formal sense: It means the acceptance that the activities carried out by the board of directors are in compliance with the law and in line with the interests of the partnership.
In this context, the release of liability in joint stock companies constitutes a negative acknowledgment of debt and indicates that the company accepts the transactions carried out by the management bodies in the past period as legally valid. The release decision of the general assembly is a unilateral and executive decision and has direct consequences.
Scope and Limits of the Release Procedure
The release is an internal transaction and binds the shareholders and, in certain circumstances, the company’s shareholders. However, the release does not have a direct effect on third parties outside the company, especially creditors. In other words, the release decision of the joint stock company does not eliminate the right of the company’s creditors to file a lawsuit in case of damages. Creditors may continue to sue for compensation of their damages. On the other hand, the company’s right to file a liability lawsuit on its own behalf is eliminated with the release decision.
Release of the Foundation’s Governing Bodies and Legal Status
The Turkish Civil Code (TCC) stipulates that the governing bodies of a foundation are a mandatory element for the foundation to acquire legal personality (Art. 109 TCC). However, there is no provision in the TCC regarding the discharge of foundation management bodies. In this regard, there is a clear gap in the law.
Article 111 of the TCC contains the following provision regarding the audit of foundations
“The General Directorate of Foundations and its supreme organizations shall supervise whether the foundations fulfill the provisions of the foundation deed, whether they manage the foundation properties in accordance with the purpose, and whether they spend the foundation revenues in accordance with the purpose. The supervision of foundations by their higher organizations is subject to the provisions of special laws.”
This provision refers to the administrative supervision of foundations and does not contain a direct regulation on release. Therefore, it is clear that a provision on the release of foundation management bodies is missing and there is a legal gap. If the foundation’s governing bodies act negligently or maliciously, the risk of damage to the foundation increases due to the lack of a release mechanism.
For this reason, it can be argued that a legal regulation should be introduced to require the release of foundation management bodies by the general assembly, as in the case of companies. Thus, the management of foundations can be made more transparent and legal uncertainties can be eliminated.
Conclusion
Release is an important concept in our legal system in terms of the termination of the debt relationship or the release of the management bodies from liability. In the Turkish Code of Obligations, release is regulated as the waiver of the creditor from claiming its receivables from the debtor. In joint stock companies, release of liability means the removal of the liability of the members of the board of directors for the activities of a certain accounting period. However, there is no provision in the Turkish Civil Code regarding the release of foundation management bodies. This situation creates a legal gap and constitutes a deficiency in terms of transparent management of foundations. Therefore, it can be argued that a clear regulation should be introduced regarding the release of foundation management bodies.
In conclusion, the release is an important legal mechanism both in terms of debt relations and the liability of the management bodies of legal entities. As in the case of joint stock companies and other commercial legal entities, it is of great importance to regulate the release of executives within the framework of the law in order to ensure a healthy and transparent management of foundations.
