Recent Development
In its decision dated May 30, 2019 and No. 2015/11192 (“Decision“), the Constitutional Court ruled that the seizure of assets of a board member due to his liability for the public receivables of the company where he served as a board member without the power of representation does not violate the right to property. The Decision was published on the Official Gazette on July 19, 2019.
Background
The concerned board member in the relevant Decision argued that (i) he should not be held liable for the unpaid social security premium receivables and default interest; (ii) he does not have any power of representation for the company; (iii) being a member of the board of directors is insufficient for him to be held severally responsible for the public receivables because the board member must be a high level director or legal representative with the power to represent and bind the company for the premium receivable at the time of assessment and collection; and (iv) his right of property and right to fair trial regulated under Articles 35 and 36 of the Constitution were violated since his house, retirement salary and vehicle were seized and his retirement salary was deducted.
What Does the Decision Say?
The Constitutional Court emphasized that the purpose of both Article 80 of the abrogated Law No. 506 and Article 88 of the Law No. 5510, which entered into force on 1/7/2008, is to ensure the timely and regular collection of premium receivables. The Decision reaffirms that the full and timely payment of the insurance premiums is essential, with reference to the Court of Cassation Assembly of Civil Chambers’ decision dated 25/1/2017 and no. E.2014/21-2323, K.2017/152. The Constitutional Court concluded that in the case at hand, to ensure the due collection of premium receivables, it is suitable and essential to hold jointly and severally liable all of the members of the board of directors – even if they do not have the power to represent and bind the company- for the payment of the premium receivables that could not be collected in a timely and proper manner.
The Constitutional Court underlined that the Council of State and Court of Cassation’s established case-law should be applied to the premium receivable prior to the effective date of the Law No. 5510. This case-law ruled that being a member of the board of directors is insufficient criteria to be held severally liable for public receivables, and that one should also be a high-level director or legal representative with the power to represent and bind the company at the period where the premium receivable was realized and should have been paid. In addition, a member of the board of directors could intervene to ensure the payment of the premium receivables during their period of duty under the powers regulated by the law.
Conclusion
The member of the board of directors is jointly and severally liable for the public receivables accrued during his term of duty and deriving from the company’s unpaid social security premium receivables and default interest after the effective date of the Law No. 5510, regardless of whether such board member has representative power.
The Constitutional Court concluded that this liability does not impose an excessive and disproportionate burden and held that the seizure of the member’s assets did not damage the fair balance between public interest and the right to property.
