32 / 473
COMMERCIAL LAW
19
The Relation between the Affiliation Report and the Activity Report
The purposes of the affiliation report and the activity report are
similar with regards to informing the shareholders and the creditors of a
company’s activities. Aside from this similarity, they are quite different
regarding their contents. Nevertheless, TCC Art. 199/3 stipulates that
some of the information in the affiliation report must also be included
in the activity report. The article reads as follows:
“At the end of the
report, the board of directors shall explain whether or not the company,
in the circumstances and conditions known to the board at the time the
company conducted the legal transaction or took or refrained from taking
the measure, undertook the appropriate counter measure in relation to
each legal transaction and whether or not the company suffered losses due
to taking or refraining from taking the measures. In the event the company
incurred losses, the board of directors shall also specify whether or not
the losses were compensated. This explanation shall only be included in
the annual activity report.”
As seen, the article states that the affiliation report shall have a
conclusion section and it also determines the content of this section.
However, in line with the principle that the affiliation report shall not be
disclosed to the shareholders in its entirety, all of the information in the
affiliation report shall not be included in the activity report, and only its
conclusion section shall be cited in the activity report
3
.
In addition to the above explanations, another passage of the
article, which may result in material controversies in practice, should
also be mentioned. As seen above in the article, the board of directors
shall evaluate the information
“in accordance with the circumstances
and conditions known to the board”
. Therefore, it may be concluded
that the cases that are not known, but should be known to the board of
directors will not be taken as basis for such evaluation. However, the
justification of the article states that, “
Whether or not the circumstances
and conditions which should have been known to the board of directors
3
During the preparation of the TCC, the sub-commission discussed the disclosure of the
affiliation report to the shareholders in its entirety and it was decided that it is not necessary.
Accordingly, the word “only” is added to the article emphasizing that only the conclusion part
of the affiliation report shall be included in the activity report.