The need for internal company regulations that manage responsibility and work streams to also ensure anti-corruptions has significantly increased as a result of the growing number of employees working remotely and the diverse correspondence channels being used within organizations over the last few years.

Having internal company regulations and implementing them effectively contributes to ensuring compliance with the applicable laws and fostering an environment of transparency, equality, accountability, and responsibility by setting forth clear cut instructions for employee workplace practice across the organization, regardless of whether it is mandated by the applicable legislation. 

Importance of Internal Regulations for Privately Held Entities

Internal company regulations are particularly important in the case of privately held companies, which are not subject to the same level of mandatory legislative scrutiny that listed companies and those operating in regulated sectors must endure. 

Under Turkish law, legislative developments in regulated sectors have already paved the way for the legal framework of risk and compliance management issues. However, privately held companies that do not operate in a regulated sector do not enjoy the scrutiny of a regulatory authority and are usually monitored by their shareholders, board of directors, management, creditors, or customers.

Under Turkish law, legislative developments in regulated sectors have already paved the way for the legal framework of risk and compliance management issues. However, privately held companies that do not operate in a regulated sector do not enjoy the scrutiny of a regulatory authority and are usually monitored by their shareholders, board of directors, management, creditors, or customers.

Since these companies’ constituents can raise compliance issues that may lead to civil or criminal liability, depending on the nature of the issue, it is becoming more evident than ever that all organizations will benefit from articulating a clear standard for internal company rules and principles, even if it is not legislatively mandatory. To that end, most corporate employers prefer issuing internal company regulations, namely a “Code of Conduct” or “Employee’s Handbook”, to set out the working conditions and principles either to reemphasize some items already addressed in employment contracts or to add new rules that do not deteriorate employee rights in practice.

Since these companies’ constituents can raise compliance issues that may lead to civil or criminal liability, depending on the nature of the issue, it is becoming more evident than ever that all organizations will benefit from articulating a clear standard for internal company rules and principles, even if it is not legislatively mandatory. To that end, most corporate employers prefer issuing internal company regulations, namely a “Code of Conduct” or “Employee’s Handbook”, to set out the working conditions and principles either to reemphasize some items already addressed in employment contracts or to add new rules that do not deteriorate employee rights in practice.

Mitigating the Risk of Liability 

Internal company regulations are also of the utmost importance when it comes to mitigating the risk of liability that may arise from non-compliance with the rules under the applicable legislation. This is because failure to maintain compliance with the applicable legislation may lead to not only civil liability but also criminal liability on the part of the board of directors (as the governing body) or the management of a privately held company. White-collar crimes such as bribery, fraud, money laundering of criminal proceeds, and embezzlement are the main white-collar corruption offences that may trigger criminal liability as per the Turkish Criminal Code,1 applicable to all individuals within the company regardless of whether privately held, listed, or regulated. 

Leading Benefits of Internal Regulations

be developed in many different areas (e.g., sales, procurement and marketing operations, workplace health and safety, etc.), the primary benefits of internal regulations from a corporate compliance perspective may be summarized as follows:

• They serve as a central guide for compliance by putting together critical items under the legislation.2

• They incentivize employees to act in compliance with the applicable legislation and ethical treatment in their relationships with other employees, customers, and third parties including governmental authorities.

• They minimize the risk associated with illegal acts and administrative fines and limit companies’ liability if an employee breaches internal company rules that may give rise to legal liability.

• They outline the main principles of human resources practices and the most common questions that may be received from employees and reduce the risk of dealing with unfair employment practice allegations.

• They assist employees with handling any legal or ethical questions that may arise while fulfilling the tasks granted to them or delving into unforeseen challenges and keep the company functioning properly.

Enforcement of Internal Company Regulations under Turkish Law

The general rule for internal company regulations is to present such regulations to the relevant employee at the time the employment relationship is established (i.e., when the employment contract is executed). In order to procure that the relevant employee reads the regulations and confirms his/her understanding, the employer should ensure that the regulations are explicitly presented to the employee, and for the avoidance of doubt, obtain written confirmation (signed on paper) from the employee for evidentiary purposes. When the internal regulations are presented to the employee in this manner, they will be deemed part of the employment contract.

Pursuant to Article 22 of the Labor Code,3 any material change made to workplace conditions shall be binding on employees provided that such change is notified to employee in writing and is accepted by the employee in writing within six business days. If the employee rejects or fails to accept such changes, the employer may terminate the employment contract by notifying the employee of termination in writing within the notice periods on the grounds that (i) such changes are based on valid grounds or (ii) the employer has other valid grounds for terminating the employment contract. However, the employee shall be entitled to initiate legal action against the employer to question the grounds for termination and claim compensation. 

As per the applicable legislation and established court precedents, internal company regulations are considered as workplace conditions. Therefore, any internal regulation presented to the employee following the formation of the employment relationship (i.e., execution of the employment contract) may be deemed as a material change to the terms of the employment contract which requires the written consent of the employee. Therefore, employers should evidence that employees have read and agreed to such rules to prevent any legal action in the future. In practice, employers circulate these internal regulations to each employee in return for his/her signature as an enclosure of the employment agreement.

Any amendments made to the internal working regulations should be circulated to each employee and their written confirmation to the amendments should be obtained. It may be burdensome for some companies to obtain employees’ signatures for each revision, so obtaining online consent may be used as an alternative method. In this case, there will still be a valid code of conduct, but it will be up to the employer to evidence that the employee was aware of the code of conduct in case of a dispute. In this respect, it is advisable to keep signed Turkish copies of internal company regulations, trainings, and/or logs of online consent in the personnel file of each employee.