Corporate and M&A

Contact: Selen Ozturk; Erdem & Erdem (Turkey)

In General

The Turkish Commercial Code No. 6102 ("TCC") adopts a different system from the old Turkish Commercial Code No. 6762 ("Old TCC") and regulates group companies. One of the most important regulations with respect to group companies is contained in the articles that regulate the liability of the controlling company. Paragraphs 1 and 2 of TCC Art. 202 set forth two different conditions which would constitute a contravention of the law. This paper will examine the conditions of contravention of the law regulated under paragraph 1 of TCC Art. 202 and the lawsuit that may be filed due to this contravention of the law.

The Contravention of Law as Regulated under TCC Art. 202/1

In accordance with Art. 202/1 TCC, a controlling company may not exercise its control in a way that would make the dependent company incur a loss. If the controlling company exercises its control in a way that causes losses to the dependent company, this would constitute a contravention of the law. Art. 202/1 provides examples of the acts and transactions that may create loss. Accordingly, the controlling company may not direct the dependent company to carry out legal transactions such as the transfer of business, assets, funds, staff, receivables and debt; to decrease or transfer its profits; to restrict its assets with real or personal rights; to undertake liabilities such as providing surety, guarantee and bill guarantee; to make payments; to adopt decisions or take measures which negatively affect the dependent company's efficiency and activity such as not renovating its facilities, limiting or stopping its investments without any reasonable grounds or refraining from taking measures that will ensure its development.

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