Turkey: Action For Company Damages Pursuant To Art. 202/1 Of The Turkish Commercial Code No. 6102

Last Updated: 24 January 2014
Article by Selen Ozturk

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.

If a loss due to any of the aforementioned occurs, the controlling company will be obliged to compensate the dependent company. Where the controlling company fulfills its compensation obligation, the contravention of the law will be eliminated and the controlling company will be relieved of its liability. Pursuant to Art. 202/1, the compensation obligation may be fulfilled by compensating the loss within that activity year or a right to claim of equivalent value is granted to the dependent company at the latest by the end of that activity year by specifying how and when the loss will be compensated.

In the event that the compensation foreseen under Art. 202/1 TCC has not been paid/ performed, a contravention of the law will be deemed to exist and the shareholders of the dependent company may file suit for the damages incurred by the dependent company. The provisions of the lawsuit will be briefly examined below.

Cause of Action

In order to file a suit as regulated under Art. 202/1(b), certain factual elements must be met. The first element is the existence of a group. Moreover in order to file a suit for damages there must be a dependent company and a controlling company in compliance with Art. 195 TCC. This type of action seeks to compensate the damage caused to the dependent company for losses incurred due to abuse of control. Consequently, the presence of a controlling company and dependent company is essential. Furthermore, there must be a contravention of the law pursuant to Art. 202/1(a). A contravention of the law will arise where the dependent company incurs a loss due to use of control and such loss has not been compensated within the period prescribed by the law. In the presence of these factual elements, a suit for the dependent company's damages may be filed by the shareholders of the dependent company.

Parties

Pursuant to Art. 202/1 of the TCC, if compensation has not been paid/performed within the activity year in which the damage occurred or if a right of equivalent claim has not been granted within the due period, each shareholder of the dependent company may demand that the loss incurred be compensated by the controlling company and its board members who caused the loss. The plaintiff is set forth as the shareholder of the dependent company, as the dependent company is not entitled to file a suit pursuant to said article. The preamble of the TCC explains the reasoning behind this regulation. In accordance with the preamble of the TCC, the dependent company may not carry out this lawsuit against the controlling company in good faith since it is affiliated with the controlling company.

In accordance with said article, the suit may be filed against the controlling company or its board members who caused the loss. The controlling company shall be liable for the entire loss. On the other hand, the lawsuit may also be filed against the board members who caused the loss. Pursuant to Article 202/1(e), Articles 553, 555 to 557, 560 and 561 shall apply to the action to be taken by shareholders, by analogy. The aforementioned articles regulate the liability of the board members of a joint stock company. Accordingly, the board members may only be held liable where they are at fault. The principles of differentiated succession shall apply to the liability of the board members.

Release from Liability

Article 202/1(d) TCC stipulates a special condition where the controlling company and its board members may be released from liability. Where it is proven that under the same or similar conditions, the board members of an independent company, who take care of company interests in good faith and act with the care of a prudent manager, would also have carried out or refrained from a transaction as a result of which loss occurs, compensation may not be awarded.

Claims

The plaintiff may demand that the controlling company compensate for the loss incurred by the dependent company. The amount of the claim shall be the difference between the current status of the company's assets and the would be position of its assets if the act or transaction realized due to the performance of control had not been realized. The facts which have a causal relation to the act that gave rise to the loss shall be taken into account while calculating the loss. The judge has sole discretion while determining the method of compensation.

The claimant may request the purchase of his shares by the controlling company instead of filing a compensation claim. However, in order to apply this solution, the request of compensation should not be possible. Furthermore, if it is justifiable; instead of compensation, the judge may decide that the plaintiff shareholders' shares must be acquired by the controlling company or decide on another solution, which is acceptable and appropriate to the situation. Accordingly, this provision is assumed as an important provision since the judge may use his discretionary power while deciding on the solution. The judge, without any request, by considering the circumstances of the relevant case, may rule for the purchase of the shares or for any other solution. Art. 202/2 shall be applied while determining the purchase price of the shares. In accordance with Art. 202, if possible, the shares shall be purchased at least at stock exchange value. If there is no such value or if the stock exchange value is not just, then they shall be purchased at actual values, or at a value to be determined in accordance with a method that is generally accepted.

Jurisdiction and Statute of Limitations

The competent court is the commercial court of first instance, pursuant to Art. 561 TCC. Said article sets forth that the lawsuit against the respondent shall be filed in the commercial court of first instance where the headquarters of company is situated. However, said article does not clarify whether "headquarters" refers to that of the controlling or the dependent company. Art. 202/1(e) stipulates that if the headquarters of the controlling enterprise is located abroad, the suit for compensation shall be filed in the commercial court of first instance at the location of the headquarters of the dependent company.

TCC Art. 560 shall be applied with respect to prescription period due to reference to art. 560. In accordance with this article, the compensation claims must be made within two years from the date on which the claimant became aware of the loss, and the person that is responsible of that loss and in any case, within five years from the occurrence date of the act which caused the loss.

Conclusion

TCC Art. 202/1 brings a new dimension to liability law and foresees the indemnification of a dependent company for the acts and transactions conducted by the dependent company upon the instruction of the controlling company. The suit for damages may be filed where there is a loss incurred by dependent company and where such loss has not been compensated within the period prescribed by the law. The lawsuit is filed by the shareholder of the dependent company and the respondent is the controlling company or its board members who caused the loss. TCC Art. 202/1 is an important provision since it regulates the liability of the controlling company within the framework of group companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions