Group companies had substantial importance in Turkish commercial
and legal world with their existence without any normative rule
under legislation. Therefore, the legislative aimed to fill this
significant gap with set of provisions, which has been introduced
under Article 195-210 of the Turkish Commercial Code numbered 6102
entered into force on 1 July 2012 (the
'TCC' or the
'Code'). One of the most radical changes
brought by the TCC is the liability of the parent company within a
group, arising from the trust, as described under Article 209 of
According to the relevant article, the parent company shall be
liable from the trust which is based on its reputation, provided
that such a reputation attains a level where it inspires trust to
the consumers and the community. The level of this reputation shall
be evaluated along with the circumstances of each case1.
In light of the above, there are certain requirements for
Article 209 to apply. First and the most important, there needs to
be an existence of a 'group' within the meaning of Article
195, i.e. existence of a 'domination relationship' between
at least two companies, as defined therein2. Consequently, in
case of lack of such relationship, Article 209 shall not be
Furthermore, as mentioned above, the publicly recognized
reputation of the group needs to result in a confidence in public.
Therefore, if the group does not have a reputation, or has a
reputation which does not result in confidence, Article 209 shall
not apply. In this aspect, the crucial point is the reputation
being special, in terms of arising confidence; i.e. any confidence
does not raise the application of the said article. Taking into
account that the legislative does not have a specific definition on
the reputation that arises confidence, as mentioned above, this
shall be determined in accordance with the circumstances of each
Lastly, in order for article 209 to become applicable, the
abovementioned trust should be used by the subsidiary against third
party, who suffers a loss as a result of relying on such trust. The
third party may (i) act or (ii) refrain to act, counting on the
trust and confidence established by the group. These affirmative
and privative acts should be in a way that will raise further
trust, which induces the third parties (i.e. consumers, customers,
etc.) to enter into a transaction with the sister company (i.e. the
subsidiary). It should also be noted that there needs to be an
'adequate causality' in terms of evaluating the loss arisen
from such an action or refrainment, which is also the case in the
application of such theories in most civil law countries in Europe
(i.e. Switzerland and Germany).
To focus on a more specific issue under such rule, the preamble
of Article 209 mentioned letters of comfort as a particular
appearance of the liability arising from trust. Under Turkish law,
the letters of comfort are defined from a perspective of a group
company structure, as they are declarations by the parent company
in relation to its subsidiaries, addressed to the third parties,
aiming to ease the conclusion of an agreement with the subsidiary.
The parent company may leave an impression that it is giving a
guarantee, even though in general, it does not have the intention
to undertake any legal obligation.
From the same perspective, the legislative introduced Article
209, in order for the parent company to be deemed responsible. Even
though there is no written letter of comfort, but there is a trust
at the society arising from the reputation of the parent company,
this Article shall be applied. Therefore, the said provision grants
a legal binding nature to the comfort letters in that context, and
deems the parent company liable which is hiding behind the veil of
1. Ahmet Battal, Sirketler Toplulugunda Guvenden
Dogan Sorumluluk, Marmara Üniversitesi Hukuk
Fakültesi Hukuk Araştırmaları Dergisi
(MÜHF-HAD) Book: 18, Issue: 2, Year: 2012, p.
2. According to Article 195 of the TCC, if a company,
directly or indirectly, (i) holds the majority of the voting rights
of another, or (ii) has the right to ensure the appointment of the
members forming a resolution quorum in the management body of
another company, according to the articles of association
('AoA') of such, or (iii) holds the right
to dispose the majority of voting rights of another company
according to an agreement, solely or with other shareholders based
on an agreement, in addition to its own voting rights, or (iv) is
able to control the other company in accordance with an agreement
or through other means, the former company is deemed as the
controlling company and the latter is deemed as the dependant
company or subsidiary.
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.
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