Turkey: The Ability Of Companies To Enter Into Specific Transactions (Limits Of Corporate Powers) Under Turkish Law:

The Ultra Vires1 Doctrine

When a company is first established, its shareholders may be confident that -through that company- they will be able to carry out any and all activities. In accordance with Turkish law, this would not be a right reasoning. One day, the said shareholders may suddenly discover that their "almighty" company is legally not capable of entering into a certain transaction, or even more strikingly, part of the transactions already executed by it are null and void. How can this be?

Article 137 of the Turkish Commercial Code (the TCC) is as follows:

"Having legal personality, trade companies shall be entitled to acquire all rights and undertake all obligations provided that such rights and obligations fall within the scope of activities indicated in their Articles of Association. Statutory exceptions regarding this matter shall be reserved."

One can easily infer the essence of what is called the Ultra Vires doctrine from the above: Any company established in Turkey may carry out only the activities specified in its Articles of Association (AoA). The Ultra Vires doctrine (the Doctrine) restrains the ability of a company to enter into a contract or perform an operation that is beyond its corporate powers whose limits are determined by its AoA. Accordingly, any Ultra Vires act concluded by a company is considered to be invalid and thus does not confer any rights and/or obligations on neither the company nor third parties.

Although open to criticism, the Doctrine is widely recognized in Turkish law practice. Below you may find information on (i) the Doctrine; (ii) the way it is implemented by the Turkish Court of Appeals (the Court); and (iii) its fate under the Draft TCC.

I. The Doctrine under the TCC

Principle. The Doctrine was imported to Turkish law from the United Kingdom. As mentioned above, it is derived from Article 137 of the TCC and basically provides that a company may carry out only the transactions explicitly authorized by its AoA, which is registered with the respective Trade Registry and announced in the Trade Registry Gazette.

Scope. Pursuant to Turkish law, only collective partnerships (kolektif sirket), limited partnerships (komandit sirket), cooperatives (kooperatifler), limited liability companies (limited sirket) and joint stock companies (anonim sirket) fall within the scope of the definition of "Trade Companies" (ticaret sirketleri) and thus are subject to the Doctrine.

Consequence. In cases where a company performs a transaction that is beyond its corporate powers, such transaction would be an Ultra Vires act whose validity may be challenged on the ground that the company lacked the necessary power when the relevant transaction was performed. Ultra Vires acts are null and void, which means that they do not have any binding effect.

Post-approval of an Ultra Vires act by the shareholders of the relevant company does not rectify the nullity of the said act. The only way to overcome the nullity of an Ultra Vires act is (i) first to amend the AoA of the company in order to broaden its scope of activity and (ii) then re-perform the same act.

II. The Doctrine in light of the Precedents of the Court

The earlier judgements of the Court reflected a very strict implementation of the Doctrine. However, the Court subsequently realized that such an approach may hinder companies' ordinary course of business and obstruct their day-to-day management. By taking this very fact into account, it has softened its interpretation of the Doctrine.

For instance, the Court allowed companies to provide guarantee in favour of banks for credit debts and obligations of third parties even if a special wording, e.g., provision of guarantee for debts and obligations of third parties, is not expressly set out among their scope and objective. The rationale behind this ruling is that commercial circumstances necessitate merchants to support other merchants to conduct their businesses and ensure their continuance. Therefore, provision of guarantee for credit debts of third parties is in the nature of ordinary business activities and is not necessarily required to be expressly specified in the scope of activities of their AoA. Nonetheless, in a more recent judgement, the Civil General Assembly of the Court brought a more restrictive interpretation of the Doctrine.

To sum up, it will depend on the circumstances of each case to determine whether or not the acts performed by a certain company are subject to the application of the Doctrine. Considering conflicting judgements of the Court and to be on the safe side, it would be advisable for companies to (i) include comprehensive scope and objective clauses and general clauses in their AoA allowing them to engage in any business; or (ii) amend their AoA where necessary before engaging in a potentially Ultra Vires activity. Consequently, they will be able to transform potential Ultra Vires acts into Intra Vires.

III. The Doctrine under the Draft TCC

The inconsistent and erratic application of the Doctrine so far seems to have caused the legislator to dismiss it: Article 125 of the Draft TCC, derived from Article 9 of the First Council Directive No. 68/1512, abolishes the long-standing Doctrine set forth by the TCC. The said Article does not contain any special provision as regards companies' corporate powers and makes reference to the general rule on the capacity of natural persons stipulated in the Turkish Civil Code. Accordingly, once the Draft TCC is enacted, the Doctrine restricting the operational comfort of companies will be history, resulting in companies conducting business more freely.


1. Beyond the powers.

2. First Council Directive 68/151/EEC of 9 March 1968 on co-ordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community published in the Official Journal OJL 65, dated 14 March 1968, pages 8 to 12.

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.

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”

Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.