Illegal control and liability under the Commercial Code - International Law Office

International Law Office

Company & Commercial - Turkey

Illegal control and liability under the Commercial Code

June 20 2011


The Commercial Code (Law 6102) - accepted by the Turkish Grand National Assembly on January 13 2011 and published in the Official Gazette on February 14 2011 - will enter into force on July 1 2012. Unlike the existing code, the new code includes arrangements for the regulation of corporate groups, with discussion focused on regulation of illegal control within such groups. Illegal control is regulated in the first and second clauses of Article 202 of the code, which involve:

  • compensation for a subsidiary's losses; and
  • compensation for its shareholders' losses and acquisition of shares thereof.

Under the first clause of Article 202, if a parent company exercises control in a manner that results in losses for the subsidiary and the former cannot offset those losses, a case can be filed for compensation for the subsidiary's losses. Such a case is filed by the subsidiary's shareholders or creditors against the parent company or its board members. However, there is no regulation on whether the subsidiary company has the status of claimant and board members the status of defendant. Requested compensation is paid to the subsidiary, not to its board members. The court may rule that the subsidiary's shares be purchased instead of compensation being paid - or may issue another resolution appropriate to the given situation. If the losses derive from behaviour that can be approved within the framework of the board's obligation due diligence, no compensation decree will be made (under Article 202 (1)(d)).

Under the second clause of Article 202, any of the subsidiary's shareholders who object to a resolution of the parent company's general assembly or board by which excessive control is exercised, may request compensation for its losses or request the purchase of its shares.

For further information on this topic please contact Özgün Öztunç at Ozgun Law by telephone (+90 212 356 32 10), fax (+90 212 356 32 13) or email (ozgun@ozgunlaw.com).


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