Can a foreign shareholder sue a company director for mismanagement in Turkey? Learn about director liability, company losses, shareholder claims, evidence, compensation, limitation periods and emergency legal remedies.

A foreign shareholder who invests in a Turkish company may eventually discover that the company’s directors have made decisions that seriously damage the business. Company funds may have been transferred to related businesses, valuable assets may have been sold below value, corporate opportunities may have been diverted, accounting records may have been concealed or directors may have entered transactions primarily benefiting themselves or another shareholder.

Turkish law provides mechanisms for holding directors personally liable in appropriate circumstances.

The central provision is Article 553 of the Turkish Commercial Code No. 6102. Directors and managers who culpably breach obligations arising from legislation or the company’s articles of association may be liable for resulting damage to the company, shareholders and company creditors. (Son Karar)

But a director liability lawsuit is not simply a claim that:

“The director made a bad business decision, so the director must pay.”

A successful case normally requires careful analysis of the director’s duty, the alleged breach, fault, financial loss and causal connection between the breach and the damage.

For foreign shareholders, another issue is equally important: who actually suffered the loss? If the company suffered the damage, a shareholder may be entitled to bring the claim, but Article 555 generally requires the compensation recovered through that route to be paid to the company rather than personally to the shareholder. (Son Karar)

Understanding this distinction is essential before litigation begins.

When Can a Company Director Be Sued for Mismanagement in Turkey?

Director liability can arise where a director culpably violates duties imposed by legislation or the company’s constitutional documents and causes legally recoverable damage.

Article 553 expressly covers founders, board members, managers and liquidators. (Son Karar)

Potential cases can involve misuse of company assets, unauthorized transactions, serious conflicts of interest, diversion of corporate opportunities, improper related-party transactions, unlawful payments, failure to perform mandatory corporate duties or other conduct violating statutory or constitutional obligations.

The specific duty allegedly breached should always be identified.

Is Every Bad Business Decision Mismanagement?

No.

Companies take commercial risks. Investments fail, customers disappear, exchange rates change, projects become unprofitable and business strategies sometimes prove unsuccessful.

The fact that a company lost money does not automatically establish director liability.

A foreign shareholder should therefore avoid framing the lawsuit merely around the size of the loss.

The stronger question is:

What legal or corporate duty did the director breach, how did they breach it, and what financial damage resulted from that breach?

What Must a Foreign Shareholder Prove?

A director liability claim normally requires a structured evidentiary case.

The shareholder should identify the applicable obligation, the conduct constituting the breach, the director responsible for that conduct, the resulting damage and the causal connection between the breach and the loss.

Fault is also central to the Article 553 liability framework. (Lexpera)

Simply showing that the claimant disagrees with management is not enough.

Example: Company Director Transfers Money to Their Own Business

Consider a company in which a foreign investor owns 40%.

A director causes substantial payments to be made to another business owned by the director.

This alone does not necessarily establish liability.

The investigation should determine whether genuine goods or services were supplied, whether contracts exist, whether the price was commercially reasonable, whether the transaction was properly authorized and whether the company suffered loss.

If the company paid EUR 500,000 for fictitious services, the evidence may support a substantially stronger liability claim than a mere allegation of “bad management.”

Related-Party Transactions

Related-party transactions are one of the most important areas for foreign shareholders to investigate.

A director may cause the company to purchase services from another company controlled by the director, a shareholder or a related person.

Such transactions are not automatically unlawful.

However, artificial transactions, inflated prices, nonexistent services or transactions structured primarily to transfer corporate value elsewhere can create serious liability issues.

The commercial substance of the transaction must be examined.

Director Uses Company Money for Personal Expenses

Personal expenditure paid from corporate funds can also require investigation.

The shareholder should identify the individual transactions and determine whether they had a legitimate corporate purpose.

Travel, accommodation, vehicles, personal purchases, family expenses and other payments should be compared against employment arrangements, corporate approvals and accounting records.

The evidence should establish what the company actually paid and why.

Director Sells Company Property Below Market Value

A sale below an expected price does not automatically establish liability.

There may be legitimate reasons for accepting a discounted price.

However, the circumstances become much more concerning if a director sells a valuable company asset to their own business or another related party at an artificially low price.

The investor should investigate the asset’s value, purchaser, relationship between purchaser and director, corporate authorization, consideration actually paid and destination of the sale proceeds.

Director Diverts Customers to Another Company

A director may potentially cause substantial damage by redirecting customers or business opportunities to another enterprise.

Evidence might include customer communications, quotations, contracts, invoices, payment instructions, employee communications and information concerning ownership of the competing company.

The shareholder should document the financial impact rather than merely asserting that customers were “stolen.”

Who Can Sue the Director?

This is one of the most important questions.

Article 553 recognizes potential liability toward the company, shareholders and creditors for damage caused by qualifying breaches. Article 555 then specifically provides that both the company and each shareholder may seek compensation for damage suffered by the company. (Son Karar)

This is extremely important where the directors who allegedly caused the damage also control the company and refuse to authorize litigation.

A shareholder does not necessarily have to wait for management to sue itself.

Can a Minority Foreign Shareholder File the Lawsuit?

Potentially, yes.

Article 555 gives each shareholder the right to seek compensation for damage suffered by the company. (Son Karar)

Therefore, owning 10%, 20%, 30% or 40% of a company does not automatically prevent the investor from pursuing a director liability claim.

The foreign shareholder’s lack of voting control does not necessarily eliminate litigation rights.

Does the Compensation Go to the Foreign Shareholder?

This depends critically on the nature of the damage.

Where the shareholder brings a claim under Article 555 seeking compensation for damage suffered by the company, the shareholder may request that compensation be paid only to the company. (Son Karar)

This rule is frequently misunderstood.

Suppose a director causes EUR 2 million of company money to be unlawfully transferred elsewhere.

A shareholder owns 25%.

The shareholder cannot automatically claim:

“EUR 500,000 of the missing money belongs to me personally.”

The money belonged to the company.

The company’s direct loss and the shareholder’s indirect economic loss through the reduced value of the investment are different legal concepts.

What Is Direct Shareholder Damage?

A shareholder can potentially suffer damage directly rather than merely through loss suffered by the company.

The distinction depends on whose assets or legally protected interests were directly affected by the director’s conduct.

Where direct shareholder damage exists under the applicable liability rules, the structure of the claim may differ from an Article 555 company-loss action.

This distinction should be determined before calculating compensation.

Why Is This Important for Foreign Investors?

Because suing for the wrong loss can fundamentally weaken the case.

A foreign shareholder may understandably calculate damages according to ownership percentage.

For example:

Company loss: EUR 5 million.

Foreign investor’s shareholding: 40%.

Claimant assumes personal damages: EUR 2 million.

That calculation does not automatically reflect the legal structure of the claim.

If the EUR 5 million is company loss, Article 555 provides that the shareholder pursuing that loss requests payment to the company. (Son Karar)

What Evidence Should Be Collected Before Filing?

Director liability cases are evidence-intensive.

Relevant material can include company financial statements, accounting records, bank transactions, board resolutions, general assembly decisions, contracts, invoices, emails, messages, audit reports, shareholder agreements, related-party records and documents concerning particular asset transfers.

The investor should preserve documents already lawfully possessed.

Original electronic files should be maintained wherever possible.

What If Directors Refuse to Provide Company Records?

The shareholder may need to use statutory information and inspection rights before or alongside the liability litigation.

The precise procedure depends on company type.

If the investor is also a board member, separate board-level information and inspection rights may also exist.

Where records may disappear, evidence-preservation procedures should be evaluated urgently.

The director liability claim should not be abandoned merely because the alleged wrongdoers currently control the documents.

Can a Special Audit Help?

Potentially.

For a joint-stock company, a special audit can become an important mechanism for investigating specified corporate matters where the statutory requirements have been satisfied.

This can be useful where the shareholder suspects a particular pattern of transactions but ordinary information requests have failed to provide adequate answers.

The request should normally focus on identifiable matters rather than demanding a general investigation of everything management has ever done.

Can Bank Records Be Used as Evidence?

Banking information can be particularly valuable.

A payment trail can identify when money left the company, the recipient and transaction description.

But a bank transfer alone does not prove wrongful conduct.

It should be compared with invoices, accounting entries, contracts, corporate approvals and evidence of actual performance.

Can Accounting Records Prove Mismanagement?

They can provide important evidence, but context matters.

Accounting records may reveal unusual expenses, unexplained shareholder accounts, payments to related parties or transactions inconsistent with the company’s ordinary operations.

Independent financial analysis may be necessary in complex cases.

A forensic accounting review can be particularly useful where thousands of transactions must be reconstructed.

What If the Director Deleted Records?

Preserve everything that remains.

Backups may exist with accountants, banks, suppliers, customers or other third parties.

Email systems and electronic accounting platforms may also contain historical data.

If destruction or alteration of evidence is genuinely threatened, the possibility of judicial evidence preservation should be assessed.

Can the Foreign Shareholder Request an Interim Injunction?

Potentially, depending on the claim and circumstances.

A compensation lawsuit may take time.

If the director is currently transferring assets or taking actions that threaten irreversible damage, waiting for a final judgment may not provide adequate protection.

An appropriate interim measure may therefore need to be considered where the statutory conditions are satisfied.

The requested protection should be tied to a specific risk and supported by evidence.

Can Company Bank Accounts Be Frozen?

Not automatically merely because a shareholder alleges mismanagement.

A court will require a legally recognized basis and satisfaction of the applicable conditions for the particular interim remedy requested.

A general statement that the shareholder “does not trust the director” is unlikely to substitute for evidence of a concrete claim and risk.

Can the Director’s Personal Assets Be Targeted?

A director liability claim seeks personal responsibility where the statutory requirements are established.

However, bringing a lawsuit does not automatically allow the claimant to seize everything owned by the director.

Interim protection against the defendant’s assets and enforcement following judgment are separate procedural questions.

The evidence, nature of the claim and applicable procedural requirements must be considered.

What If Several Directors Were Involved?

Article 557 contains an important differentiated-liability framework where several persons are responsible for the same damage.

The Commercial Code provides that each responsible person may be jointly liable with others to the extent the damage can be attributed personally to that person according to their fault and the circumstances. (rt-union.com)

Therefore, liability should not simply be assumed to be identical for every board member.

The role of each defendant must be examined.

Can a Director Defend Themselves by Saying They Did Not Know?

That depends on the facts and the director’s duties.

A director cannot necessarily avoid liability simply by claiming ignorance.

At the same time, Article 553 prevents automatic liability for matters outside a person’s control and contains specific rules concerning lawful delegation of duties and authority. (Son Karar)

The court should therefore examine what responsibility the individual director actually possessed.

What If Authority Was Delegated?

Lawful delegation can significantly affect liability.

Article 553 provides that where a duty or authority arising from legislation or the articles is lawfully delegated, the delegating person is generally not liable for the acts and decisions of the delegate unless reasonable care was not exercised in selecting that person. (Son Karar)

The validity and scope of the delegation therefore need to be examined.

A director cannot necessarily be held responsible simply because misconduct occurred somewhere within the company.

No Automatic Liability for Matters Outside a Director’s Control

Article 553 also states that a person cannot be held responsible for unlawful conduct or irregularities outside their control merely by relying on supervision and duty-of-care concepts. (Son Karar)

This is important in multi-director companies.

A liability lawsuit should identify what each defendant actually did or failed to do.

What If the Director Was Released by the General Assembly?

A general assembly release decision can materially affect litigation rights.

Article 558 regulates the effect of release. A release decision can eliminate the company’s claim regarding disclosed matters covered by the release and can affect shareholder claims. Shareholders who did not vote in favor of the release do not necessarily lose their rights immediately, but the statute establishes a six-month period following the release decision for the relevant claims. (Protokol)

Therefore, foreign shareholders should carefully review general assembly agendas containing director-release resolutions.

Do Not Vote for Release Without Reviewing the Accounts

This is especially important where the investor already suspects misconduct.

A shareholder should understand what transactions and facts are being presented before voting on a resolution releasing directors from liability.

Financial statements, board reports, audit materials and known disputed transactions should be reviewed first.

A release vote can have serious consequences for future litigation.

What If the Foreign Shareholder Voted Against Release?

Preserve proof of the vote and meeting records.

Article 558 distinguishes between shareholders who approved the release and other shareholders. The latter’s relevant litigation rights are subject to the six-month statutory consequence following the release decision. (Protokol)

Do not assume that voting against release means the shareholder can wait indefinitely before taking action.

Limitation Period for Director Liability Claims

Article 560 is critical.

The right to claim compensation against responsible persons generally becomes time-barred two years after the claimant learns of both the damage and the responsible person, and in any event five years after the act causing the damage. (Protokol)

If the conduct also constitutes a criminal offence subject to a longer criminal limitation period, the longer period can apply to the compensation claim under Article 560. (TC Mevzuat)

These deadlines should be assessed immediately when misconduct is discovered.

When Does the Two-Year Period Begin?

The wording of Article 560 focuses on knowledge of the damage and the responsible person. (Protokol)

In practice, disputes can arise over when sufficient knowledge existed.

A foreign shareholder should therefore avoid assuming that the limitation period begins only when every accounting detail has been fully investigated.

Once suspicious conduct is discovered, limitation analysis should begin immediately.

What If the Mismanagement May Also Be Criminal?

Civil liability and criminal liability are separate questions.

Mismanagement itself is not automatically a criminal offence.

However, facts discovered during the investigation may potentially indicate independent criminal conduct, such as document forgery or fraudulent transactions.

Where the conduct constitutes a criminal offence and is subject to a longer criminal limitation period, Article 560 expressly recognizes the relevance of that longer period to the compensation claim. (TC Mevzuat)

Criminal proceedings should nevertheless be pursued only where the evidence supports an independently criminal allegation.

Can a Criminal Complaint Replace the Compensation Lawsuit?

No.

The two procedures have different objectives.

A criminal investigation focuses on whether an offence was committed and who is criminally responsible.

A director liability action focuses on compensation for legally recoverable damage.

Foreign shareholders seeking financial recovery should not assume that filing a criminal complaint automatically recovers company losses.

What If the Director Forged a Shareholder’s Signature?

This requires immediate evidence preservation.

Obtain the disputed resolution, authorization, contract or other document.

Determine where the original is located.

Preserve communications showing whether the foreign shareholder actually participated in the alleged decision.

Forensic document examination may become necessary.

The conduct may create corporate, civil and potentially criminal consequences.

What If the Director Claims the General Assembly Approved the Transaction?

Obtain the resolution.

Check when the meeting occurred, who attended, what information shareholders received and what exactly was approved.

An alleged general authorization should not automatically be assumed to cover every subsequent transaction.

The wording and circumstances of the approval matter.

What If the Director and Majority Shareholder Are the Same Person?

This is common in closely held companies.

Suppose the foreign investor owns 30%, while the local partner owns 70% and also controls the board.

The local partner may assume majority ownership prevents any meaningful challenge.

That is not necessarily correct.

Article 555 expressly permits each shareholder to seek compensation for company damage, although compensation in such a claim is payable to the company. (Son Karar)

This mechanism is especially important where corporate management refuses to sue itself.

Can a 10% Shareholder Sue?

Article 555 does not restrict the company-loss claim to majority shareholders.

It refers to each shareholder. (Son Karar)

Therefore, the central issues are not simply the claimant’s voting percentage but shareholder status, the alleged breach, damage and applicable procedural requirements.

What If the Company Is 50/50 Owned?

Director liability may form only part of a larger corporate deadlock.

Where one shareholder controls management and the relationship has collapsed, the dispute may involve information rights, challenges to resolutions, management authority, director liability, interim measures and ultimately shareholder exit or restructuring.

A compensation lawsuit alone may not restore a workable corporate relationship.

Can the Director Be Removed as Well as Sued?

Potentially, depending on company type, management structure and circumstances.

Removal and compensation serve different purposes.

Removal addresses future control.

Liability proceedings address losses already caused.

Where misconduct is continuing, both issues should be considered simultaneously rather than waiting for the compensation case to finish.

Can a Director Liability Case Recover Lost Profits?

Potentially, where the claimed loss can be established according to applicable damages principles.

Lost-profit claims require convincing evidence.

Suppose a director diverted an existing long-term customer to their own competing business.

Historical sales, contracts, margins, customer communications and the likelihood of continued business may help establish the financial consequences.

Speculative projections are much weaker.

Expert Evidence in Director Liability Cases

Complex claims often require expert examination.

Accounting experts may need to reconstruct transactions.

Valuation experts may assess assets sold below value.

Industry expertise may be relevant when determining whether pricing was commercially abnormal.

The legal claim should be designed so that expert analysis answers clearly defined factual questions.

Where Is a Director Liability Lawsuit Filed?

Article 561 regulates territorial jurisdiction for these liability actions and provides for proceedings in the court at the company’s registered headquarters. (MONA HUKUK)

The competent court and procedural requirements should be confirmed for the particular dispute before filing.

Foreign shareholders should therefore verify the company’s current registered office rather than relying on an old address contained in an investment agreement.

Does the Foreign Shareholder Need to Be in Turkey?

Not necessarily.

A foreign shareholder can generally pursue litigation through appropriately authorized legal counsel, subject to the requirements applicable to powers of attorney and the specific proceeding.

This can be particularly important where the investor resides abroad and the directors control all physical company records in Turkey.

What Documents Should Be Given to the Lawyer?

The most useful starting materials usually include the articles of association, shareholder agreement, current ownership information, relevant board and general assembly resolutions, financial statements, banking evidence, disputed contracts, invoices, correspondence with directors and a chronology of suspected misconduct.

Documents should be organized by transaction where possible.

A clear chronology can significantly improve the initial legal assessment.

Practical Example: Foreign Shareholder Discovers EUR 1 Million in Related-Party Payments

Assume a foreign shareholder owns 35% of a Turkish company.

The remaining shares are controlled by the director and related parties.

The foreign investor discovers that approximately EUR 1 million was paid over two years to another company owned by the director. Management describes the payments as consulting fees but refuses to provide detailed contracts or evidence of services.

The investor should first determine whether the company itself suffered the financial loss.

Relevant bank transactions, accounting records, invoices, corporate approvals and communications should be preserved and examined.

If the evidence supports a culpable breach of statutory or constitutional duties, Article 553 may provide the substantive basis for director liability. (Son Karar)

If the EUR 1 million represents company loss, Article 555 permits the company or each shareholder to seek compensation, but the shareholder bringing that claim requests payment to the company. (Son Karar)

If payments are continuing, the investor should separately consider whether emergency protective measures are needed.

The limitation period under Article 560 should also be analyzed immediately rather than waiting until the financial investigation is complete. (Protokol)

Step-by-Step Strategy for a Foreign Shareholder

A foreign shareholder considering proceedings against a director should first establish exactly what the director allegedly did and which duty was breached. The company’s articles, board structure, delegation arrangements and shareholder agreements should then be reviewed.

The shareholder should identify whether the loss belongs directly to the company or personally to the shareholder. This determines the structure of the compensation claim and, critically, who should receive any recovery.

Evidence should then be secured. Bank transactions, accounting records, contracts, invoices, corporate resolutions and communications should be preserved before the directors have an opportunity to alter the factual landscape.

If company information is being withheld, information and inspection remedies should be considered. Where evidence is at risk, evidence-preservation procedures may also be appropriate.

Any existing or proposed general assembly resolution releasing directors from liability should be reviewed urgently because Article 558 can materially affect litigation rights. (Protokol)

Finally, Article 560 limitation periods should be calculated at the outset. A foreign shareholder should not allow negotiations, accounting reviews or internal discussions to consume the available litigation period. (Protokol)

Frequently Asked Questions

Can a foreign shareholder sue a Turkish company director personally?

Potentially, yes. Article 553 provides for liability where directors culpably breach obligations arising from legislation or the articles and cause damage to the company, shareholders or creditors. (Son Karar)

Can a minority shareholder sue a director?

Yes, potentially. Article 555 provides that each shareholder may seek compensation for loss suffered by the company. (Son Karar)

Does compensation go directly to the shareholder?

Not where the shareholder is pursuing the company’s loss under Article 555. In that situation, the shareholder may request payment only to the company. Direct personal shareholder damage requires separate analysis. (Son Karar)

Is a director personally liable whenever the company loses money?

No. A commercial loss alone does not establish liability. The relevant duty, breach, fault, damage and causation must be examined.

Can several directors be sued?

Potentially. Where multiple persons are responsible for the same damage, Article 557 applies a differentiated liability framework based on matters including personal fault and circumstances. (rt-union.com)

What happens if the director delegated responsibility?

Lawful delegation can affect liability. Under Article 553, a delegating person is generally not liable for the delegate’s acts and decisions unless the required care was not exercised in selecting the person, subject to the statutory framework. (Son Karar)

How long do I have to sue?

Article 560 generally provides two years from learning of the damage and responsible person and, in any event, five years from the act causing the damage. A longer criminal limitation period may apply where the conduct constitutes a criminal offence subject to such a period. (Protokol)

What if shareholders previously released the director?

A release resolution can materially affect the company’s and shareholders’ litigation rights. Article 558 also establishes a six-month consequence for relevant claims of shareholders who did not approve the release. (Protokol)

Can I sue if the director transferred money to their own company?

Potentially, but the transaction must be investigated. The relationship between the companies, commercial purpose, contracts, invoices, authorization, pricing and resulting damage should be established.

Can I pursue the lawsuit while living abroad?

Potentially, yes. Foreign shareholders can generally use appropriately authorized legal representation in Turkey, subject to the procedural requirements applicable to the case.

Client-Focused Legal Support for Foreign Shareholders

Director mismanagement can rapidly reduce the value of a foreign investment, particularly where the same individuals control company management, financial information and shareholder voting.

The first objective should be to determine who suffered the loss, which director caused it, which duty was breached and what evidence proves the financial consequences.

Article 553 of the Turkish Commercial Code establishes the central liability framework for directors and managers who culpably breach statutory or constitutional duties. Article 555 is particularly important for minority investors because the company and each shareholder can seek compensation for company loss, although a shareholder pursuing that loss must request payment to the company. (Son Karar)

Foreign investors should also act quickly. Article 560 generally establishes a two-year period from knowledge of the damage and responsible person and an ultimate five-year period from the act, subject to the rule concerning conduct carrying a longer criminal limitation period. (Protokol)

Where suspected mismanagement is continuing, a compensation lawsuit may be only one part of the strategy. Shareholder information rights, evidence preservation, challenges to corporate resolutions, director removal, interim asset protection, liability proceedings and, where independently justified, criminal remedies may need to be coordinated.

Fırat Fesih Kaya Law Office assists foreign shareholders, investors and international businesses with director liability lawsuits, company mismanagement claims, minority shareholder protection, related-party transactions, misuse of corporate assets, director removal, corporate investigations, compensation claims and shareholder disputes in Turkey.

Phone: +90 312 434 22 22
Mobile: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yıldırım Tower, Balgat, Çankaya, Ankara, Turkey