Can foreign shareholders sue a Turkish company director for misusing company assets? Learn about director liability, unauthorized payments, related-party transactions, company losses, evidence, compensation and emergency remedies in Turkey.

Yes. A foreign shareholder may potentially pursue legal remedies where a director or manager of a Turkish company misuses company assets, breaches management duties or causes financial loss.

However, one of the most important questions is:

Who legally suffered the loss — the company or the foreign shareholder personally?

If a director transfers TRY 10 million belonging to the company for an unauthorized personal purpose, the immediate financial loss will ordinarily be suffered by the company. The shareholder may also suffer economically because the value of their investment decreases, but this does not automatically convert the entire company loss into the shareholder’s personal claim.

Turkish company law therefore requires careful distinction between company damage, direct shareholder damage and the procedure through which compensation is sought.

Does Foreign Nationality Prevent a Shareholder From Bringing a Claim?

No. Foreign nationality does not, by itself, prevent a shareholder from relying on Turkish corporate-law remedies.

The analysis normally depends on:

• Company type;
• Shareholder status;
• Director’s duties;
• Conduct complained of;
• Damage;
• Causation;
• Available evidence;
• Who legally suffered the loss.

What Is the Main Legal Basis for Director Liability?

Article 553 of the Turkish Commercial Code establishes the core liability framework for founders, board members, managers and liquidators.

Where these persons breach obligations arising from legislation or the company’s constitutional documents, liability for resulting damage may arise under the statutory conditions.

This makes Article 553 particularly important in disputes involving allegations that directors have improperly used corporate property or funds.

What Can Constitute Misuse of Company Assets?

Potential examples include:

• Unauthorized bank transfers;
• Personal use of company money;
• Fictitious consultancy payments;
• Payments to related companies without commercial justification;
• Personal expenses charged to the company;
• Below-market sale of company assets;
• Unauthorized shareholder loans;
• Excessive or unauthorized remuneration;
• Diversion of customers;
• Transfer of corporate opportunities;
• Misuse of company vehicles or property;
• Unexplained cash withdrawals.

Not every questionable business decision automatically creates liability.

The transaction must be investigated in context.

Example: Director Transfers Company Money to Himself

Assume:

Company bank balance: TRY 25 million

Director transfers to personal account: TRY 4 million

Payment description: Loan repayment

The foreign shareholder should request evidence showing:

• Original loan;
• Date money was originally advanced;
• Loan agreement;
• Accounting treatment;
• Corporate authorization;
• Repayment terms.

If no underlying loan can be established, the payment may require further legal action.

What If the Director Transfers Money to Another Company They Own?

Related-party transactions deserve particular scrutiny.

Suppose the director owns another business and causes the jointly owned Turkish company to pay that business TRY 8 million for “management services.”

The investigation should determine:

1. Was there a contract?
2. Were services actually provided?
3. Was the price commercially reasonable?
4. Who approved the transaction?
5. Was the director’s interest disclosed?
6. Did the company receive genuine value?

A related-party transaction is not automatically unlawful.

The problem arises where corporate assets are transferred without legitimate commercial justification or contrary to the director’s duties.

What If Company Property Is Sold Below Market Value?

Consider:

Market value: TRY 30 million

Sale price: TRY 12 million

Buyer: Company controlled by director’s relative

The foreign shareholder should investigate:

• Valuation;
• Corporate approval;
• Relationship between parties;
• Payment of purchase price;
• Commercial rationale;
• Subsequent resale.

A substantial value difference combined with a related-party relationship can justify careful examination.

Can Personal Expenses Create Director Liability?

Potentially.

Examples might include company payment of:

• Personal holidays;
• Family expenses;
• Private property expenses;
• Personal credit cards;
• Private vehicles;
• Unrelated luxury purchases.

The first step is to determine whether the payment had a legitimate corporate purpose or was properly authorized remuneration or reimbursement.

What About Excessive Director Salaries?

A high salary is not automatically unlawful.

Review:

• Employment agreement;
• Management agreement;
• Corporate resolutions;
• Historical remuneration;
• Duties performed;
• Bonus arrangements;
• Applicable approval requirements.

The legal issue becomes stronger where remuneration is unauthorized or appears to be a mechanism for extracting corporate value contrary to applicable duties.

Company Loss and Shareholder Loss Are Different

This distinction is critical.

Suppose a director wrongfully causes the company to lose TRY 20 million.

A shareholder owning 40% may experience an economic reduction in investment value.

But it does not automatically follow that the shareholder can simply demand:

TRY 20 million × 40% = TRY 8 million personally.

The legal nature of the damage must first be determined.

Can a Shareholder Sue for Damage Suffered by the Company?

Turkish Commercial Code Article 555 is particularly important.

The statutory framework allows both the company and shareholders to seek compensation for damage suffered by the company, while a shareholder pursuing such damage requests that compensation be paid to the company.

This protects the corporate asset pool rather than converting company property directly into the individual shareholder’s property.

Example of Company Damage

Suppose a director improperly transfers TRY 15 million from the company.

The company loses TRY 15 million.

A foreign shareholder bringing an appropriate liability action concerning company damage would ordinarily seek restoration of the loss to the company, rather than payment of the entire amount into the shareholder’s personal account.

This distinction should be reflected correctly in the claim.

Can the Foreign Shareholder Claim Their Own Direct Loss?

Potentially, where the director’s conduct caused a legally recognized loss directly to the shareholder rather than merely reducing company assets.

Direct and indirect loss should therefore be separated carefully.

This distinction affects:

• Claimant;
• Defendant;
• Amount claimed;
• Recipient of compensation;
• Evidence required.

Can Minority Foreign Shareholders Bring Claims?

Potentially, yes.

Director liability is not reserved only for controlling shareholders.

A minority investor may have important remedies even where the Turkish partner controls:

• General assembly;
• Board;
• Banking;
• Accounting;
• Day-to-day management.

The precise procedural route depends on the claim.

What If the Majority Shareholder Is Also the Director?

This is common in closely held companies.

For example:

Foreign investor: 30%

Turkish shareholder/director: 70%

The director may control both voting and management.

That does not automatically eliminate director duties.

The foreign shareholder should investigate whether majority control is being used to transfer company value personally.

What If the Company Is Owned 50/50?

A 50/50 structure can create serious deadlock.

The Turkish director may refuse to:

• Provide records;
• Convene meetings;
• Approve litigation;
• Return money;
• Change banking authority.

The foreign investor may therefore need to consider remedies that do not depend solely on cooperation from the other shareholder.

What Evidence Is Needed?

A director-liability claim should be built transaction by transaction.

Important evidence may include:

• Bank statements;
• SWIFT records;
• Accounting records;
• General ledger;
• Contracts;
• Invoices;
• Board resolutions;
• General assembly resolutions;
• Emails;
• Corporate correspondence;
• Tax records;
• Related-party records;
• Asset valuations.

The objective is to demonstrate exactly what happened to company property.

Follow the Money

For each disputed transaction, establish:

Company account → payment → recipient → legal basis → corporate approval → accounting treatment → benefit received by company

This structure is often more effective than broad allegations that a director “stole company money.”

Can Board Members Obtain Company Information?

Board members have significant statutory information rights.

Article 392 of the Turkish Commercial Code provides that each board member may request information concerning company business and transactions, ask questions and examine corporate records.

Where a foreign shareholder has appointed a board representative, these rights can become important in investigating suspected asset misuse.

What If the Director Refuses to Provide Records?

Preserve evidence of every refusal.

Make specific written requests for:

• Bank statements;
• Contracts;
• Invoices;
• Related-party transactions;
• Shareholder accounts;
• Asset-sale records;
• Management remuneration.

A documented pattern of obstruction may become relevant to the broader dispute.

Can an Independent Financial Review Help?

Yes.

A forensic review may compare:

Bank transactions

with

Accounting records

with

Contracts and invoices

with

Actual commercial activity.

This can reveal transactions that ordinary annual financial statements may not make obvious.

Look for Related-Party Transactions

Create a list of payments involving:

• Director;
• Director’s family;
• Other shareholders;
• Companies owned by management;
• Employees connected to management;
• Foreign related entities.

For each transaction, identify its genuine economic purpose.

Look for Unexplained Cash Withdrawals

Cash transactions can be particularly difficult to trace.

Identify:

• Withdrawal date;
• Amount;
• Person making withdrawal;
• Accounting entry;
• Supporting receipts;
• Claimed business purpose.

Repeated unexplained withdrawals may require urgent action.

Look for Shareholder Current Accounts

Review whether the director or controlling shareholder owes money to the company.

Examine:

• Withdrawals;
• Loans;
• Advances;
• Repayments;
• Interest;
• Accounting entries.

These balances can reveal significant transfers of company value.

Can the Director Defend the Transaction as a Business Decision?

Potentially.

Not every unsuccessful transaction constitutes breach of duty.

Business inherently involves risk.

A director-liability claim should therefore distinguish between:

a genuine commercial decision that later produced a loss

and

misuse of corporate assets for unauthorized or personal purposes.

This distinction can be decisive.

What If Another Employee Made the Payment?

Actual responsibility should be investigated.

Article 553 also addresses circumstances involving delegation of duties and authority. The liability analysis therefore requires attention to who held the relevant function, who actually made the decision and whether duties were lawfully delegated.

Do not assume that every director is automatically liable for every employee transaction.

Can Several Directors Be Liable?

Potentially.

Where multiple directors participated in or approved the relevant conduct, each person’s role should be examined separately.

Create a responsibility matrix:

Person	Position	Authority	Conduct	Approval	Benefit
Director A	Chair	Banking	Ordered transfer	Yes	Possible
Director B	Board Member	Joint approval	Approved	Yes	None known
CFO	Employee	Payment preparation	Prepared	No final authority	None known

Liability should be individualized.

Can the Foreign Shareholder Seek Emergency Protection?

Potentially, particularly where there is evidence that further assets are about to disappear.

For example:

• Another major bank transfer is planned;
• Company property is being sold;
• Machinery is being transferred;
• Funds are moving to related entities;
• Company receivables are being redirected.

The relevant interim protective remedies depend on the underlying claim and statutory conditions.

Can a Precautionary Attachment Be Considered?

Potentially, where the statutory requirements are satisfied.

The purpose is to preserve the practical possibility of recovery before final judgment.

The applicant generally needs concrete evidence supporting both the claim and the need for provisional protection.

Can the Director’s Management Powers Be Restricted?

Potentially, depending on company type and circumstances.

If misuse of assets is continuing, simply filing a compensation claim may not be enough.

The investor may also need to examine:

• Removal from management;
• Restriction of representation authority;
• Removal of banking authority;
• Dual-signature requirements;
• Interim corporate protection.

Can a Director Be Removed?

Potentially.

The procedure differs between joint stock and limited liability companies.

Management removal should be considered separately from compensation.

Removing the director can stop future conduct.

It does not automatically recover money already lost.

Can the Company Recover Property Instead of Money?

Depending on what happened, recovery may involve more than a damages claim.

If identifiable company property has been improperly transferred, legal remedies concerning the specific asset or transaction may also need to be examined.

The correct remedy depends on:

• Asset type;
• Recipient;
• Contract;
• Registration;
• Good faith of third parties.

What If the Recipient Is the Director’s Relative?

Family relationship does not automatically prove wrongdoing.

But it can make the transaction’s commercial basis particularly important.

Ask:

• What was purchased?
• Why was that person selected?
• Was market pricing used?
• Was the relationship disclosed?
• Was approval obtained?

What If the Recipient Is an Innocent Third Party?

This can significantly affect recovery strategy.

A third party that legitimately supplied goods or services and received payment in good faith is in a different position from an entity created merely to receive diverted company money.

Do not treat every recipient as participating in the director’s alleged misconduct.

Can Criminal Proceedings Also Be Considered?

Potentially, where the evidence indicates conduct that may constitute a criminal offence.

However:

Director liability under company law and criminal liability are separate questions.

A breach of corporate duty does not automatically establish a crime.

The evidence should be analyzed before criminal allegations are made.

Do Not Use Criminal Complaints Merely as Shareholder Pressure

Foreign investors should avoid treating criminal proceedings as a negotiating tactic.

The stronger approach is to document:

• Transaction;
• Authority;
• Recipient;
• Missing commercial basis;
• Company loss;
• Director involvement.

If that evidence also supports a criminal-law issue, it can then be evaluated separately.

Can Misused Company Assets Affect Dividend Rights?

Yes.

Suppose the company should have earned TRY 40 million but TRY 15 million was improperly transferred as fictitious expenses.

The foreign shareholder may face:

1. Reduction of company assets;
2. Reduction of accounting profit;
3. Reduction of potential dividend distribution.

These consequences should be analyzed without double-counting the same damage.

Can Misuse Affect the Value of the Foreign Investor’s Shares?

Potentially.

Asset diversion can reduce:

• Net assets;
• Profitability;
• Cash;
• Company valuation;
• Sale price of shares.

This becomes particularly important where the parties are simultaneously negotiating a shareholder exit.

Do Not Sell Shares Before Investigating the Accounts

A director accused of asset misuse may offer to buy the foreign investor’s shares.

Before accepting, investigate:

• Cash;
• Debt;
• Related-party balances;
• Hidden assets;
• Tax exposure;
• Receivables;
• Disputed transactions.

Otherwise, the investor could sell based on financial statements already affected by the disputed conduct.

What If the Director Has Resigned?

Resignation does not necessarily eliminate potential liability for conduct occurring during the relevant management period.

Create a timeline showing:

Appointment date

Disputed transactions

Resignation/removal date

This helps connect particular acts to the relevant period of authority.

What If the Director Claims the General Assembly Approved Everything?

Obtain the actual resolutions.

Check:

• Meeting notice;
• Agenda;
• Attendance;
• Voting;
• Conflict-of-interest issues;
• Exact wording;
• Whether approval covered the specific transaction.

Do not rely on a general statement that “shareholders approved it.”

What If Corporate Records Were Falsified?

Preserve originals and available electronic copies.

Potentially relevant evidence may include:

• Earlier versions;
• Email attachments;
• Metadata;
• Bank records;
• Accountant copies;
• Trade registry records.

Do not alter documents while attempting to demonstrate that they were manipulated.

Can Foreign Shareholders Recover Legal Costs?

Allocation of litigation expenses depends on the proceedings and outcome.

Costs should be considered when selecting between:

• Compensation litigation;
• Corporate proceedings;
• Interim protection;
• Negotiated settlement.

Is There a Limitation Period?

Director-liability claims are subject to limitation rules.

The applicable period can depend on the legal basis, knowledge of the damage and responsible person, timing of the conduct and whether the conduct also constitutes an offence subject to a longer limitation period.

Foreign investors should therefore avoid delaying investigation after discovering suspicious transactions.

First 48-Hour Action Plan

A foreign shareholder who suspects misuse of company assets should:

1. Preserve bank records.
2. Secure accounting data.
3. Identify disputed transactions.
4. Identify recipients.
5. Map related parties.
6. Review management authority.
7. Obtain board and general assembly resolutions.
8. Preserve corporate emails.
9. Calculate preliminary company loss.
10. Determine whether further assets are at risk.
11. Consider emergency protective measures.
12. Determine whether the loss belongs directly to the company or shareholder.
13. Evaluate management removal.
14. Assess potential compensation claims.
15. Avoid unsupported criminal allegations.

Frequently Asked Questions

1. Can a foreign shareholder sue a Turkish company director?

Potentially, yes. Foreign nationality does not itself prevent the use of Turkish corporate-law liability mechanisms.

2. What law governs director liability?

Article 553 of the Turkish Commercial Code establishes a central liability framework for directors and managers who breach statutory or corporate obligations and cause damage.

3. Can a shareholder sue if the company itself lost the money?

Potentially. Turkish company law distinguishes damage suffered by the company from direct shareholder damage. Where compensation is sought for company damage through the shareholder mechanism, recovery is generally sought for the company.

4. Can the shareholder personally receive compensation for the company’s entire loss?

Not automatically. The distinction between company damage and direct shareholder damage must be respected.

5. What if the director transferred company money to a personal account?

The payment should be traced and its legal basis, authorization and accounting treatment investigated immediately.

6. Can related-party payments create liability?

Potentially, especially where they lack genuine commercial justification, proper authorization or corresponding value to the company.

7. Can the director also be removed from management?

Potentially. Removal and compensation are separate remedies and may sometimes be pursued as part of the same broader shareholder strategy.

8. Can company assets be protected while the case continues?

Potentially, where the statutory requirements for interim protection are satisfied.

9. Does every bad business decision make a director personally liable?

No. A genuine commercial decision that produces a loss should be distinguished from breach of duty or misuse of corporate property.

10. What should the foreign shareholder do first?

Preserve the financial evidence and build a transaction-by-transaction record showing what asset left the company, who authorized it, who received it, whether the company received value and what loss resulted.

Client-Focused Legal Support for Director Misconduct in Turkey

Suspected misuse of company assets should be treated as more than a personal disagreement between business partners.

The foreign shareholder should determine whether the disputed conduct caused damage directly to the company, directly to the shareholder, or both. That distinction can determine who may pursue the claim and where any compensation should ultimately be paid.

Article 553 of the Turkish Commercial Code establishes the statutory foundation for liability arising from breaches of corporate duties, while Turkish company law also provides mechanisms enabling shareholders to pursue compensation concerning damage caused to the company under the applicable conditions.

A strong case normally requires bank tracing, accounting analysis, corporate-authority review, identification of related parties, calculation of loss and preservation of evidence.

Where asset misuse is continuing, the strategy may also require urgent protective measures, restriction or removal of management authority and action to prevent further transfers.

Fırat Fesih Kaya Law Office assists foreign shareholders, international investors and foreign-owned companies with director liability, misuse of company assets, unauthorized transfers, related-party transactions, shareholder disputes and recovery of corporate losses in Turkey.

Lawyer Fırat Fesih Kaya provides legal assistance in investigating disputed corporate transactions, protecting company assets, pursuing management liability and coordinating corporate, compensation and appropriate protective proceedings.

Phone: +90 312 434 22 22
Mobile: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey

This article is intended for general information and does not constitute legal advice. Director liability and shareholder remedies depend on the company’s legal form, nature of the alleged misconduct, type of damage, corporate documents, available evidence and specific circumstances of the dispute.