Seller breached a Share Purchase Agreement in Turkey? Learn how foreign buyers can claim compensation, terminate or avoid the SPA, recover the purchase price, enforce warranties and seek interim protection.

A Share Purchase Agreement is often the central document protecting a foreign investor acquiring a Turkish company. It determines what shares are being purchased, how much will be paid, what the seller promises about the target company, which liabilities remain with the seller and what happens if those promises prove false.

Problems frequently emerge after signing or closing.

The seller may refuse to transfer the shares, conceal liabilities, breach representations and warranties, violate non-compete obligations, remove assets before closing, fail to satisfy closing conditions or provide financial information that later proves inaccurate.

The foreign buyer may then ask:

Can I terminate the Share Purchase Agreement, recover the purchase price and claim compensation?

Potentially, yes. But there is no single remedy for every SPA breach. The buyer’s rights depend on the nature and seriousness of the breach, wording of the SPA, whether closing has occurred, contractual termination provisions, representations and warranties, indemnities, governing law and dispute-resolution clause.

This distinction is particularly important because terminating an SPA before closing can be very different from trying to unwind an acquisition after the shares and purchase price have already changed hands.

Turkey’s Ministry of Trade confirms in its current foreign-investment guidance that foreign investors may invest by acquiring shares in companies already established in Turkey. The formal mechanics of share transfers differ between joint-stock and limited liability companies. (https://ticaret.gov.tr)

What Constitutes a Breach of a Share Purchase Agreement?

An SPA breach occurs when a party fails to perform a contractual obligation imposed by the agreement.

Not every disagreement between buyer and seller constitutes a breach.

The SPA itself should therefore be the starting point.

Common disputes involve failure to transfer shares, non-payment of the purchase price, false warranties, undisclosed liabilities, breach of closing conditions, unauthorized pre-closing transactions, violation of confidentiality provisions, breach of non-compete obligations and failure to make agreed post-closing payments.

The buyer should identify the exact contractual clause allegedly breached before deciding what remedy to pursue.

Seller Refuses to Transfer the Shares

One of the clearest disputes occurs where the foreign buyer pays all or part of the purchase price but the seller refuses to complete the promised share transfer.

The legal strategy depends partly on the company type and transaction documents.

The Ministry of Trade’s current foreign-investment guide explains that share transfers in joint-stock and limited liability companies operate differently. For limited liability companies, the statutory process generally involves a written share-transfer agreement with the required authentication, general assembly approval unless otherwise provided, and registration and announcement procedures. (https://ticaret.gov.tr)

The buyer should determine whether it wants performance of the promised share transfer or recovery of the money already paid.

Those are different objectives and can require different remedies.

Buyer Paid but Received No Shares

Suppose a foreign investor signs an SPA to acquire 60% of a Turkish company for EUR 3 million.

The buyer pays EUR 1 million at signing.

The remaining EUR 2 million is payable at closing.

The seller then refuses to complete the transaction and begins negotiating with another purchaser.

The foreign investor should immediately examine the SPA’s conditions precedent, termination rights, specific-performance provisions, deposit arrangements, exclusivity obligations and remedies for seller default.

If the EUR 1 million was paid into escrow, the escrow provisions must also be reviewed.

The buyer should not assume that every advance payment is automatically refundable without first examining its contractual characterization.

Breach of Representations and Warranties

Warranty claims are among the most common post-acquisition disputes.

The seller may have represented that:

the financial statements were accurate,

there were no undisclosed liabilities,

taxes had been properly declared,

no material litigation existed,

the company owned its intellectual property,

material contracts remained valid,

all required licenses existed,

and the company complied with applicable law.

After closing, one or more representations may prove false.

The buyer may then possess a contractual compensation or indemnification claim depending on the SPA.

Hidden Debt After Closing

Suppose the seller warrants that the target has no material undisclosed financial liabilities.

Three months after acquisition, the foreign buyer discovers EUR 1.5 million of previously undisclosed debt.

The buyer should determine whether the debt existed before closing, whether it falls within the relevant warranty and whether it was disclosed elsewhere in the transaction documents.

The disclosure letter is particularly important.

A warranty should rarely be analyzed in isolation from the disclosures qualifying it.

Hidden Tax Liabilities

Tax disputes are another major source of SPA claims.

The seller may warrant that all taxes relating to periods before closing were properly declared and paid.

After the acquisition, the target receives a substantial assessment relating entirely to a pre-closing period.

The SPA should be reviewed for both general tax warranties and specific tax indemnities.

These provisions can operate differently.

A specific indemnity may provide a clearer contractual recovery mechanism than a general damages claim.

False Financial Statements

If the purchase price was based on inaccurate financial statements, the buyer may have several overlapping remedies.

There may be a breach of the financial statement warranties.

There may also be a contractual indemnity.

If the financial information was deliberately manipulated to induce the buyer to enter the transaction, intentional deception under the Turkish Code of Obligations may also require examination.

The distinction between contractual inaccuracy and intentional deception is crucial.

Breach of Pre-Closing Covenants

SPAs often regulate what the seller may do between signing and closing.

The seller may agree to operate the company only in the ordinary course of business.

Without the buyer’s consent, the seller may be prohibited from taking actions such as disposing of material assets, taking significant new debt, paying extraordinary dividends, terminating important employees, entering major contracts or transferring intellectual property.

These restrictions protect the buyer from receiving a fundamentally different company at closing.

Seller Removes Assets Before Closing

Suppose a foreign investor agrees to acquire a manufacturing company.

Before closing, the seller transfers valuable machinery to another company under the seller’s control.

The target company is therefore materially less valuable when closing approaches.

The buyer should investigate whether the transaction violates an ordinary-course covenant, specific asset restriction, warranty or closing condition.

Depending on the SPA, the buyer may potentially refuse to close, terminate the transaction, seek compensation or pursue another contractual remedy.

Material Adverse Change Clauses

Some SPAs contain a Material Adverse Change or Material Adverse Effect provision.

These clauses may permit the buyer to refuse closing when a sufficiently serious event affects the target before completion.

But MAC clauses should not be treated as general rights to walk away from an acquisition whenever business conditions deteriorate.

Their wording can be highly specific.

The definition may contain exceptions for general economic conditions, sector-wide changes, political developments, currency movements or other events.

The exact clause should be analyzed carefully.

Conditions Precedent Are Not Satisfied

Closing may depend on specified conditions.

Examples include regulatory approvals, third-party consents, corporate approvals, refinancing arrangements or completion of particular restructuring steps.

If a required condition is not satisfied, the SPA may provide that the buyer is not required to complete the acquisition.

However, responsibility for the failed condition matters.

A party that deliberately prevents satisfaction of a condition may face a different legal position from a party affected by circumstances outside its control.

Compensation for Breach of SPA

Compensation is often the primary remedy where the buyer wants to keep the acquired company.

Suppose the foreign investor paid EUR 10 million for a business.

After closing, the investor discovers that the seller breached several warranties, producing EUR 2 million of measurable financial loss.

The buyer may prefer to retain the shares and pursue the seller for the resulting loss.

The exact recoverable amount depends on the contractual provisions and applicable damages rules.

How Are SPA Damages Calculated?

There is no universal formula.

The calculation depends on the breached obligation and the economic consequences.

A buyer may claim losses associated with an undisclosed liability, warranty breach, overpayment, failure to deliver agreed assets or another contractual violation.

Causation remains important.

The buyer generally needs to connect the seller’s breach to the claimed financial loss rather than simply showing that the target company performed poorly after acquisition.

Purchase Price Overpayment

Overvaluation claims frequently arise from false financial information.

Suppose the purchase price was calculated using an EBITDA multiple.

The seller represented EBITDA as EUR 4 million.

After closing, forensic accounting shows normalized EBITDA at the relevant time was EUR 2.5 million.

If the inaccurate financial figure directly influenced the acquisition price, the buyer may argue that it substantially overpaid.

Financial expert evidence can become critical in quantifying the effect.

Contractual Indemnities

An indemnity can provide a more specific recovery route.

For example, the SPA might state that the seller will compensate the purchaser for any pre-closing tax liability arising after closing.

If the relevant liability occurs, the buyer can invoke the contractual indemnity mechanism.

The buyer should carefully follow any notice, documentation and defense-control procedures established by the SPA.

Liability Caps

Most sophisticated SPAs limit seller liability in some way.

The agreement may provide an overall liability cap.

For example, warranty claims may be limited to 20% of the purchase price.

Fundamental warranties may have a higher cap.

Fraud-related claims may be treated differently.

The exact limitation regime should therefore be mapped before calculating the realistic recovery amount.

De Minimis and Basket Clauses

An SPA may prevent the buyer from pursuing very small warranty claims individually.

A de minimis provision may exclude claims below a specified amount.

A basket may require aggregate qualifying claims to exceed a threshold before recovery becomes available.

Suppose individual breaches cause losses of EUR 20,000, EUR 40,000 and EUR 75,000.

Whether those amounts are recoverable may depend on the SPA’s threshold provisions.

Contractual Claim Deadlines

SPAs frequently establish their own claim-notification periods.

For example, ordinary warranties may survive for a limited period while tax warranties remain effective longer.

The buyer should not assume that general statutory limitation rules are the only deadlines that matter.

The SPA may require a compliant notice substantially earlier.

Missing a contractual notification deadline can create a major defense for the seller.

How Should a Warranty Claim Be Notified?

Follow the SPA exactly.

The agreement may require written notice to a specified address.

It may require the buyer to identify the relevant warranty, facts underlying the claim and estimated amount.

Some contracts contain highly detailed claim-notification provisions.

An informal message stating:

“There are problems with the company and we want compensation”

may not necessarily satisfy the contractual mechanism.

Can the Foreign Buyer Terminate the SPA?

Potentially.

But the answer depends on the transaction stage and legal basis.

Before closing, termination may be relatively straightforward where an express termination event has occurred.

After closing, the analysis can be considerably more complicated because the shares have already transferred and the transaction has been implemented.

The buyer should distinguish between termination of future contractual obligations and unwinding an already completed acquisition.

Termination Before Closing

An SPA may expressly permit termination where:

closing does not occur before a long-stop date,

conditions precedent fail,

a material warranty becomes false,

a material covenant is breached,

or another specified termination event occurs.

The buyer should examine whether a cure period applies before termination.

Notice requirements should also be followed strictly.

Long-Stop Date

Cross-border acquisitions often contain a long-stop date.

If closing has not occurred by that date, one or both parties may obtain a contractual termination right.

However, a party responsible for causing the delay may sometimes be restricted from relying on the long-stop provision.

The wording of the agreement is decisive.

Termination After Closing

This is much more difficult conceptually.

Once shares have transferred and the purchase price has been paid, the transaction has largely been performed.

A buyer seeking to reverse the acquisition must identify a legal basis capable of unwinding the transaction.

This may arise from contractual provisions, serious breach or grounds such as intentional deception, depending on the facts.

The practical consequences must also be considered.

Intentional Deception

The Turkish Code of Obligations provides an important separate remedy where a contract was entered into because of deception.

Under Article 36, a party induced to enter into an agreement through the counterparty’s deception may potentially avoid being bound by the contract under the statutory conditions.

This can be particularly important where the seller deliberately falsified financial statements, concealed major liabilities or fabricated material information to secure the acquisition.

The key issue is not merely that information was incorrect.

There must be a legally sufficient basis for the deception claim.

One-Year Period After Discovering Deception

Article 39 of the Turkish Code of Obligations creates an important deadline.

Where the statutory requirements apply, the affected party generally must exercise the relevant avoidance right within one year from discovering the deception or mistake.

Foreign investors should therefore record the discovery date immediately.

Do not assume that lengthy settlement negotiations automatically protect this period.

Other SPA claims can be governed by different contractual or statutory periods.

Returning the Shares and Recovering the Purchase Price

Where the legal objective is to unwind a completed acquisition, restitution becomes a central issue.

The buyer may seek return of the purchase price while ownership of the shares is restored to the seller.

But this can become complicated.

The company may have changed significantly since closing.

The buyer may have contributed additional capital, changed management, received dividends, sold assets or reorganized the business.

These consequences must be addressed in any attempt to reverse the transaction.

Buyer Wants to Keep the Company

In many cases, compensation is commercially preferable.

A foreign investor may discover a EUR 1 million warranty breach in a company that remains worth EUR 20 million.

Destroying the entire acquisition may make little economic sense.

The investor may instead enforce the warranty or indemnity and retain ownership.

Legal strategy should therefore begin with the investor’s commercial objective, not merely the most aggressive remedy available.

Specific Performance

Some SPA disputes concern obligations that the buyer wants performed rather than compensated.

For example, the seller may refuse to execute documents required to complete the transfer.

Depending on the nature of the obligation, contractual terms and applicable law, performance-based remedies may need to be considered.

Whether specific performance is available depends on the precise obligation and circumstances.

Escrow Protection

Escrow arrangements can dramatically improve the buyer’s position.

Suppose 20% of the purchase price remains in escrow for two years to secure warranty claims.

If a qualifying claim arises, the buyer may be able to prevent release of the relevant amount according to the escrow mechanism.

The SPA and escrow agreement should be read together.

Claim notice requirements may apply to both.

Holdback Arrangements

A holdback operates similarly from a risk-management perspective.

Part of the purchase price remains unpaid until specified conditions are satisfied or warranty periods expire.

If a serious breach arises, the buyer may have leverage that would not exist if the entire price had already been transferred.

However, the buyer should not simply retain money outside the contractual mechanism.

The right to withhold payment must be established.

Deferred Purchase Price

Many acquisitions include installments.

Suppose the foreign buyer has paid EUR 5 million but another EUR 2 million remains due.

The buyer then discovers a major warranty breach.

Whether the buyer can suspend the remaining payment depends on the SPA and applicable law.

Simply refusing to pay can expose the buyer to a counterclaim.

Set-off, suspension and contractual adjustment rights should be examined first.

Purchase Price Adjustment Disputes

SPAs often adjust the purchase price after closing based on cash, debt or working capital.

These mechanisms can generate separate disputes.

The seller may claim EUR 500,000 of additional consideration.

The buyer may calculate that EUR 300,000 should instead be refunded.

The SPA may provide an expert-determination mechanism specifically for accounting disputes.

Such a mechanism should not automatically be confused with the general arbitration or court clause.

Earn-Out Disputes

Part of the purchase price may depend on future financial performance.

Disputes can arise where the seller alleges that the buyer deliberately reduced profits to avoid paying the earn-out.

Conversely, the buyer may discover that the seller manipulated pre-closing figures used in the earn-out calculation.

The accounting rules and operational covenants governing the earn-out should be examined carefully.

Breach of Non-Compete Obligations

A seller may agree not to establish or support a competing business after closing.

Suppose the buyer acquires the company and its customer relationships.

Six months later, the seller establishes another business and begins contacting the same customers.

The buyer should review the non-compete clause’s scope, duration, territory and applicable validity requirements.

Potential remedies can include contractual claims and, depending on the circumstances, urgent judicial protection.

Breach of Non-Solicitation Obligations

The SPA may also prohibit the seller from soliciting customers or employees.

Evidence is important.

The buyer should preserve emails, customer communications, employee messages and other lawful evidence demonstrating the alleged solicitation.

Confidential Information Misused After Closing

A seller may retain confidential information about customers, pricing, technology or business strategy.

If that information is later used to compete with the acquired business, several contractual and potentially statutory remedies may require consideration.

Confidentiality obligations frequently survive closing and sometimes survive termination of the SPA itself.

Seller Breaches Transitional Support Obligations

Some acquisitions require the seller to remain involved temporarily.

The seller may agree to introduce customers, transfer operational knowledge, assist with licenses or provide management support.

If the seller immediately disappears after receiving the purchase price, the buyer should examine whether those post-closing obligations were contractually enforceable and whether the breach caused measurable loss.

Can the Seller’s Assets Be Frozen?

Potentially, depending on the nature of the claim and whether the statutory requirements for provisional attachment or another interim measure are satisfied.

This can become important where the seller has received a substantial purchase price and appears to be transferring assets after a dispute emerges.

The buyer should not wait until the end of a multi-year case before considering collectability.

Arbitration Versus Turkish Courts

The SPA’s dispute-resolution clause is critical.

International acquisitions frequently provide for arbitration.

The parties may select Turkish law while agreeing that disputes will be resolved through arbitration.

Alternatively, Turkish commercial courts may have jurisdiction.

The buyer should confirm the correct forum before commencing proceedings.

Foreign Governing Law

Not every acquisition of a Turkish company necessarily uses Turkish law for every contractual issue.

The parties may select another governing law for certain agreements, subject to mandatory rules and conflict-of-laws principles.

At the same time, the corporate mechanics of shares in a Turkish company can continue to raise mandatory Turkish-law issues.

Contract law and corporate law should therefore not be treated as identical.

SPA Claims and Shareholder Claims Can Coexist

After closing, the foreign buyer becomes a shareholder.

A later dispute may therefore involve two separate layers.

The seller may have breached the SPA before or during closing.

The seller, if remaining as a shareholder or director, may then commit additional corporate misconduct after closing.

For example, the seller may conceal liabilities before closing and later approve related-party transactions damaging the company.

The investor may therefore need both SPA remedies and shareholder remedies.

Practical Example: EUR 8 Million Acquisition

Assume a foreign investor acquires 70% of a Turkish company for EUR 8 million.

The SPA contains warranties concerning financial statements, taxes, material contracts and litigation.

After closing, the buyer discovers EUR 900,000 of undisclosed tax exposure, EUR 600,000 of fictitious receivables and a major customer dispute that existed before closing.

The buyer should first compare each problem with the relevant warranty and disclosure letter.

Next, the contractual claim-notification periods and liability caps should be calculated.

The investor should determine whether specific indemnities apply.

Financial experts may then calculate the resulting loss.

If evidence indicates that the seller deliberately concealed the problems to induce the acquisition, intentional-deception remedies may additionally require examination.

Finally, the investor must choose between two fundamentally different commercial objectives:

keep the shares and recover compensation, or attempt to unwind the transaction.

Immediate Action Plan After an SPA Breach

The foreign buyer should immediately preserve the signed SPA, disclosure letter, schedules, amendments, escrow agreement and closing documents. The complete data room and due-diligence record should also be secured.

Next, identify the exact contractual clause breached and establish when the breach occurred or was discovered.

Then calculate every applicable contractual notification deadline.

The financial effect of the breach should be quantified.

If intentional deception may be involved, the discovery date should be documented because statutory avoidance periods can become important.

Finally, assess the seller’s assets and whether interim protection is necessary.

Frequently Asked Questions

Can a foreign buyer sue for breach of a Share Purchase Agreement in Turkey?

Potentially, yes. The appropriate forum, governing law and remedy depend on the SPA and circumstances of the breach.

Can I terminate the SPA before closing?

Potentially. Many SPAs contain termination rights for failed conditions precedent, material breach, missed long-stop dates or other specified events.

Can I cancel the acquisition after closing?

Potentially, but unwinding a completed acquisition is substantially more complicated. A sufficient contractual or statutory legal basis must exist.

Can I claim compensation instead of terminating the SPA?

Potentially. This is frequently the preferred solution where the buyer wants to retain the acquired company.

What if the seller concealed company debt?

The SPA warranties, indemnities and disclosure letter should be reviewed. Undisclosed liabilities may support a contractual recovery claim.

What if the seller deliberately lied?

Intentional deception may create additional remedies under the Turkish Code of Obligations. The facts and applicable deadlines should be examined promptly.

Can I recover the entire purchase price?

Potentially in an appropriate unwinding or restitution scenario, but this is not automatic. Compensation while retaining the shares normally involves a different calculation.

Can I stop paying deferred purchase-price installments?

Not automatically. The SPA should be examined for set-off, suspension, indemnity and adjustment mechanisms before withholding payment.

Can I freeze the seller’s assets?

Potentially, where the statutory requirements for the relevant interim remedy are satisfied.

What if the SPA contains an arbitration clause?

The contractual dispute may need to be pursued through the agreed arbitration mechanism rather than ordinary court proceedings.

Client-Focused Legal Support for Foreign Buyers

A breach of a Share Purchase Agreement should be addressed by identifying the exact contractual obligation breached, the financial consequences and the remedy the buyer actually wants.

The distinction between pre-closing and post-closing disputes is especially important. Before closing, a material breach may potentially justify refusal to complete or contractual termination. After closing, the buyer may instead need to pursue warranty claims, indemnification, compensation or, in sufficiently serious circumstances, remedies aimed at unwinding the acquisition.

Foreign buyers should also distinguish between contractual and corporate issues. Turkey’s current foreign-investment guidance confirms that foreign investors may acquire shares in existing Turkish companies, while the legal mechanics of transferring shares differ according to the company type. (https://ticaret.gov.tr)

A comprehensive SPA dispute strategy may therefore involve breach-of-warranty claims, indemnification, compensation, purchase-price adjustment, termination, restitution, intentional-deception claims, escrow enforcement, interim asset protection and arbitration or commercial litigation.

Fırat Fesih Kaya Law Office assists foreign buyers and international investors with Share Purchase Agreement disputes, breach of warranty, hidden liabilities, acquisition termination, purchase-price recovery, indemnification, compensation claims, investment disputes and cross-border corporate litigation 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