Company Manager Creates False Debts Owed to Related Parties in Turkey: How Can Foreign Investors Challenge Them? 2026 Updated Guide

A Turkish company manager records fictitious debts owed to related parties. Learn how foreign shareholders can challenge fake liabilities, preserve company assets, inspect records and pursue civil, commercial and criminal remedies.

A serious shareholder dispute can arise when a company manager records false or inflated debts allegedly owed by the company to the manager, shareholders, relatives, affiliated companies or other related parties. These entries may be used to withdraw company funds, justify suspicious transfers, reduce distributable profits, manipulate the company’s financial position or create artificial creditor claims before a shareholder dispute or company sale. For a foreign investor in a Turkish company, the priority is to determine whether the alleged debt reflects a genuine commercial transaction and, if not, to preserve evidence and prevent company assets from being transferred before effective legal action can be taken.

What Is a False Related-Party Debt?

A related-party debt may appear in company accounts as a loan, shareholder financing, management expense, consultancy fee, supplier debt, advance, current-account balance or another liability.

The fact that a creditor is related to the manager does not itself make the debt unlawful. The central question is whether there is a real and legally supportable transaction underlying the accounting entry.

Warning Signs Foreign Investors Should Examine

Particular attention may be necessary where substantial liabilities suddenly appear shortly before a shareholder dispute, manager dismissal, dividend distribution, share transfer, audit or litigation.

Other warning signs include round-number debts, missing contracts, retrospective invoices, unexplained consultancy fees, repeated payments to relatives, liabilities owed to newly established affiliated companies and accounting entries unsupported by bank transactions.

Start With the General Ledger

The foreign shareholder should identify exactly when the alleged liability first appeared and how it developed.

Review the general ledger, subsidiary accounts, journal entries, opening and closing balances and any corrections made to earlier accounting periods.

Demand the Underlying Contract

A ledger entry does not by itself establish that a genuine debt exists.

Request the loan agreement, supply contract, consultancy agreement, invoice, delivery documentation, board or shareholder approvals and other documents allegedly supporting the liability.

Follow the Money

If the manager claims that a related party previously lent money to the company, determine whether that money actually entered the company’s bank account.

Bank statements can expose fictitious loan entries where accounting records show a large debt but no corresponding transfer can be identified.

Cash Transactions Require Particular Scrutiny

A manager may claim that financing was provided in cash. Such explanations should be examined carefully against cash ledgers, receipts, accounting entries, financial capacity of the alleged lender and subsequent use of the money.

The absence of a bank transfer does not automatically establish that the debt is fictitious, but it can make supporting evidence particularly important.

Examine the Alleged Creditor

Identify the creditor’s shareholders, managers, address and commercial activity.

A company controlled by the manager, their family or another shareholder may require closer examination where it suddenly becomes a major creditor.

Related-Party Transactions Are Not Automatically Invalid

Transactions between related companies can be legitimate. A parent company may finance a subsidiary, an affiliate may provide services or a shareholder may advance working capital.

The legal issue arises where the transaction is fictitious, unauthorized, commercially unjustifiable or used contrary to the interests of the company.

Check Whether Services Were Actually Performed

False consultancy and management-service debts are particularly difficult because the company may possess an invoice and contract even though no meaningful service was provided.

Request reports, correspondence, deliverables, employee records, meeting documentation and other evidence showing what the alleged service provider actually did.

An Invoice Alone May Not Resolve the Dispute

An invoice can be important commercial evidence, but the existence of an invoice should not end the investigation into whether the underlying transaction genuinely occurred.

Accounting, contractual and factual evidence should be assessed together.

Look for Retrospective Documents

Foreign investors should examine creation dates, signatures, corporate approvals and accounting chronology.

A contract apparently signed years earlier but first appearing immediately after a shareholder dispute deserves careful examination.

Electronic Evidence Can Be Critical

Emails, company messaging systems, accounting-system logs and document metadata may help establish when a transaction was actually created or approved.

Evidence should be preserved lawfully before access rights change.

Review Manager Authority

Determine whether the manager had authority to enter into the alleged transaction on behalf of the company.

The existence of signature authority does not necessarily resolve questions concerning conflict of interest, corporate approvals, fiduciary obligations or abuse of managerial powers.

Conflict of Interest Must Be Investigated

Where the manager causes the company to become indebted to a business they control, the transaction should be examined for conflicts between the manager’s personal interests and duties toward the company.

Corporate decision-making records may become central.

Review Board and Shareholder Resolutions

Determine whether the disputed transaction required or received corporate approval.

Minutes, resolutions, attendance records and signature records can reveal whether the transaction was genuinely discussed or retrospectively presented as authorized.

Check for Forged Signatures

If the investor disputes signatures appearing on contracts or resolutions, preserve the originals where possible.

Signature authenticity may become an evidentiary issue requiring expert examination.

Review Electronic Signature Records

Where documents were executed electronically, relevant authentication and transaction records should be preserved.

A document appearing in company files should not automatically be assumed to have been validly authorized.

Compare the Debt With Tax and Accounting Records

Determine how the alleged liability was treated in tax declarations, financial statements and earlier accounting periods.

A large debt that appears suddenly without a consistent accounting history may require explanation.

Audit Previous Financial Statements

The investigation should not be limited to the current balance sheet.

Compare previous years to determine whether the debt existed, increased gradually or appeared through a large year-end adjustment.

Look for Circular Transactions

A manager may create transactions among related companies that ultimately return money to the same economic group.

Map payments between the company, manager, shareholders, relatives and affiliated entities.

Follow Payments After the Debt Was Recorded

A fictitious accounting entry becomes especially urgent if company funds are then transferred to the alleged creditor.

Identify payment dates, amounts, bank accounts and payment descriptions.

Consider Immediate Asset Protection

If there is evidence that funds are being transferred rapidly, waiting for final litigation may allow assets to disappear.

Depending on the circumstances and legal requirements, provisional judicial measures may need to be evaluated.

Preliminary Injunctions May Become Important

A court may be asked for interim protection where the statutory conditions are satisfied and delay creates a risk that effective enforcement of rights will become significantly more difficult.

The requested measure should be proportionate to the specific risk.

Precautionary Attachment May Be Relevant

Where the dispute also involves a sufficiently established monetary claim and the applicable statutory requirements are satisfied, precautionary attachment may be considered.

Whether this remedy is available depends heavily on the nature and maturity of the claim.

Preserve Bank Evidence Immediately

Bank statements, payment orders and account transaction records can be among the strongest evidence in a related-party debt dispute.

Do not rely exclusively on accounting exports supplied by the disputed manager.

Consider an Independent Financial Examination

For complicated cases, an independent accountant or financial expert can reconstruct the company’s books and identify unsupported liabilities, unusual journal entries and related-party transfers.

A transaction timeline can substantially clarify the dispute.

Foreign Investors Should Secure Their Information Rights

Shareholders may have corporate-law mechanisms allowing access to company information and financial records depending on the company’s legal form and circumstances.

The precise rights of a shareholder in a joint-stock company and a limited-liability company should be evaluated separately.

What If the Manager Refuses to Provide Records?

Document every request and refusal.

Repeated refusal to provide legitimately requested corporate information may itself become relevant in subsequent corporate litigation.

Commercial Books Can Become Court Evidence

Where litigation begins, company books and accounting records can become central evidence.

Preservation of original records and accounting-system data should therefore be considered before documents can be altered or destroyed.

A Special Audit May Be Relevant

Depending on the company’s legal form and statutory requirements, corporate mechanisms relating to special examination or audit may provide an important method of investigating disputed transactions.

This can be particularly useful where minority investors cannot independently access the necessary records.

Manager Liability Can Arise

Where managers breach duties imposed by law or the company’s constitutional documents and cause loss, civil liability may potentially arise.

The claim should identify the specific breach, resulting loss and causal connection rather than relying solely on the existence of a shareholder conflict.

Company Loss and Shareholder Loss Should Be Distinguished

If false debts cause money to leave the company, the immediate economic loss may belong to the company.

The appropriate claimant and cause of action should therefore be identified carefully before litigation begins.

Can the False Debt Itself Be Challenged?

Potentially. The legal strategy may seek a determination that the alleged liability does not exist, challenge the underlying transaction or pursue recovery of payments already made, depending on the factual structure.

The correct claim depends on how the fictitious debt was created and used.

What If the Related Party Starts Enforcement Proceedings?

A particularly urgent scenario occurs where the alleged creditor uses the fictitious debt to initiate enforcement proceedings against the company.

The company must react within the applicable procedural periods and determine the appropriate objection or litigation strategy.

Collusive Enforcement Proceedings Require Immediate Attention

A manager and related creditor could potentially attempt to convert a questionable accounting entry into an enforcement claim.

Corporate control, representation and conflicts of interest should be addressed immediately if the company’s management refuses to defend the company properly.

Payments Already Made May Be Recoverable

If the company has already transferred funds on the basis of a transaction later established to lack a valid legal basis, recovery claims may potentially be considered against the recipient and other responsible persons.

Tracing the payment is therefore essential.

Criminal Liability May Also Need Examination

False documents, forged signatures, fraudulent transactions or intentional diversion of corporate assets can potentially raise criminal-law questions depending on the facts.

A commercial disagreement should not automatically be characterized as a crime, but genuine evidence of fraudulent conduct should not be ignored.

Do Not Use a Criminal Complaint Merely as Commercial Pressure

Criminal proceedings should be based on concrete facts capable of supporting an alleged offence.

Shareholder disagreements concerning valuation, accounting judgment or contract interpretation are not automatically criminal matters.

Evidence Preservation Comes Before Accusations

Before confronting the manager, preserve accounting exports, bank records, corporate resolutions, emails and other evidence lawfully available to the investor or company.

Premature confrontation may result in records becoming more difficult to obtain.

Review Whether Other Assets Are Being Transferred

False liabilities sometimes accompany other transactions such as below-market property sales, transfers to affiliates, excessive management payments or unexplained withdrawals.

The investigation should therefore consider the company’s wider asset movements.

Check Whether Dividends Were Artificially Reduced

Creating false expenses or liabilities may reduce apparent profits and affect distributions to shareholders.

Review whether the disputed transactions materially changed distributable profit or the company’s reported financial performance.

Company Valuation Can Also Be Manipulated

Artificial liabilities can reduce the apparent net value of a company immediately before a share sale, investor exit or valuation dispute.

Historical financial statements should therefore be normalized by identifying questionable related-party balances.

Foreign Investors Should Review Share Purchase Warranties

If the investor recently acquired the shares, the SPA may contain warranties concerning undisclosed liabilities, related-party transactions, financial statements and accuracy of company accounts.

A false pre-existing liability may therefore create claims against the seller in addition to claims concerning current management.

Indemnity Provisions Should Be Checked

Specific tax, accounting or undisclosed-liability indemnities can materially affect recovery.

Notice periods and contractual claim procedures should be protected.

Arbitration Clauses May Affect the Strategy

Shareholder agreements and SPAs involving foreign investors frequently contain arbitration provisions.

Determine whether the dispute belongs before Turkish courts, an arbitral tribunal or potentially different forums depending on the particular claims.

Removal of the Manager May Be Considered

Where the manager is actively causing damage, corporate mechanisms for dismissal, limitation of authority or replacement should be evaluated.

The procedure depends on the company’s legal form, articles and shareholder structure.

Bank Authority Should Be Reviewed

If the disputed manager retains sole access to company bank accounts, the practical risk may continue even after litigation begins.

Corporate authority and banking mandates should be reviewed through lawful company procedures.

Notify Banks Carefully Where Necessary

Where authorized corporate decisions change representation or signature authority, banks should receive the proper documentation promptly.

Informal accusations to banks without a valid corporate or judicial basis can create additional problems.

Prepare a Transaction Map

A useful litigation file should show:

the alleged creditor; relationship with the manager; date the liability appeared; underlying contract; invoices; alleged services or financing; corporate approvals; bank transfers; accounting entries; payments made; and ultimate recipient of company funds.

This can turn a confusing accounting dispute into a clear evidentiary narrative.

Immediate Legal Strategy for Foreign Investors

A foreign investor discovering suspicious related-party debts should immediately preserve corporate and banking evidence, obtain the detailed ledger, identify the alleged creditor, demand supporting contracts and invoices, trace the original financing or services, investigate related-party relationships, review corporate approvals, map subsequent payments, assess urgent asset-protection measures, consider independent financial examination and evaluate civil, commercial, enforcement and—where genuinely justified—criminal remedies.

Frequently Asked Questions

Can a company manager legally lend money to the company?

Potentially. The existence of a relationship does not automatically invalidate genuine financing. The transaction should nevertheless be supported by evidence and comply with applicable corporate-law requirements.

Is an accounting entry enough to prove that the company owes money?

Not necessarily. The underlying legal transaction and supporting evidence should be examined.

Can a foreign shareholder inspect the company’s accounting records?

Potential information and inspection rights depend on the company’s legal form, the shareholder’s position and the circumstances. The appropriate corporate procedure should be identified.

What if the manager refuses to disclose the contract?

The refusal should be documented and available corporate and judicial mechanisms for obtaining information should be evaluated.

Can suspicious payments be frozen?

Depending on the facts and statutory requirements, provisional judicial measures may potentially be sought. Urgency and supporting evidence are particularly important.

Can the manager be personally liable?

Potentially, where a breach of managerial duties causes legally recoverable loss and the required elements of liability are established.

Can money already transferred to a related company be recovered?

Potentially. The legal basis of the payment, recipient’s position and evidence concerning the underlying transaction must be examined.

Does creating a fictitious company debt constitute a crime?

It can potentially raise criminal issues where conduct involves elements such as fraudulent documentation, forgery or intentional unlawful diversion of assets. Not every disputed accounting entry constitutes a criminal offence.

What if the fake creditor starts enforcement proceedings?

The company should act immediately because enforcement procedures contain strict procedural periods. The alleged debt and the company’s representation arrangements should both be reviewed.

What is the most important evidence?

The strongest case usually comes from combining accounting records with bank transactions, corporate approvals and evidence concerning the alleged underlying transaction. If the books show a large related-party debt but there is no genuine loan, service, delivery or other legal basis supporting it, that discrepancy can become central to the investor’s challenge.

Client-Focused Legal Support for Foreign Investors in Turkish Company Disputes

Fırat Fesih Kaya Law Office assists foreign shareholders and investors facing suspicious related-party transactions, artificial company debts, unauthorized payments, asset transfers, manager misconduct and shareholder disputes in Turkey. Lawyer Fırat Fesih Kaya provides legal assistance in examining corporate and accounting records, tracing disputed transactions, challenging fictitious liabilities, seeking appropriate interim measures, pursuing manager-liability and recovery claims and coordinating commercial, enforcement and criminal-law strategies where the circumstances require them.

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