Misled before buying shares in a Turkish company? Learn how foreign investors can pursue contract cancellation, compensation, warranty claims and fraud remedies for hidden debts, false financial statements and misrepresentation.

Buying shares in a Turkish company can expose a foreign investor to liabilities and risks that are not immediately visible from the share certificate or trade registry records. The investor may believe that they are acquiring a profitable company with valuable assets, reliable customers and limited debt, only to discover after closing that the financial picture presented before the acquisition was materially inaccurate.

The company may have undisclosed tax liabilities. Revenue figures may have been exaggerated. Important customers may already have terminated their contracts. Company assets may have been overvalued or may not belong to the company at all. Litigation may have been concealed. Related-party debts may have been omitted from the accounts.

In more serious cases, financial documents may have been deliberately manipulated to persuade the foreign investor to pay an inflated purchase price.

When this happens, the investor should not assume that the only option is to accept the loss.

Depending on the transaction structure and evidence, Turkish law may provide several possible remedies, including contractual warranty and indemnity claims, damages, cancellation or avoidance of the transaction, restitution, claims against responsible persons and, where intentional deception satisfies the relevant requirements, criminal proceedings.

The critical question is what the seller represented before the investment and whether those representations caused the foreign investor to enter into the transaction.

Misrepresentation Before a Share Acquisition

The distinction between ordinary investment risk and legally actionable misconduct is fundamental.

Suppose a foreign investor buys 40% of a Turkish company for EUR 3 million.

The company later loses an important customer and profits decline.

That does not mean the seller committed fraud.

Investment involves commercial risk.

Now consider a different scenario.

Before closing, the seller provides documents stating that the company has annual revenue of EUR 10 million, no material tax debt and long-term contracts with five major customers.

After closing, the investor discovers that revenue was actually EUR 5 million, a major tax assessment existed before the acquisition and three customer contracts had already been terminated.

That situation raises substantially different legal issues.

Fraud and Ordinary Incorrect Information Are Not the Same

Not every inaccurate statement constitutes fraud.

A representation may be incorrect because of negligence, poor accounting, misunderstanding or deliberate deception.

The legal remedy can depend on why the information was wrong, what the seller knew and how important the statement was to the investor’s decision.

Intentional deception can potentially support remedies relating to fraud.

An inaccurate contractual representation may also create warranty or damages claims even where proving criminal fraud is more difficult.

The investor should therefore avoid structuring the entire case around the word “fraud” before examining the contracts and evidence.

Turkish Code of Obligations and Intentional Deception

The Turkish Code of Obligations contains important rules concerning agreements entered into because of deception.

Article 36 provides, in substance, that a party induced to conclude a contract through another party’s deception is not bound by the agreement even where the mistake caused by the deception would not otherwise qualify as fundamental.

Where deception comes from a third party, additional knowledge requirements concerning the counterparty become relevant.

The official legislation database publishes the current text of Code of Obligations No. 6098. Turkish Code of Obligations – Official Legislation Database

This provision can become important where the investor alleges that the seller intentionally created a false picture of the company before the share acquisition.

The One-Year Period Can Be Critical

Timing is particularly important in deception cases.

Under Article 39 of the Turkish Code of Obligations, a party affected by mistake or deception generally must declare that it is not bound by the agreement, or reclaim what has been given, within one year from discovering the mistake or deception.

This should not be confused with the closing date.

If the foreign investor discovers the deception later, the date of discovery can become critical to the analysis.

Article 39 also preserves potential compensation rights arising from deception even where the contract is subsequently approved.

Because different contractual and damages claims can have different limitation rules, every possible claim should be assessed separately rather than assuming that one universal deadline governs the entire dispute.

What Types of Misrepresentation Commonly Occur?

Foreign investors should pay particular attention to misrepresentations concerning the company’s financial condition.

Typical disputes involve hidden debts, exaggerated turnover, fictitious receivables, undisclosed litigation, tax liabilities, social security liabilities, regulatory investigations, customer concentration, ownership of important assets and related-party transactions.

Intellectual property can also create major problems.

An investor may purchase a technology company believing that valuable software belongs to the company, only to discover that the intellectual property is personally owned by a founder.

The difference can dramatically affect company valuation.

False Financial Statements

Financial statements frequently become central evidence.

Suppose the seller provides financial statements showing substantial profits.

After closing, an independent review identifies fictitious sales, uncollectible receivables recorded at full value and liabilities that were excluded from the accounts.

The investor should preserve the exact financial statements received before closing.

Later financial statements should then be compared against them.

The question is not merely whether the company’s financial performance declined after the acquisition.

The question is whether the information describing the company at the time of the transaction was materially inaccurate.

Hidden Company Debt

Undisclosed debt is one of the most common acquisition disputes.

A foreign investor may discover previously undisclosed bank debt, supplier liabilities, shareholder loans, tax exposure or litigation.

The share purchase agreement should be examined carefully.

Did the seller warrant that no undisclosed liabilities existed?

Was a specific debt schedule attached?

Was the investor given access to financial records?

Was the debt disclosed in the data room?

Did the seller know about it?

The answers can determine whether a contractual claim exists.

Hidden Tax Liabilities

Tax liabilities can substantially reduce the value of an acquired company.

Suppose the seller states that all taxes have been properly declared and paid.

Six months after closing, the company receives a major tax assessment relating entirely to periods before the acquisition.

The share purchase agreement should be checked for tax warranties and tax indemnities.

A well-drafted acquisition agreement often allocates pre-closing tax risk specifically.

The investor should also determine whether the underlying issue was known or reasonably identifiable before closing.

Undisclosed Litigation

Pending lawsuits can materially affect company value.

Examples include major employee claims, customer disputes, intellectual-property litigation, administrative proceedings and commercial claims.

If the seller expressly represented that no material litigation existed while knowingly withholding a major pending case, contractual and potentially deception-based remedies may require examination.

Court and company records should be compared with the disclosure materials provided before closing.

Fake or Exaggerated Customer Contracts

Customer relationships can drive the entire valuation of a business.

A foreign investor may pay a premium because the company supposedly has multi-year contracts with major customers.

After closing, the investor may discover that those agreements had already expired, were terminable immediately or were never binding contracts at all.

Preserve every contract and sales presentation provided before closing.

The investor should also examine whether customer consent was required because of the change in company ownership.

Inflated Revenue

Revenue manipulation can dramatically distort valuation.

Suppose the acquisition price was based on a multiple of annual revenue.

The seller represents annual revenue as EUR 8 million.

After closing, the investor discovers that EUR 2 million consisted of transactions with related parties that were reversed shortly after year-end.

The accounting treatment, invoices, payment records and relationships between the companies should be investigated.

Financial expert analysis may become necessary.

Fictitious Receivables

A company’s balance sheet may show substantial receivables that appear to increase its value.

After acquisition, the investor discovers that many customers dispute the debts or that some supposed customers do not exist.

The investor should determine whether the receivables were genuine at closing and whether management already knew they were uncollectible.

Ageing reports, invoices, customer confirmations and post-closing collection history can provide important evidence.

Company Assets Do Not Belong to the Company

This can be particularly serious.

An investor may believe that the company owns a factory, machinery, vehicles, trademarks or software.

After closing, it becomes clear that these assets are owned by the seller personally or another related company.

The share purchase agreement and due-diligence materials should be compared against official ownership records.

If the assets were central to the valuation, the economic consequences can be substantial.

Related-Party Transactions Were Concealed

A seller may fail to disclose that the company depends heavily on businesses controlled by the seller or their family.

After closing, those arrangements disappear.

Alternatively, the company may have substantial liabilities toward related parties that were not adequately disclosed.

Related-party transactions should therefore be identified during both due diligence and post-closing investigations.

Seller Removes Assets Before Closing

Another serious situation arises when the company appears valuable during negotiations but assets are removed immediately before closing.

Cash may be distributed.

Equipment may be transferred.

Receivables may be assigned.

Intellectual property may be moved.

A valuable contract may be transferred to another company controlled by the seller.

The share purchase agreement should be examined for pre-closing conduct covenants and restrictions on extraordinary transactions.

Representations and Warranties

For many foreign investors, the strongest claim may arise directly from the share purchase agreement.

Representations and warranties commonly address corporate authority, ownership of shares, financial statements, taxes, employees, litigation, contracts, compliance, intellectual property, assets and undisclosed liabilities.

If a representation was false, the investor may have contractual remedies even where establishing intentional fraud would be more difficult.

This is why the acquisition agreement should be reviewed before deciding that the case is purely a criminal fraud matter.

Indemnification Clauses

An indemnity can provide a specific recovery mechanism.

For example, the seller may agree to indemnify the purchaser for tax liabilities relating to periods before closing.

If a pre-closing tax assessment later costs the company EUR 500,000, the investor may have a contractual indemnification route.

However, indemnity clauses frequently contain procedural requirements.

The purchaser may need to provide notice within a specified period.

Missing a contractual notice requirement can create avoidable disputes.

Liability Caps and Thresholds

Share purchase agreements frequently limit seller liability.

They may contain maximum liability caps, minimum claim thresholds, baskets, exclusions and time limits.

Fraud claims can sometimes interact differently with contractual limitations, depending on the agreement and applicable mandatory rules.

The investor should therefore review the entire limitation-of-liability structure rather than reading only the warranty that was breached.

Due Diligence Does Not Automatically Eliminate Seller Liability

A seller may argue:

“You conducted due diligence. You should have discovered the problem.”

That argument does not automatically defeat every claim.

The outcome depends on what information was available, what was disclosed, what contractual warranties were given and whether information was actively concealed.

A purchaser’s due diligence and a seller’s contractual representations can coexist.

The precise acquisition documentation matters.

Data Room Evidence

In modern acquisitions, the virtual data room can become some of the most important evidence in later litigation.

The investor should preserve, where lawfully available, a complete record of the materials made available before closing.

Document indexes, upload dates, Q&A responses and disclosure letters may help establish what the seller disclosed and what was withheld.

If litigation appears likely, data-room access should be preserved before the seller or platform administrator closes it.

Pre-Closing Emails and Messages

Do not focus only on the signed agreement.

Negotiation correspondence can reveal what the seller knew.

Suppose the seller writes:

“There are absolutely no tax investigations against the company.”

Internal documents later show that the seller had received a formal tax notice before sending that email.

That chronology may become highly significant.

Original electronic records should be preserved.

Can the Foreign Investor Cancel the Share Purchase?

Potentially, depending on the legal basis and circumstances.

Where the investor was induced to contract through qualifying deception, avoidance mechanisms under the Code of Obligations may become relevant.

Contractual termination or rescission rights may also exist under the acquisition agreement.

However, unwinding a completed share acquisition can be significantly more complicated than simply sending a termination email.

The investor may already have exercised voting rights, changed management, injected additional funds or integrated the company into a larger group.

The consequences of unwinding must therefore be analyzed carefully.

What Happens After Cancellation?

If a transaction is successfully unwound, restitution issues arise.

The purchaser may seek recovery of the purchase price while the shares may need to be returned.

But the position can become complicated if the company has changed substantially since closing.

Dividends, capital increases, management changes, additional investments and deterioration in company value can all affect the dispute.

The investor should therefore assess the practical consequences before selecting cancellation as the primary remedy.

Compensation Instead of Cancellation

Sometimes the investor wants to keep the company.

Suppose the acquired business remains strategically valuable, but hidden liabilities caused the investor to overpay by EUR 2 million.

The investor may prefer compensation rather than unwinding the entire acquisition.

The availability and calculation of damages depend on the contractual and statutory basis of the claim.

This makes valuation evidence particularly important.

How Is the Investor’s Loss Calculated?

There is no single formula for every case.

Possible approaches may involve the difference between the price paid and the actual value of the shares, costs arising from undisclosed liabilities, contractual indemnification amounts or other legally recoverable losses.

Suppose the investor paid EUR 10 million based on an EBITDA figure of EUR 2 million.

Later evidence shows that genuine EBITDA at closing was only EUR 1 million because financial statements were manipulated.

An expert may need to determine how that misstatement affected the purchase price.

Can the Seller Be Personally Liable?

Yes, potentially.

In many share acquisitions, the seller personally receives the purchase price.

If the seller made contractual warranties or engaged in actionable deception, claims may potentially be pursued directly against that seller.

This differs from cases where the loss was caused only by company management after closing.

The identity of the person who made each representation matters.

What If the Misrepresentation Came From the Company’s Director?

This can create a more complicated structure.

The investor should determine whether the director was acting for the seller, the target company or another person.

Potential contractual, corporate and tort-related claims should be distinguished.

If multiple people participated in preparing false information, responsibility should be analyzed individually.

Can the Investor Sue Accountants or Advisers?

Potentially, but professional liability requires its own legal basis.

An adviser is not automatically responsible simply because an acquisition later performs poorly.

The investor would need to examine the adviser’s contractual scope, professional duties, alleged error, causation and damage.

If an independent report contained material inaccuracies, the terms under which the report was prepared and who was entitled to rely on it become important.

Fraud Under Turkish Criminal Law

In serious cases, the conduct may potentially amount to criminal fraud.

The Turkish Penal Code regulates fraud where a person obtains an unlawful benefit through deceptive conduct causing loss to another.

Certain circumstances can result in aggravated forms of fraud.

The official legislation database provides the current Turkish Penal Code. Turkish Penal Code – Official Legislation Database

However, an unsuccessful investment or inaccurate warranty does not automatically constitute criminal fraud.

The evidence must support the elements of the criminal offense.

Criminal Complaint or Commercial Lawsuit?

Sometimes both may be relevant, but they serve different purposes.

A commercial lawsuit may seek cancellation, damages, indemnification or enforcement of contractual rights.

A criminal complaint concerns criminal responsibility.

The foreign investor should not assume that filing a criminal complaint automatically returns the purchase price.

Civil and commercial recovery mechanisms usually require their own analysis.

Evidence of Intentional Deception

The strongest fraud cases often involve evidence created before closing.

Examples include internal documents showing that the seller knew a representation was false, deliberately altered financial statements, concealed correspondence or instructed employees to withhold information.

Timing is crucial.

A statement that becomes inaccurate after closing does not necessarily prove that it was fraudulent when originally made.

The investor needs evidence of what the seller knew at the relevant time.

Can Assets Be Frozen?

Potentially, subject to the statutory requirements for the relevant interim measure.

If there is credible evidence that the seller is preparing to dispose of assets after receiving a substantial purchase price, urgent asset protection may need to be evaluated.

Possible strategies can involve provisional attachment or other interim judicial measures depending on the nature of the claim.

These remedies are not automatic.

The investor must establish the applicable legal requirements.

Why Asset Investigation Should Start Early

A successful EUR 5 million judgment has limited practical value if the defendant has already transferred all collectible assets.

Recovery planning should therefore begin at the start of the dispute.

The investor should identify the seller’s known assets and monitor legally available information concerning suspicious transfers.

Where transfers appear designed to prejudice creditors, separate enforcement remedies may potentially become relevant.

Arbitration Clauses in Share Purchase Agreements

Cross-border share acquisitions frequently include arbitration clauses.

Before filing a lawsuit in Turkey, the investor should review the dispute-resolution provisions carefully.

The agreement may provide for institutional arbitration or another agreed forum.

The governing law and dispute forum are separate issues.

A contract may be governed by Turkish law while disputes are resolved through arbitration.

Filing proceedings in the wrong forum can create significant delay.

Multiple Contracts May Have Different Dispute Clauses

A transaction may include a share purchase agreement, shareholder agreement, loan agreement, escrow agreement and guarantee.

Do not assume that all of them contain identical jurisdiction provisions.

One claim may belong before a Turkish commercial court while another contractual dispute may be subject to arbitration.

The entire transaction structure should be mapped before proceedings begin.

Foreign Investor Bought Shares Through a Holding Company

Cross-border acquisitions are frequently structured through special-purpose vehicles.

The legal claimant may therefore be the foreign holding company rather than the ultimate individual investor.

This distinction matters.

The party that signed the share purchase agreement and paid the purchase price should be identified before bringing a claim.

Corporate structure should not be ignored simply because the ultimate owner personally negotiated the deal.

What If the Seller Is Also the Continuing Business Partner?

This is particularly difficult.

The foreign investor may discover misrepresentation but still own the company together with the seller.

The dispute can then expand beyond the acquisition itself.

The seller may control management, refuse access to records, approve related-party transactions or attempt to dilute the investor.

The strategy may therefore require both acquisition-related claims and minority shareholder protection.

Post-Closing Misconduct Is a Separate Issue

Suppose the seller made false representations before closing and later, as controlling shareholder, also transfers company assets to another business.

These are separate legal events.

The pre-closing conduct may create misrepresentation, warranty or fraud claims.

The post-closing conduct may create shareholder, director-liability or corporate-governance claims.

Combining everything into one vague allegation of “fraud” can weaken the case.

Each event should be legally classified.

Practical Example: Foreign Investor Pays EUR 5 Million

Assume a foreign investor buys 60% of a Turkish company for EUR 5 million.

The purchase price is based on financial statements showing strong profitability and minimal debt.

Six months after closing, the investor discovers EUR 1.5 million of previously undisclosed liabilities.

Several major receivables appear fictitious.

A valuable trademark presented as a company asset is actually owned personally by the seller.

The investor also discovers emails indicating that management discussed these problems before the acquisition.

The investor should immediately review the share purchase agreement for warranties, indemnities, liability limitations, claim-notice procedures and dispute-resolution provisions.

At the same time, the one-year period associated with discovery of deception under Article 39 should be considered.

The investor must then decide whether the commercial objective is to keep the shares and claim compensation or seek to unwind the transaction.

If evidence indicates intentional deception, potential criminal remedies may also require evaluation.

Immediate Action Plan After Discovering Misrepresentation

First, preserve the entire pre-acquisition record.

Do not rely only on current company documents.

Secure the share purchase agreement, disclosure letter, data-room materials, due-diligence reports, financial statements, presentations and communications.

Second, identify every representation that appears false.

Third, determine when the investor first discovered each problem.

Fourth, calculate the financial impact.

Fifth, review contractual notice periods and statutory deadlines.

Finally, determine whether the seller is transferring assets and whether urgent protective measures are necessary.

Frequently Asked Questions

Can a foreign investor cancel a share purchase in Turkey because of fraud?

Potentially. Intentional deception can provide grounds for avoiding an agreement where the statutory requirements are satisfied. The transaction structure and consequences of unwinding must also be examined.

What is the deadline after discovering deception?

Article 39 of the Turkish Code of Obligations generally provides a one-year period from discovery of the deception or mistake for the relevant avoidance declaration.

Can I claim compensation instead of returning the shares?

Potentially. Contractual warranties, indemnities and damages rules may provide monetary remedies depending on the acquisition documents and circumstances.

What if the company had hidden debt?

Review the share purchase agreement, disclosure materials and financial statements. Undisclosed liabilities may support warranty, indemnity or other claims depending on the contract.

What if financial statements were deliberately falsified?

This can strengthen contractual and potentially fraud-related claims. Preserve the versions supplied before closing and evidence showing what the seller knew.

Does due diligence prevent me from suing the seller?

Not automatically. The scope of due diligence, information actually disclosed, contractual warranties and any deliberate concealment must all be considered.

Can I file a criminal complaint?

Potentially, where the evidence supports the elements of a criminal offense. An investment loss or contractual breach alone is not automatically fraud.

Can I freeze the seller’s assets?

Potentially, where the statutory requirements for provisional attachment or another interim measure are established.

What if the share purchase agreement contains arbitration?

The arbitration clause should be reviewed before commencing court proceedings. Contractual claims may need to be pursued in the agreed forum.

Can I recover the entire purchase price?

That depends on the remedy. Unwinding the transaction, contractual damages and indemnification can produce different recovery outcomes.

Client-Focused Legal Support for Foreign Investors Misled Before a Share Acquisition

When a foreign investor discovers that a Turkish company was materially different from what was represented before the acquisition, the case should begin with a comparison between what the investor was told before closing and what actually existed at closing.

The strongest evidence frequently comes from the share purchase agreement, representations and warranties, disclosure letter, financial statements, data room, due-diligence correspondence and internal documents showing what the seller knew.

Timing matters. Where intentional deception is relied upon, Article 39 of the Turkish Code of Obligations establishes an important one-year period linked to discovery. Contractual warranty and indemnity claims may have separate notice requirements and limitation periods.

The investor should also decide on the commercial objective early. Keeping the company and recovering the overpayment can require a very different strategy from cancelling the transaction and seeking restitution of the purchase price.

Where deliberate deception is supported by evidence, the legal strategy may involve contract avoidance, restitution, compensation, breach-of-warranty claims, indemnification, interim asset protection and potentially criminal proceedings. Where the seller remains a shareholder or director after closing, minority shareholder protection and management-liability remedies may also become necessary.

Fırat Fesih Kaya Law Office assists foreign investors and international companies with share purchase disputes, investment fraud allegations, hidden company liabilities, false financial statements, warranty and indemnity claims, contract cancellation, shareholder disputes, compensation claims 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