Planning to acquire or invest in a Turkish company? Learn how foreign investors can detect hidden tax debts, bank loans, lawsuits, enforcement proceedings, employee claims, social security liabilities, guarantees and off-balance-sheet obligations before closing a deal.

Buying shares in an existing company in Turkey can provide a foreign investor with immediate access to customers, employees, contracts, licenses, assets and an established market presence. However, acquiring an existing business can also mean acquiring a company that already carries substantial liabilities. Some of those liabilities may be clearly visible in the financial statements. Others may be difficult to detect because they arise from pending litigation, tax audits, unpaid social security contributions, guarantees, employee claims, customs investigations, related-party transactions, unrecorded agreements or obligations that have not yet resulted in a formal payment demand. For this reason, legal and financial due diligence before investing in a Turkish company should focus not only on what the company owns but also on what it may owe.

A foreign investor should never assume that a clean-looking balance sheet proves that a company has no hidden liabilities. Corporate records, tax information, litigation files, bank documents, employment records and material contracts should be independently reviewed. Turkey’s MERSIS system electronically maintains company registration, amendment and deregistration records and integrates legal-entity information within a centralized system. (Dys Ticaret) However, corporate registry information alone cannot reveal every financial exposure. A proper acquisition investigation must go considerably further.

What Is a Hidden Company Debt?

A hidden company debt is not necessarily an intentionally concealed liability. The term can include any financial obligation that is not immediately apparent from the company’s headline financial statements or information initially provided to the investor.

For example, a company may have an ongoing lawsuit that could result in a substantial damages award. It may be undergoing a tax inspection concerning earlier accounting periods. Employees may have accrued overtime or severance claims. A bank guarantee issued for another group company may create contingent exposure. Customs authorities may later reassess historical import transactions.

The company may therefore appear financially healthy today while carrying significant future liabilities.

Why Hidden Debts Matter in a Share Acquisition

There is an important difference between purchasing assets and purchasing shares in an existing company.

When an investor acquires shares, the legal entity normally continues to exist with its historical rights and obligations. Changing the shareholders does not simply erase liabilities that already belong to the company.

This is why a company that appears inexpensive can become extremely expensive after closing.

Suppose a foreign investor purchases 100 percent of a Turkish company for EUR 3 million. Six months later, historical tax, employment and customs disputes produce another EUR 1 million of exposure.

The investor has effectively purchased both the business and its historical problems.

Start With Corporate Registry Due Diligence

The first investigation should establish exactly what company is being acquired.

Verify the company’s legal name, registration information, capital structure, shareholders, managers or directors, registered representation authority and historical corporate changes.

MERSIS is an important component of this process because it centralizes company and commercial-enterprise registration information and electronically maintains records relating to registration, amendments and deregistration. (Dys Ticaret)

Corporate records can reveal changes that deserve additional investigation.

Investigate Frequent Changes in Shareholders and Directors

Repeated changes in management or ownership are not automatically suspicious.

However, they can justify additional questions.

Why did previous shareholders leave?

Why were directors replaced?

Did those changes occur shortly before a major tax investigation, creditor dispute or deterioration in financial performance?

Corporate history should be compared against litigation and financial history.

Review the Articles of Association

The articles can reveal important governance and representation arrangements.

Foreign investors should determine who can bind the company, whether signatures must be joint or individual and whether unusual corporate arrangements exist.

Representation authority can become particularly important when investigating undisclosed contracts and guarantees.

Review the Company’s Financial Statements

Obtain several years of financial information rather than relying only on the latest balance sheet.

Compare revenue, liabilities, receivables, cash, inventory and related-party balances over time.

Sudden movements deserve explanation.

For example, a dramatic reduction in liabilities immediately before a sale may appear positive but should be verified against actual payment records.

Do Not Rely Only on Seller-Prepared Financial Statements

Financial statements are essential, but acquisition due diligence should test them against independent evidence.

Compare reported bank debt with bank confirmations.

Compare tax liabilities with tax documentation.

Compare employee liabilities with payroll records.

Compare litigation provisions with actual pending cases.

The purpose is to determine whether the financial statements reflect economic reality.

Check Tax Debts

Tax liabilities can materially change the value of an acquisition.

The investor should request current documentation concerning outstanding tax obligations and examine historical tax filings, assessments, payment arrangements and disputes.

Official administrative practice also recognizes formal documentation showing the absence of overdue tax debt; for example, Ministry of Trade licensing guidance expressly requires a tax-office “no debt” document for certain regulated activities. (Batman Ticaret Müdürlüğü)

A current no-debt document can be useful, but it should not be treated as a complete substitute for historical tax due diligence.

A Company Can Have Future Tax Exposure Without a Current Tax Debt

This is critical.

A company may have no currently payable tax debt and still face substantial historical exposure.

For example, an audit may later challenge earlier deductions, invoices or transfer-pricing practices.

The investor should therefore ask:

Has the company undergone a tax inspection?

Is an inspection currently pending?

Have authorities requested documents?

Are disputed assessments being litigated?

Are there transactions that could produce future assessments?

Review Historical Tax Audits

Obtain audit reports, notices, assessments and correspondence with tax authorities.

If the company operates in a tax-sensitive industry or has unusual transaction patterns, the review should go deeper.

Particular attention may be appropriate for related-party transactions, unusually large expenses, questionable invoices and aggressive tax positions.

Fake Invoice Exposure

Historical fake-invoice allegations can become particularly serious.

A company may have used invoices years before the foreign investor acquired its shares, yet the resulting investigation may continue after the acquisition.

The investor should therefore review high-risk suppliers and determine whether significant purchases correspond with genuine goods or services.

Check Social Security Liabilities

Employee-related public liabilities should be independently investigated.

Review social security filings and payment records, together with payroll information.

Current compliance should be distinguished from potential historical exposure.

Turkey’s Social Security Institution continues to administer employer declarations and premium-payment obligations; its 2026 notices confirm the ongoing reporting and payment framework for employers. (Çorum SGK)

Review Employee Claims

Employment liabilities can exist even when no lawsuit has yet been filed.

Employees may potentially assert claims concerning severance, notice compensation, overtime, annual leave, workplace accidents or other employment rights.

Therefore, simply searching for existing lawsuits is insufficient.

Review employment contracts, payroll records, termination history and workforce practices.

Examine Long-Term Employees

Long-service employees can create substantial accrued obligations.

Foreign investors should determine how many employees have significant service periods and assess potential termination-related exposure.

This becomes especially important where the investor plans post-acquisition restructuring.

Workplace Accident Exposure

Ask whether serious workplace accidents have occurred.

A pending investigation or unresolved accident can potentially create significant financial consequences.

Review occupational safety documentation, insurance coverage and existing proceedings.

Search for Litigation

Pending lawsuits can represent major hidden liabilities.

The company should provide a complete litigation schedule identifying the court, parties, claim amount, procedural status and potential financial exposure.

This information should then be verified where legally possible rather than accepted without review.

Check UYAP Records

Turkey’s judicial information infrastructure is particularly relevant.

The Ministry of Justice’s UYAP Institution Portal enables private companies and public institutions to monitor cases in which they are parties before judicial and administrative courts and enforcement offices throughout Turkey. (UYAP)

For due diligence, access and verification should be structured through the target company and appropriate authorization.

Check Enforcement Proceedings

A company may be subject to enforcement proceedings even where management does not emphasize them during negotiations.

Enforcement files can indicate unpaid suppliers, bank debts, lease obligations, judgments or other creditor claims.

UYAP’s corporate portal specifically includes company file inquiries and access relating to enforcement, civil and administrative proceedings. (Vatandaş UYAP)

Every material enforcement file should be analyzed individually.

Do Not Look Only at Claim Amounts

A EUR 500,000 lawsuit does not necessarily create EUR 500,000 of actual exposure.

Conversely, a smaller-looking case can create broader consequences.

Legal due diligence should assess the probability, procedural status and potential secondary consequences of each material dispute.

Search for Administrative Proceedings

Companies operating in regulated industries may face administrative penalties and license-related risks.

These can involve competition, energy, environmental, municipal, customs or sector-specific authorities.

Identify every regulator relevant to the target company’s business.

Then investigate inspections, notices, sanctions and pending applications.

Check Customs Liabilities

This is particularly important for importers and exporters.

Historical customs transactions can create future liabilities after a transaction has already been completed.

In July 2026, the Ministry of Trade reported that its post-clearance and secondary-control activities resulted in substantial additional assessments and penalties concerning historical customs and foreign-trade transactions. (Ticaret Bakanlığı)

For companies heavily involved in international trade, customs due diligence should therefore be treated as a separate workstream.

Review Customs Audits

Investigate customs classification, customs value, origin documentation, exemptions and preferential tariff treatment.

Ask whether the company has received inspection reports or requests for documentation.

An apparently clean customs payment history does not necessarily eliminate future reassessment risk.

Review Bank Loans

Obtain a complete schedule of bank borrowing.

Do not rely only on amounts shown in management presentations.

Review loan agreements, repayment schedules, interest obligations, security packages and default provisions.

Confirm whether acquisition itself could trigger a contractual consequence.

Investigate Undisclosed Guarantees

Guarantees can create significant off-balance-sheet exposure.

A company may have guaranteed obligations of a shareholder, subsidiary, affiliate or another group company.

The company might currently owe nothing under the guarantee but become liable if the primary debtor defaults.

Every guarantee should therefore be identified.

Check Corporate Guarantees for Shareholders

This deserves particular attention in family-owned or closely held companies.

Before selling the company, an existing shareholder may have used the business to support personal or group borrowing.

The investor should determine whether the target company has guaranteed loans that do not directly benefit its own operations.

Check Mortgages and Pledges

Corporate assets may secure third-party obligations.

Review security interests affecting real estate, vehicles, machinery, shares, receivables and other important assets.

A company may legally own valuable property while that property is heavily encumbered.

Review Letters of Guarantee

Companies frequently issue or procure guarantees relating to commercial contracts, tenders, leases and other obligations.

Prepare a complete schedule showing beneficiary, amount, expiry date and underlying obligation.

Open-ended or long-term guarantees deserve special attention.

Check Leasing and Factoring Arrangements

Debt may not always appear as a conventional bank loan.

Review financial leasing, factoring and other financing arrangements.

Determine whether receivables have been assigned or pledged.

The company’s reported receivables may not necessarily remain freely available.

Examine Supplier Debts

Accounts payable should be tested against supplier information.

Large overdue balances can indicate liquidity problems.

Request an ageing schedule showing how long each major supplier debt has remained unpaid.

Repeated late payments can reveal financial stress that headline financial statements obscure.

Search for Unrecorded Supplier Claims

Management may dispute certain invoices and therefore not treat them as ordinary payable amounts.

Those disputed claims should still be disclosed during due diligence.

Review correspondence with major suppliers concerning unpaid invoices and contractual disputes.

Customer Advance Payments

Customer advances can also represent liabilities.

A company may hold substantial money for goods or services it has not yet delivered.

Cash in the bank can therefore create a misleading impression of financial strength if corresponding contractual obligations are ignored.

Review Refund Obligations

Businesses in certain sectors may face significant customer refund exposure.

Investigate cancelled orders, warranty claims, consumer complaints and contractual repayment obligations.

Review Major Commercial Contracts

A company can have substantial future payment obligations hidden within otherwise ordinary contracts.

Review long-term supply agreements, distribution agreements, agency contracts, leases, licensing arrangements, construction contracts and service agreements.

Pay particular attention to termination payments and minimum purchase commitments.

Change-of-Control Clauses

An acquisition itself can trigger liabilities.

A material contract may permit termination or require consent when control of the company changes.

A foreign investor could therefore purchase a company only to discover that a major customer or supplier can terminate immediately afterward.

All material contracts should be reviewed for change-of-control provisions.

Penalty Clauses

Contractual penalties can create substantial contingent exposure.

Identify agreements containing significant penalty provisions and determine whether any triggering breach has already occurred.

Management may not have recorded a liability if the counterparty has not yet formally demanded payment.

Foreign Currency Obligations

Foreign currency debt can create additional financial risk.

Identify the currency of every material liability.

A company earning primarily in one currency but carrying substantial debt in another may face significant exchange-rate exposure.

Related-Party Debts

Transactions involving shareholders, directors and affiliated companies require enhanced scrutiny.

Determine whether the company owes money to related parties and whether related parties owe money to the company.

Then verify whether those balances represent genuine transactions.

Shareholder Loans

A shareholder loan can materially affect acquisition economics.

The seller may expect the buyer to acquire shares and separately repay shareholder financing.

The share purchase agreement should make clear how shareholder loans will be treated at closing.

Hidden Director Accounts

Accounting balances involving directors and shareholders should be reviewed.

Repeated withdrawals may be classified in ways that make the company’s true financial position difficult to understand.

A forensic accounting review can be appropriate where significant unexplained balances exist.

Review Tax and Social Security Payment Plans

A company may have restructured public debts.

Current monthly payments may appear manageable while the total outstanding obligation remains substantial.

Obtain the complete restructuring documentation and outstanding balance.

Check Real Estate Liabilities

If the company owns real estate, verify title and encumbrances.

Do not simply accept a list supplied by management.

Mortgages, restrictions and disputes affecting important property can materially reduce company value.

Review Lease Obligations

Long-term leases can create substantial future liabilities.

Determine rental obligations, escalation provisions, deposits, termination rights and penalties.

An unfavorable lease can effectively operate as significant debt.

Environmental Liabilities

Industrial acquisitions require environmental due diligence.

Contamination, waste-management problems or permit violations can create substantial remediation and administrative exposure.

Historical conduct matters because environmental problems may remain after ownership changes.

Regulatory Licenses

Determine which licenses and permits are essential to the business.

Then verify whether they remain valid and whether any investigations threaten them.

A business whose economic value depends on a license can lose substantial value even without conventional financial debt.

Competition Law Exposure

Review significant distribution arrangements, pricing practices and competitor relationships where relevant.

Pending competition investigations or historical practices can create substantial future liabilities.

Intellectual Property Disputes

Trademark, patent, software and licensing disputes can also create hidden obligations.

Verify ownership of key intellectual property and review infringement claims.

A technology company’s most valuable asset may become worthless if ownership is disputed.

Data Protection Exposure

Companies processing substantial personal information may face compliance risks.

Review significant data breaches, complaints and regulatory investigations.

Past non-compliance may create future financial consequences.

Check Insurance Coverage

Insurance does not eliminate liability, but it can materially affect the investor’s net exposure.

Review policies covering property, liability, directors, professional risks, cyber incidents and other relevant areas.

Determine whether historical claims have been notified properly.

Insurance Coverage Gaps

A company may tell the investor that a major dispute is “insured.”

Do not stop there.

Check policy limits, exclusions, deductibles and whether the insurer has accepted coverage.

Potential liability of EUR 5 million backed by only EUR 500,000 of insurance remains a substantial acquisition risk.

Review Pending Tax, Customs and Regulatory Audits

This deserves a separate disclosure schedule.

Ask the seller to identify every ongoing inspection and every written request received from a public authority.

An audit that has not yet produced an assessment can still represent a material contingent liability.

Ask for Management Representations

Management should provide written responses concerning liabilities that may not appear in conventional records.

Ask specifically about threatened litigation, tax investigations, guarantees, employee disputes, regulatory inspections and undisclosed agreements.

Vague questions produce vague answers.

Interview the Finance Team

Documents are essential, but interviews can reveal inconsistencies.

Ask the finance director, accountant and relevant management personnel independently about major liabilities and disputes.

Different answers to the same question may reveal areas requiring deeper investigation.

Speak With the Company’s External Accountant

Where properly authorized, the company’s accounting professionals can provide valuable context concerning historical issues, disputed entries and public liabilities.

However, legal due diligence should not be delegated entirely to accounting professionals.

Financial and legal risks overlap but are not identical.

Review Auditor Reports

Where the company has undergone independent audit, obtain the reports and management letters.

Qualifications, emphasis-of-matter paragraphs and repeated control weaknesses deserve particular attention.

The Ministry of Trade itself requires financial statements or professional accounting/audit reports in certain regulated licensing contexts, illustrating the importance of verified financial information in assessing corporate standing. (Ticaret Bakanlığı)

Build a Debt Matrix

Every material potential liability should be placed into one central due-diligence matrix.

A useful structure is:

Liability → Amount → Creditor → Due Date → Security → Disputed? → Litigation? → Probability → Maximum Exposure → Seller Disclosure → Proposed Protection.

This prevents important risks from disappearing inside hundreds of pages of documents.

Separate Known Debt From Contingent Debt

Known debt is only part of the picture.

The investor should classify liabilities as:

Confirmed liabilities: amounts clearly owed.

Disputed liabilities: amounts demanded but challenged.

Contingent liabilities: obligations dependent on future events.

Potential historical liabilities: risks identified through tax, employment, customs or regulatory review but not yet formally assessed.

This provides a much more realistic picture of the acquisition.

Look for Debt Outside the Balance Sheet

This is one of the most important acquisition principles.

Search beyond conventional accounting debt for guarantees, litigation, employee claims, regulatory investigations, contractual penalties, tax audits and environmental obligations.

The largest post-acquisition surprise may never have appeared as a normal payable item.

Red Flags in the Data Room

Foreign investors should investigate situations where important documents are missing, repeatedly delayed or provided only shortly before signing.

Other warning signs include inconsistent financial statements, unexplained related-party transactions, unusual cash withdrawals, missing bank statements and substantial payments described vaguely as consulting or management expenses.

One red flag does not prove wrongdoing.

Several connected red flags can justify deeper forensic review.

Beware of “No Debt” Statements From the Seller

A seller saying “the company has no debt” has limited evidentiary value.

The statement should be converted into contractual representations and warranties.

More importantly, the investor should independently test the statement before relying on it.

Share Purchase Agreement Protection

Due diligence cannot eliminate every risk.

The share purchase agreement should therefore allocate residual risks between buyer and seller.

Representations and warranties may address tax compliance, litigation, employee liabilities, indebtedness, guarantees, regulatory matters and accuracy of financial information.

Tax Indemnities

Historical tax exposure may justify a specific indemnity.

Rather than relying solely on a general warranty, the agreement can allocate responsibility for identified historical tax periods or known investigations.

The drafting should reflect the actual due-diligence findings.

Specific Indemnities for Known Risks

Suppose due diligence identifies a pending lawsuit with potential exposure of EUR 800,000.

The investor may decide to proceed with the acquisition while requiring a specific contractual indemnity covering that dispute.

Known risks should not simply disappear into general contractual language.

Escrow and Holdback Structures

Where substantial uncertainty exists, part of the purchase price can potentially be retained or placed into an agreed security structure.

This can provide practical protection where future liabilities are expected to crystallize after closing.

The appropriate mechanism depends on the transaction.

Purchase Price Adjustment

Debt findings can directly affect valuation.

A company valued at EUR 10 million with EUR 3 million of previously undisclosed net debt should not necessarily be purchased at the same equity price.

Financial due diligence and legal due diligence therefore directly affect transaction economics.

Conditions Precedent

Some problems should be resolved before closing rather than compensated afterward.

For example, the investor may require repayment of a related-party loan, release of a guarantee or settlement of a material dispute before completing the acquisition.

When Should an Investor Walk Away?

Not every risk can be solved through warranties.

An investor should reconsider the transaction where management refuses to disclose basic financial information, significant liabilities cannot be quantified, corporate records appear manipulated or the seller refuses reasonable contractual protection for identified risks.

Sometimes the most valuable outcome of due diligence is deciding not to invest.

What Should Foreign Investors Review Before Signing?

At minimum, the investor should understand the company’s corporate structure, financial debt, tax position, social security position, litigation, enforcement proceedings, employment exposure, major contracts, guarantees, security interests, related-party transactions, customs risks, regulatory matters, real estate, intellectual property and insurance.

Sector-specific risks should then be added.

Why 2026 Due Diligence Needs to Be More Detailed

Enforcement risk should not be assessed solely by looking at today’s payable debts. Authorities can examine historical transactions and later create substantial liabilities.

This is particularly visible in customs enforcement. In July 2026, the Ministry of Trade announced that post-clearance and secondary-control reviews covering historical customs and foreign-trade activity had generated billions in additional assessments and penalties over recent years. (Ticaret Bakanlığı)

The lesson extends beyond customs: historical transactions can become tomorrow’s debt.

Frequently Asked Questions

1. How can a foreign investor check whether a Turkish company has hidden debts?

Conduct coordinated legal, financial and tax due diligence covering corporate records, bank borrowing, tax and social security obligations, litigation, enforcement files, employment liabilities, guarantees, major contracts and regulatory risks.

2. Is checking the balance sheet enough?

No. Many significant liabilities are contingent, disputed or not yet formally assessed and may therefore not appear as ordinary balance-sheet debt.

3. Can litigation files be checked?

Yes, subject to appropriate authorization and access. UYAP Institution Portal enables companies to monitor judicial, administrative and enforcement files in which they are parties. (UYAP)

4. Should tax debts be checked before buying shares?

Yes. Current tax obligations should be verified, but historical tax practices and ongoing audits should also be reviewed because future assessments may arise from earlier periods.

5. Should social security liabilities be investigated?

Yes. Social security contributions and employer reporting should form part of employment and public-debt due diligence.

6. Can a company have hidden guarantees?

Yes. Corporate guarantees supporting shareholders, affiliates or other companies can create significant contingent liabilities even when no payment is currently due.

7. Can historical customs transactions create debt after the acquisition?

Potentially. Historical declarations can be reviewed through post-clearance and other control mechanisms, making customs due diligence particularly important for importers and exporters. (Ticaret Bakanlığı)

8. What happens if hidden debt is discovered before closing?

The investor may renegotiate the purchase price, require repayment before closing, request specific indemnities, use an escrow or holdback mechanism, restructure the transaction or decide not to proceed.

9. Can the seller be made responsible for undisclosed debts?

The share purchase agreement can allocate historical risks through appropriately drafted representations, warranties and indemnities. The effectiveness of those protections depends on the contractual terms and circumstances.

10. What is the biggest mistake foreign investors make?

Completing the share acquisition based primarily on financial statements and seller assurances without independently investigating contingent and historical liabilities.

Legal Due Diligence for Foreign Investors Acquiring Turkish Companies

Detecting hidden company debts before investing in a Turkish business requires considerably more than asking the seller for a list of outstanding loans.

A comprehensive investigation should determine what the company currently owes, what it has guaranteed, what creditors are claiming, which lawsuits and enforcement proceedings are pending, whether historical tax or customs transactions may create future assessments, what employee obligations have accrued and whether contracts contain liabilities that could crystallize after the acquisition.

Official systems can support parts of that investigation. MERSIS provides centralized corporate registration information, while UYAP Institution Portal allows companies to monitor litigation and enforcement files in which they are parties. (Dys Ticaret) These checks should be combined with financial, tax, contractual and sector-specific due diligence.

Fırat Fesih Kaya Law Office provides legal assistance to foreign investors, international companies and foreign shareholders concerning legal due diligence in Turkey, Turkish company acquisitions, hidden company debts, share purchases, tax and customs risks, litigation searches, enforcement proceedings, corporate guarantees, director liabilities and acquisition risk analysis.

Legal assistance may include corporate-record review, litigation and enforcement analysis, examination of material agreements and guarantees, assessment of employment and regulatory exposure, coordination with financial and tax professionals, preparation of due-diligence reports and negotiation of share purchase agreement protections.

Phone: +90 312 434 22 22
Mobile / WhatsApp: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Office: Mevlana Boulevard No:221, Yildirim Tower, Balgat, Cankaya, Ankara, Turkey

For foreign investors, the objective of due diligence is not simply to confirm that a company is profitable. It is to determine what the investor is actually buying—including liabilities that may only become visible after the purchase price has been paid.