Discover when a seller may be liable for hidden debts after a Turkish company acquisition. Learn about undisclosed tax debts, lawsuits, employee claims, guarantees, breach of warranties, indemnities and compensation rights for foreign buyers.

A foreign investor may acquire a Turkish company after reviewing financial statements, conducting due diligence and negotiating a share purchase agreement, only to discover substantial liabilities after closing. The newly acquired company may face unpaid tax obligations, historical customs assessments, employee claims, enforcement proceedings, bank loans, corporate guarantees, supplier debts or litigation that the seller allegedly failed to disclose.

When this happens, one of the most important questions is whether the seller can be held liable for hidden debts discovered after a company acquisition in Turkey.

The answer is potentially yes, but seller liability is not automatic. The buyer’s rights will usually depend on the structure of the transaction, the share purchase agreement, representations and warranties, indemnities, disclosure letter, due diligence information, seller knowledge, contractual claim procedures and the circumstances surrounding the undisclosed liability.

Turkey’s current corporate-law framework continues to include the Turkish Commercial Code No. 6102 and Turkish Code of Obligations No. 6098. The Ministry of Trade’s updated 2026 legislation page identifies both statutes within the applicable companies and commercial-registry framework. (Ticaret Bakanlığı)

For international investors, the first step is therefore to distinguish the company’s liability to the creditor from the seller’s potential liability to the buyer.

What Happens to Existing Debts When Company Shares Are Sold?

A share acquisition generally does not create a new company.

The existing corporate entity continues operating while ownership of its shares changes.

The Ministry of Trade’s 2026 foreign-investor guide expressly confirms that foreign investors may invest in Turkey by acquiring shares in companies already established in the country and explains the applicable share-transfer mechanisms for joint-stock and limited companies. (Ticaret Bakanlığı)

This distinction is critical.

Suppose a foreign investor acquires 100 percent of a Turkish company. The company had EUR 2 million in undisclosed supplier liabilities before closing.

Changing ownership does not ordinarily erase those corporate liabilities.

The creditors may continue pursuing the company.

The separate question is whether the buyer can recover the resulting economic loss from the seller.

Hidden Debt Does Not Automatically Become the Seller’s Debt

This is one of the most frequently misunderstood issues.

The creditor’s claim and the buyer’s claim against the seller are legally different.

The company may owe money to a bank, employee, supplier or public authority.

Meanwhile, the buyer may have a contractual or other claim against the seller because the liability was not properly disclosed.

Therefore, the buyer usually needs to analyze two disputes simultaneously:

Can the underlying company debt be challenged?

Can the resulting loss be recovered from the seller?

What Is an Undisclosed Liability?

An undisclosed liability can include an obligation that existed at closing but was omitted from the information supplied to the buyer.

It can also include contingent liabilities.

For example, an event giving rise to liability may have occurred before closing even though no creditor demand had yet been issued.

This category is particularly dangerous in company acquisitions.

Hidden Tax Debts

Historical tax liabilities are a major acquisition risk.

Suppose the investor buys a company in 2026.

In 2027, authorities assess additional taxes concerning transactions undertaken in 2024.

Although the assessment arose after the acquisition, the underlying conduct occurred during the seller’s ownership period.

The SPA should immediately be examined for tax warranties and tax indemnities.

Customs Debts Discovered After Closing

Companies engaged in importing goods can face similar risks.

Historical customs declarations may subsequently be examined and additional duties or penalties imposed.

This is not merely theoretical. In July 2026, the Ministry of Trade reported that post-clearance company audits and secondary reviews concerning historical customs and foreign-trade transactions had generated TL 28.7 billion in additional assessments and penalties over the preceding two and a half years. (Ticaret Bakanlığı)

For acquisitions involving importers, manufacturers and international trading companies, historical customs exposure should therefore receive specific attention.

Hidden Employee Liabilities

Employment claims can also emerge after completion.

Former or existing employees may claim unpaid overtime, severance compensation, annual leave payments or other employment entitlements arising from periods before the acquisition.

The buyer should determine when the underlying employment obligation arose and whether the SPA contains appropriate employment warranties or indemnities.

Undisclosed Litigation

Suppose the seller represents that the company has no material pending litigation.

After closing, the buyer discovers a lawsuit seeking EUR 1 million that had already been filed.

This can create a potential breach-of-warranty claim.

The buyer should preserve evidence showing when proceedings commenced and whether the seller or management knew about them.

Threatened Claims

A lawsuit does not necessarily need to have been formally filed before closing.

A customer may already have sent a substantial compensation demand.

An employee may have commenced mandatory pre-litigation procedures.

A regulator may have started an investigation.

Whether these matters should have been disclosed depends on the wording of the SPA.

Hidden Enforcement Proceedings

Enforcement proceedings can reveal debts that were never properly communicated during the acquisition.

The buyer should determine whether the proceedings existed before closing, whether management knew about them and whether the relevant debt appeared in financial information supplied during due diligence.

Undisclosed Bank Loans

Hidden financial indebtedness can directly affect the purchase price.

This is particularly important where the transaction was priced on a cash-free/debt-free basis.

If the seller represented that the company had EUR 1 million of debt but the buyer later discovers another EUR 2 million loan, the agreed equity value may have been materially distorted.

Hidden Corporate Guarantees

Guarantees can be even more difficult to identify.

The company may have guaranteed a loan owed by the seller, another shareholder or an affiliated company.

Nothing may be payable at closing because the borrower is still performing.

After the acquisition, the borrower defaults and the acquired company suddenly faces a substantial demand.

The buyer should immediately review warranties concerning guarantees, security and financial indebtedness.

Undisclosed Security Over Company Assets

A company may legally own valuable machinery, inventory, receivables or intellectual property while those assets secure another obligation.

Turkey maintains a commercial movable-pledge framework covering various categories of business assets.

Therefore, acquisition due diligence should examine not merely whether the target owns an asset but whether that asset is encumbered.

Related-Party Debts

Transactions involving the seller and affiliated companies require particular attention.

Before closing, a seller may describe balances as routine intercompany accounts.

After closing, another group company may demand substantial repayment.

The SPA should state clearly which related-party balances will remain, be repaid or be released at completion.

When Can the Seller Be Liable?

Seller liability can arise through different legal mechanisms depending on the transaction.

In professionally structured acquisitions, the starting point will normally be the SPA.

The agreement may contain representations, warranties, indemnities and purchase-price mechanisms allocating responsibility for historical liabilities.

General contractual principles may also become relevant depending on the facts.

What Is a Warranty?

A warranty is essentially a contractual assurance concerning the target company or transaction.

For example, the seller may warrant that:

the financial statements accurately reflect the company’s financial condition;

all material liabilities have been disclosed;

the company has properly paid taxes;

no material litigation exists other than disclosed proceedings;

the company has no undisclosed financial indebtedness;

and no undisclosed guarantees have been granted.

If the statement proves incorrect, the buyer may investigate a warranty claim.

No Undisclosed Liabilities Warranty

This is one of the most important protections for foreign buyers.

A properly drafted provision may state that the target has no liabilities except those identified in specified financial statements or otherwise fairly disclosed.

When an unexpected debt appears after closing, this warranty should be one of the first provisions reviewed.

Tax Warranties

Tax warranties can address historical returns, payments, investigations and compliance.

However, a warranty claim and a tax indemnity are not necessarily the same.

Foreign buyers should understand the distinction before signing.

What Is an Indemnity?

An indemnity generally allocates responsibility for a defined risk.

For example, the seller might agree to compensate the buyer for tax liabilities attributable to pre-closing periods.

A specific indemnity can also cover an identified lawsuit, customs investigation, environmental issue or employee dispute.

The precise contractual language determines the scope of protection.

Known Versus Unknown Risks

Due diligence may identify an existing risk before closing.

For example, the company may already be undergoing a customs investigation.

Because the buyer knows about the investigation, relying only on a general warranty can create unnecessary uncertainty.

A specific indemnity can expressly allocate that known risk to the seller.

Disclosure Letter

The disclosure letter is often central to post-acquisition disputes.

A seller may provide broad warranties but disclose specific exceptions.

For example, the seller warrants that no litigation exists except as disclosed.

The disclosure letter then identifies two lawsuits.

Those lawsuits cannot ordinarily be treated in the same manner as genuinely undisclosed litigation.

Was the Debt Fairly Disclosed?

This frequently becomes the real dispute.

The seller may say:

“The document was in the data room.”

The buyer may respond:

“The existence and financial significance of the liability were never properly disclosed.”

Whether merely uploading a document constitutes sufficient disclosure depends heavily on the SPA’s disclosure standard.

Data Room Disclosure

Foreign buyers should preserve a complete copy of the virtual data room immediately after closing.

If a dispute arises two years later, access may no longer exist.

The seller may argue that a particular contract or tax notice was available during due diligence.

The buyer needs an evidentiary record showing exactly what was uploaded and when.

Seller Knowledge

Some warranties are qualified by knowledge.

For example:

“To the Seller’s Knowledge, no material investigation is pending.”

This creates another question:

What does “Seller’s Knowledge” mean?

The SPA may define it narrowly as actual knowledge of named individuals or more broadly.

The definition can significantly affect liability.

What If the Seller Deliberately Concealed the Debt?

Intentional concealment should be treated differently from an innocent error.

Suppose the seller receives a substantial tax audit report before closing but deliberately removes it from the due diligence materials and tells the buyer that no investigation exists.

Emails, internal reports and communications with advisers may become critical evidence.

The buyer should preserve them immediately.

Fraudulent Misrepresentation

Where the buyer alleges intentional deception, the dispute may extend beyond an ordinary warranty claim.

The exact legal characterization depends on the evidence and transaction documents.

The buyer should avoid making fraud allegations before establishing who knew what and when.

Due Diligence Does Not Necessarily Eliminate Seller Liability

Sellers sometimes argue that sophisticated foreign investors should have discovered every problem during due diligence.

That does not automatically resolve the issue.

The buyer may have relied on contractual warranties precisely because certain information could not independently be verified.

The legal effect of buyer knowledge and due diligence depends on the agreement and circumstances.

What If the Buyer Missed an Obvious Debt?

The seller’s defense may become stronger if complete and clear information was properly disclosed but the buyer simply failed to review it.

Again, the SPA matters.

Some agreements contain detailed buyer-knowledge provisions.

Others preserve warranty claims despite due diligence.

The contractual language should therefore be examined before assuming either side is protected.

Can the Buyer Claim Compensation?

Potentially.

But compensation should not simply be equated with the face value of the hidden debt.

The buyer must identify the applicable contractual or legal basis and calculate recoverable loss under that framework.

Example of a Compensation Claim

Assume a foreign buyer pays EUR 8 million for a company.

After closing, a previously undisclosed EUR 1.5 million historical tax liability emerges.

The buyer should determine whether the seller breached a tax warranty or indemnity.

The analysis should then consider the actual amount payable, interest, penalties, available defenses, tax effects and any contractual limitations.

The resulting recoverable amount may differ from EUR 1.5 million.

Can the Buyer Claim Legal Costs?

Potentially, depending on the contractual definition of recoverable loss and applicable legal rules.

Some SPAs define “Loss” broadly.

Others exclude certain categories.

The wording should be reviewed before calculating the claim.

Can Lost Profits Be Claimed?

This can be considerably more difficult.

A hidden liability might disrupt operations and allegedly cause additional commercial losses.

Whether those consequential losses are recoverable depends on causation, contractual exclusions and applicable law.

Do not assume that every commercial consequence can automatically be transferred to the seller.

Purchase Price Adjustment Claims

Some liabilities may fall within purchase-price mechanisms rather than warranty claims.

For example, where completion accounts are used, an undisclosed item of financial debt might affect the final equity-price calculation.

The buyer should determine which contractual mechanism applies before sending a claim.

Completion Accounts

Completion-account provisions often contain strict procedures.

There may be short periods for reviewing accounts and raising objections.

If a hidden liability affects the closing balance sheet, delay can prejudice the buyer’s position.

Locked-Box Transactions

In a locked-box acquisition, the seller may promise that no unauthorized value will leave the target between a historical balance-sheet date and closing.

If the seller causes the company to assume personal or group liabilities during that period, leakage provisions may potentially become relevant.

Liability Caps

Seller liability is frequently subject to contractual caps.

A general warranty claim might be limited to a specified percentage of the purchase price.

Different caps may apply to tax, title and fundamental warranties.

The buyer should calculate these limits immediately.

De Minimis Thresholds

Small individual claims may be excluded.

For example, the SPA may state that no warranty claim can be made unless an individual loss exceeds an agreed amount.

This prevents minor issues from producing repeated claims.

Basket Thresholds

The agreement may also require qualifying claims to exceed an aggregate threshold.

Foreign buyers should therefore maintain a record of all hidden liabilities, even when each individual amount appears relatively small.

Together they may cross the contractual threshold.

Claim Notification Deadlines

This is one of the most important practical issues.

The buyer may have a strong claim and still lose contractual protection by failing to notify the seller properly.

The SPA may specify a particular period for warranty claims.

Tax claims may have another period.

Fundamental warranties may have longer protection.

Specific indemnities may have separate rules.

How Should a Claim Notice Be Prepared?

Follow the contract.

The notice may need to identify the relevant warranty, describe the circumstances, estimate the loss and be delivered to a specified address using a specified method.

An informal email stating “we found another debt” may not satisfy the contractual procedure.

Do Not Wait Until the Underlying Case Ends

Suppose the acquired company receives a EUR 2 million tax assessment.

The buyer believes the assessment is wrong and starts challenging it.

Five years later, the tax dispute ends.

If the buyer waits until then to notify the seller, the contractual warranty period may already have expired.

The SPA should therefore be reviewed immediately when the claim arises.

Third-Party Claims

Many hidden debts originate from third parties.

These include tax authorities, employees, suppliers, banks and customers.

The SPA may contain procedures governing these claims.

The buyer may need to notify the seller and allow participation in the defense.

Can the Buyer Settle the Debt?

Potentially, but the SPA should be checked first.

The seller may have contractual rights concerning defense or settlement of third-party claims.

If the buyer voluntarily settles without following the agreed procedure, the seller may challenge the resulting indemnity claim.

Duty to Mitigate Loss

The buyer should also consider whether reasonable steps can reduce the financial damage.

For example, a tax assessment may be challengeable.

An employee claim may be defensible.

Insurance may cover part of the loss.

A creditor may accept a commercially reasonable settlement.

The buyer should not unnecessarily increase the loss and expect the seller automatically to pay everything.

Insurance Recoveries

If insurance covers part of the underlying liability, this may affect the compensation calculation depending on the SPA.

Check both insurance notification requirements and contractual provisions concerning third-party recoveries.

Seller Liability for Public Debts

Public debts require particular care.

Company type matters.

The Ministry of Trade’s 2026 foreign-investor guide explains that capital companies are responsible for their debts through company assets, while limited-company shareholders have specific exposure concerning public debts that cannot be collected from the company, proportionate to their capital shares. (Ticaret Bakanlığı)

This makes tax and social security due diligence especially important when acquiring interests in limited companies.

Can the Buyer Sue the Seller?

Potentially.

If negotiations fail and the contractual requirements are satisfied, proceedings may be commenced in the forum specified by the transaction documents.

The SPA’s dispute-resolution clause should therefore be reviewed.

Turkish Courts or Arbitration?

Either may be relevant depending on the agreement.

International M&A agreements frequently contain arbitration clauses.

The contract should be reviewed for governing law, seat of arbitration, institution, language and procedural requirements.

Do not assume that a dispute involving a Turkish target company automatically belongs exclusively before Turkish courts.

Interim Measures

If the buyer has a substantial claim and evidence suggests that the seller is dissipating assets, protective measures may need to be considered.

Availability depends on the forum, evidence and applicable legal requirements.

A compensation claim is much less valuable commercially if there are no assets against which it can ultimately be enforced.

What If the Seller Lives Abroad?

The claim may still be pursued, but enforcement strategy becomes more important.

Identify where the seller resides and where assets are located.

The transaction’s jurisdiction and arbitration provisions should be analyzed together with potential cross-border enforcement.

What Evidence Should the Buyer Preserve?

The buyer should immediately preserve the SPA, disclosure letter, tax covenant, due diligence report, complete data room, financial statements, management presentations, seller correspondence and documents establishing the newly discovered liability.

Evidence of what the seller knew before closing can be particularly important.

Build a Hidden-Debt Claim File

For every liability, create a structured record:

Debt → Amount → Creditor → Origin Date → Discovery Date → Disclosure Status → Relevant Warranty → Indemnity → Claim Deadline → Estimated Recoverable Loss.

This allows the buyer to manage multiple post-acquisition claims systematically.

What Should the Buyer Do in the First 24 Hours?

Preserve all transaction documents and the data room.

Obtain the document establishing the hidden liability.

Determine whether the debt arose before closing.

Identify potentially applicable warranties and indemnities.

Calculate contractual notification deadlines immediately.

Do not make admissions to the seller or creditor before understanding the buyer’s legal position.

What Should Be Done During the First Week?

Investigate whether the underlying debt is legally valid.

Determine whether it was properly disclosed.

Calculate the potential financial exposure.

Review warranty caps, baskets and exclusions.

Prepare the contractual claim notice.

Determine whether the seller must participate in defending the underlying claim.

Then develop the compensation and dispute-resolution strategy.

How Can Foreign Buyers Protect Themselves Before Acquisition?

Strong protection begins before signing.

Conduct legal, financial and tax due diligence.

Require comprehensive warranties.

Use specific indemnities for identified risks.

Define disclosure carefully.

Preserve the data room.

Negotiate appropriate claim periods.

Consider escrow or holdback structures where significant uncertainty exists.

Escrow and Holdback Protection

Contractual compensation rights are useful only if the seller can ultimately pay.

Where a substantial historical liability remains unresolved, part of the purchase price may potentially be retained through an appropriate security mechanism.

This can reduce post-closing enforcement risk.

2026 Legal Perspective

Foreign investors continue to have the ability to acquire shares in existing Turkish companies, as confirmed by the Ministry of Trade’s 2026 foreign-investor guide. (Ticaret Bakanlığı)

The applicable commercial framework continues to include the Turkish Commercial Code No. 6102 and Turkish Code of Obligations No. 6098. (Ticaret Bakanlığı)

For foreign buyers, however, the crucial principle is that a hidden debt does not automatically create a successful compensation claim against the seller.

The buyer must establish the relevant contractual or legal basis, demonstrate that the liability falls within that protection, comply with applicable notice procedures and establish the resulting recoverable loss.

Frequently Asked Questions

1. Is a seller automatically responsible for every hidden debt discovered after an acquisition?

No. Seller liability depends on the transaction documents, disclosure, representations and warranties, indemnities and applicable legal principles.

2. Does selling the shares eliminate the company’s old debts?

Generally, no. The existing corporate entity continues after the shareholder changes, so historical company liabilities do not simply disappear because shares were transferred.

3. Can a seller be liable for undisclosed tax debts?

Potentially. Tax warranties and tax indemnities should be reviewed immediately when historical tax exposure emerges.

4. Can a seller be liable for an undisclosed lawsuit?

Potentially, particularly where the seller warranted that no material litigation existed and the proceeding was not properly disclosed.

5. What if the seller deliberately concealed the debt?

Intentional concealment can materially affect the legal analysis. Evidence concerning the seller’s knowledge and communications should be preserved.

6. Can the seller argue that due diligence should have discovered the debt?

Yes, the seller may raise this defense. Its effectiveness depends on the SPA, disclosure standard, buyer-knowledge provisions and information actually made available.

7. Can the buyer recover the entire amount of the hidden debt?

Not automatically. Recoverable loss depends on the relevant contractual provisions, actual financial consequences, mitigation, insurance and other factors.

8. How long does the buyer have to notify the seller?

The SPA must be checked immediately. Contractual warranty and indemnity claim periods can differ and may impose specific notice requirements.

9. Should the buyer wait until the hidden debt becomes final?

Usually, the SPA should be reviewed and applicable notice requirements considered as soon as the liability becomes known. Waiting for the underlying dispute to conclude can create serious deadline problems.

10. Can a foreign buyer pursue the seller outside Turkey?

Potentially. The governing law, jurisdiction or arbitration clause and location of the seller’s assets should be examined when planning cross-border recovery.

Legal Assistance for Foreign Buyers in Hidden Debt and Seller Liability Disputes in Turkey

When hidden debts are discovered after a company acquisition in Turkey, foreign investors should act quickly because two separate legal issues usually arise simultaneously: the target company’s defense against the underlying liability and the buyer’s potential compensation claim against the seller.

The investigation should determine when the debt arose, whether the seller knew about it, whether it was properly disclosed, which warranty or indemnity applies, what notice deadline exists, whether the underlying debt can be challenged and what financial loss can legally be recovered.

Fırat Fesih Kaya Law Office provides legal assistance to foreign investors, international companies and foreign buyers concerning seller liability for hidden debts, Turkish company acquisitions, breach of warranty claims, tax indemnities, undisclosed liabilities, post-acquisition disputes, M&A litigation, share purchase agreements and compensation claims in Turkey.

Legal assistance may include reviewing the share purchase agreement and disclosure letter, investigating whether liabilities were properly disclosed, analyzing warranties and indemnities, preparing claim notices, defending underlying tax, customs or commercial claims, calculating compensation and representing foreign investors in negotiations, litigation or arbitration.

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

When an undisclosed liability emerges after closing, the SPA should be reviewed immediately rather than waiting for the underlying debt to become final. A delay can affect contractual notification rights and significantly weaken an otherwise valuable claim against the seller.