Foreign Shareholder Discovers Undisclosed Related-Party Loans in Turkey: What Can Be Done? (2026 Updated Guide)

A foreign shareholder discovers undisclosed related-party loans in a Turkish company. Learn how to investigate the transactions, challenge management decisions, recover company funds and seek urgent legal protection.

A foreign shareholder investing in a Turkish company may discover that company funds have been transferred to controlling shareholders, directors, affiliated companies, family-controlled businesses or other related parties through loans that were never properly disclosed. The transactions may appear in accounting records as shareholder receivables, intercompany loans, advances, current-account balances or other receivables. In more serious cases, the foreign investor may suspect that the supposed “loan” is being used to transfer company value outside the business. The legal response should begin with one fundamental question: Was the transaction genuinely entered into for the company’s benefit and through the required corporate procedures, or was company property used to benefit insiders at the expense of the company and its shareholders?

Why Are Undisclosed Related-Party Loans a Serious Corporate Risk?

Related-party financing is not automatically unlawful. Companies within the same commercial group may have legitimate financing relationships. The legal concern arises when company resources are transferred without proper authority, adequate documentation, commercially reasonable terms or genuine corporate purpose.

For a minority foreign shareholder, undisclosed related-party loans can also indicate a broader corporate-governance problem involving information rights, conflicts of interest or diversion of company assets.

First Determine Where the Money Went

The shareholder should identify the recipient of each transfer. Was the money paid to another shareholder, a director, a parent company, subsidiary, sister company, family member or an apparently independent company connected with management?

The economic relationship between the Turkish company and recipient can be more important than the label appearing in the accounting system.

Obtain the Loan Agreements

If management claims that the transfers were loans, request the underlying agreements. Review the principal amount, currency, interest rate, maturity, repayment schedule, security and purpose.

A substantial company receivable without a written agreement, maturity or meaningful repayment history deserves closer investigation.

Follow the Bank Transfers

Accounting entries should be compared with bank statements. Determine when the money left the company, which account received it and whether any amounts were subsequently repaid.

A bank-transfer chronology can reveal patterns that are difficult to understand from annual financial statements alone.

Exercise the Shareholder’s Information and Inspection Rights

A shareholder should use the information and inspection mechanisms available under Turkish company law according to the company’s legal form and circumstances. Requests should be sufficiently specific to identify the transactions being investigated.

Relevant materials can include financial statements, general ledger records, bank transactions, related-party balances, board decisions, general assembly records and contracts.

Do Not Rely Only on the Annual Balance Sheet

A balance sheet may show a large receivable without explaining its commercial substance. The shareholder should investigate the underlying transaction rather than merely confirming that an accounting entry exists.

The important questions are who received the funds, why, under whose authority and on what repayment terms.

Review the General Ledger and Current Accounts

Related-party transactions may appear through shareholder current accounts, affiliated-company accounts, advances or miscellaneous receivables.

A transaction-by-transaction review can help determine whether numerous smaller transfers collectively represent a substantial extraction of company funds.

Check Whether Corporate Approval Was Obtained

Determine whether the loan was approved by the competent corporate body and whether the persons participating in the decision had conflicts of interest.

Board minutes, shareholder resolutions and internal authorization records should be reviewed carefully.

Conflict of Interest Can Be Central

A director or controlling shareholder may be on both sides of the economic relationship. For example, the person approving a loan may also control the company receiving the money.

Such transactions require particularly careful scrutiny of authority, corporate interest and decision-making procedures.

Was the Loan Commercially Reasonable?

Compare the transaction with what an independent company would ordinarily accept.

Questions may include whether interest was charged, whether adequate security was obtained, whether the borrower was creditworthy and whether the repayment period was commercially reasonable.

An unsecured, long-term and interest-free transfer to an insider may require a substantially different explanation from an ordinary commercial loan.

Examine Whether Repayments Actually Occurred

A loan that is repeatedly extended without meaningful repayment can raise questions about whether repayment was genuinely expected.

Review principal repayments, interest payments, maturity extensions and any restructuring of the receivable.

Repeated Loans Can Reveal a Pattern

One isolated transaction may have a commercial explanation. Repeated transfers to the same related company, particularly when the Turkish company itself requires working capital, can create a much more serious governance issue.

Prepare a chronological schedule of all transfers and repayments.

Investigate Whether the Company Borrowed Money to Finance the Related Party

A particularly important scenario occurs when the Turkish company borrows from banks or shareholders and then transfers those funds to an affiliate.

The foreign investor should examine whether the company incurred financing expenses while providing favorable financing to an insider.

Review Directors’ Duties

Company managers and directors are generally expected to exercise their powers consistently with their statutory and corporate duties. A related-party loan that causes loss to the company can therefore raise questions concerning managerial responsibility.

The analysis should focus on the actual transaction, authority, decision-making process, corporate benefit and resulting loss.

Can Directors Be Personally Liable?

Potentially, depending on the company’s legal form, the director’s conduct, breach of duty, loss and causal relationship.

Director liability should not be assumed merely because a business decision later proved unsuccessful. The circumstances surrounding the decision must be examined.

Controlling Shareholder Conduct Should Also Be Reviewed

If the transaction was effectively imposed by the controlling shareholder for its own benefit, the foreign minority investor should examine remedies not only against management but also in relation to the controlling shareholder and recipient.

Corporate control does not necessarily create unlimited authority to use company property for personal or affiliated-company purposes.

Majority Ownership Does Not Mean Ownership of Company Assets

This distinction is fundamental. A shareholder owns shares in the company; company assets belong to the company itself.

Even a shareholder holding a majority of voting rights cannot automatically treat company bank accounts as personal funds.

Can the Foreign Shareholder Demand Repayment?

The debt is generally owed to the company if the company made the loan. The legal strategy therefore needs to distinguish the shareholder’s personal rights from the company’s claim against the borrower.

The shareholder may need to use corporate-law mechanisms to cause the company to pursue repayment or address management’s failure to act.

Send a Formal Demand for Information

Where the transactions remain unexplained, a documented request can identify the disputed transfers and demand the supporting agreements, approvals and repayment records.

This can also help create an evidentiary record showing that management was formally asked to explain the transactions.

Preserve Electronic Evidence

Relevant evidence may exist in corporate email, accounting systems, board communications and internal correspondence.

Lawful preservation should be considered before management changes systems or documents become unavailable.

Do Not Access Accounts Without Authorization

A shareholder should not respond to suspected wrongdoing by unlawfully entering another person’s email, banking or private communications.

Evidence should be obtained through lawful corporate, judicial and procedural mechanisms.

Independent Accounting Review Can Be Valuable

Where the transaction structure is complex, an independent accountant or financial expert may reconstruct transfers among related entities.

The objective should be to follow the economic movement of money rather than simply repeat accounting labels.

Look for Circular Transactions

Money may move from the Turkish company to an affiliate and then through several related entities before returning to a shareholder or director.

Tracing such movements can be essential where management argues that each transfer was an ordinary commercial transaction.

Examine Set-Off Transactions

A related-party receivable may disappear from the accounts through set-off rather than cash repayment.

The shareholder should examine whether the offsetting debt was genuine and whether the company actually received equivalent value.

Review Year-End Accounting Adjustments

Transactions close to the financial year-end deserve particular attention where balances are temporarily reduced and then recreated shortly afterward.

The commercial reason for such movements should be documented.

Tax Consequences May Also Arise

Related-party financing can create tax issues concerning transfer pricing, interest, disguised profit distribution or other tax treatment depending on the transaction.

Corporate-law and tax analysis should therefore be coordinated rather than conducted independently.

Could the Financial Statements Be Misleading?

If material related-party transactions were omitted, concealed or incorrectly characterized, questions may arise regarding the accuracy of financial reporting.

The shareholder should compare accounting records with the financial statements and any audit documentation.

Review the Independent Auditor’s Work Where Applicable

If the company is subject to independent audit, determine how material related-party balances were treated and whether the auditor received complete information.

An audit opinion does not necessarily resolve every underlying shareholder dispute, but the audit file can identify important accounting issues.

General Assembly Decisions May Need to Be Challenged

If shareholders approved financial statements, releases or other resolutions based on incomplete or misleading information, the validity and legal consequences of those decisions should be examined promptly.

Corporate litigation deadlines can be important, so disputed resolutions should be reviewed without delay.

Release of Directors Does Not End Every Question Automatically

The effect of a release resolution depends on the circumstances and information disclosed when the resolution was adopted.

A shareholder who later discovers concealed transactions should therefore not automatically assume that every possible claim disappeared because management was previously released.

Can a Special Audit Be Requested?

Depending on the company’s legal form and statutory requirements, special-audit mechanisms may become relevant where shareholders need investigation of particular corporate events.

A related-party financing pattern can be an issue worth evaluating for this purpose.

When Is an Injunction Necessary?

Urgent judicial protection may be required if there is evidence that additional company funds are about to be transferred, assets are being dissipated or enforcement of a future judgment could become difficult.

The requested measure must be tailored to the actual risk and supported by evidence.

Can Company Bank Accounts Be Protected?

The appropriate remedy depends on whose assets are at issue and the legal claim being pursued. A shareholder should not assume that every corporate dispute permits a general freeze of company or counterparty accounts.

Where immediate asset dissipation is demonstrated, precautionary measures should be evaluated under the applicable procedural requirements.

Consider Measures Against the Recipient

If the recipient still holds the transferred money or other assets and a repayment obligation exists, the company’s claims against that recipient should be examined promptly.

Waiting until the related company becomes insolvent can substantially reduce the practical value of a successful lawsuit.

Evidence of Insolvency Should Be Monitored

Check whether the related borrower has assets, active operations and realistic repayment capacity.

A “loan” to an entity that had no realistic ability to repay when the money was transferred may raise significant questions about the original decision.

Foreign Shareholders Should Review Shareholders’ Agreements

The shareholders’ agreement may provide additional protections beyond statutory company law.

Relevant clauses can include reserved matters, related-party transaction approvals, information rights, veto rights, board representation, financial controls and dispute-resolution mechanisms.

Reserved Matters Can Be Critical

Many foreign investment agreements require investor approval before the company enters material related-party transactions or grants loans above a threshold.

If management ignored such a restriction, contractual remedies may exist alongside corporate-law remedies.

Review Investment and Share Purchase Documents

Representations and warranties given when the foreign investor acquired its shares may cover related-party transactions, undisclosed liabilities and accuracy of financial statements.

If the loans existed before the investment but were concealed, claims under the transaction documents may need to be considered.

Escrow or Indemnity Rights May Exist

Where the investment agreement contains indemnification, escrow or holdback mechanisms, notice deadlines should be checked immediately.

A strong substantive claim can lose commercial value if contractual notification requirements are missed.

What If the Loan Was Discovered After an Acquisition?

Determine whether the transaction existed before closing, occurred between signing and closing or arose afterward.

This timing can affect whether the issue primarily concerns warranty claims, director liability, shareholder oppression or post-closing corporate governance.

Consider Whether Management Should Be Replaced

Where the evidence indicates persistent unauthorized related-party transactions, the shareholder should evaluate available corporate mechanisms concerning board or management composition.

The precise strategy depends on voting rights, articles of association, shareholders’ agreement and company type.

Deadlock May Require a Broader Solution

If the foreign investor and local shareholder cannot agree on related-party transactions, the dispute may develop into corporate deadlock.

Negotiated separation, share transfer, contractual exit mechanisms or litigation may need to be considered.

Criminal Issues Can Arise in Serious Cases

Not every disputed related-party loan constitutes a crime. Commercial disagreement, poor management or an unfavorable transaction should not automatically be converted into a criminal allegation.

However, where evidence suggests falsified records, fraudulent diversion or other conduct potentially falling within criminal law, separate criminal-law analysis may be necessary.

Avoid Using Criminal Proceedings Merely as Commercial Pressure

Criminal complaints should be based on concrete facts and applicable criminal elements. Corporate claims, repayment disputes and management-liability actions should continue to be evaluated independently.

Build a Transaction Matrix

For each disputed loan, record the date, amount, currency, recipient, relationship with the company, approving person or body, agreement, interest rate, maturity, security, repayments and outstanding balance.

This creates a clear factual foundation for both negotiation and litigation.

Quantify the Company’s Loss

The analysis should distinguish principal still outstanding from unpaid interest, financing costs and other alleged losses.

An expert financial calculation may be necessary in significant cases.

Act Before Limitation and Corporate Deadlines Become a Problem

Different claims may have different procedural and limitation periods. The shareholder should identify potential claims early rather than waiting for the broader shareholder dispute to be resolved informally.

2026 Practical Strategy for Foreign Investors

A foreign shareholder discovering undisclosed related-party loans should immediately secure corporate and accounting evidence, identify the recipients, trace bank transfers, review corporate approvals, determine whether repayment is occurring, examine directors’ and controlling shareholders’ roles, review shareholders’ agreements and acquisition documents, quantify the company’s exposure and assess whether urgent judicial protection is necessary.

The strongest strategy usually combines corporate governance, accounting evidence, contract rights and litigation planning rather than treating the matter merely as an unpaid loan.

Frequently Asked Questions

Are related-party loans automatically illegal in Turkey?

No. The legality and consequences depend on the company’s legal form, transaction structure, corporate approvals, applicable statutory restrictions, commercial terms and surrounding circumstances.

Can a foreign minority shareholder inspect the transactions?

Shareholders have statutory information and inspection mechanisms, although their scope and procedure depend on the company type and circumstances.

Can the shareholder personally demand repayment of the loan?

If the company made the loan, the repayment claim ordinarily belongs to the company. The shareholder may need to use corporate-law mechanisms concerning management and enforcement of the company’s rights.

Can directors be personally liable?

Potentially, where the legal requirements for managerial liability are satisfied, including relevant breach, loss and causation.

What if the majority shareholder approved the loan?

Majority control does not automatically eliminate corporate-law restrictions or directors’ duties. The transaction should still be examined for authority, conflicts of interest and corporate benefit.

Can an interest-free loan to an affiliate be challenged?

Potentially. The absence of interest is one factor that may be relevant when assessing the commercial rationale and consequences of the transaction.

What if management refuses to provide documents?

The shareholder should use the applicable corporate and judicial mechanisms for information, inspection and preservation of evidence rather than attempting unauthorized access.

Can urgent court protection be requested?

Potentially, where the statutory conditions are satisfied and there is a concrete risk requiring interim protection.

Can the foreign investor sue under the share purchase agreement?

Potentially, particularly if the related-party loans existed before the acquisition and breached representations, warranties or disclosure obligations.

What should the shareholder do first?

Trace the money. Identify every recipient, obtain the underlying corporate and accounting records and determine whether each supposed loan had genuine authorization, commercial terms and a realistic repayment expectation. That factual reconstruction will determine whether the appropriate response is repayment enforcement, director liability, corporate litigation, contractual claims or urgent asset-protection measures.

Client-Focused Legal Support for Foreign Shareholder and Related-Party Transaction Disputes

Undisclosed related-party loans can indicate wider problems involving minority shareholder rights, misuse of company funds, conflicts of interest, director liability, inaccurate financial reporting, hidden related-party transactions and shareholder deadlock. Fırat Fesih Kaya Law Office assists foreign shareholders and international investors in investigating disputed corporate transactions, enforcing information and shareholder rights, challenging unauthorized management decisions, pursuing company and director liability claims and seeking urgent judicial measures where corporate assets are at risk.

Lawyer Fırat Fesih Kaya provides legal assistance to foreign investors in complex shareholder and corporate disputes involving Turkish companies.

Phone: +90 312 434 22 22

Mobile / WhatsApp: +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