Fraudulent Misrepresentation in a Turkish M&A Transaction: Can the Share Purchase Agreement Be Rescinded? (2026 Updated Guide)

A buyer discovers fraudulent misrepresentation after acquiring a Turkish company. Learn when a share purchase agreement may be challenged, rescission risks, damages, warranties, evidence and emergency remedies.

A buyer acquiring shares in a Turkish company normally relies on financial statements, due diligence materials, management representations, warranties, disclosure schedules and information provided by the seller before signing the Share Purchase Agreement (“SPA”). If material information was deliberately concealed or false information was intentionally provided to induce the buyer to complete the acquisition, the dispute can go beyond an ordinary warranty claim. Depending on the circumstances, fraudulent misrepresentation may provide grounds to challenge the transaction, seek avoidance or rescission-type relief, claim damages, enforce contractual indemnities or pursue other civil and potentially criminal remedies. The correct strategy depends on the fraudulent conduct, SPA wording, evidence, timing of discovery and whether the transaction has already closed.

What Is Fraudulent Misrepresentation in a Turkish M&A Transaction?

Fraudulent misrepresentation generally involves intentional deception designed to cause another party to enter into a transaction it otherwise would not have entered into, or would have entered into on materially different terms.

In an M&A context, the alleged deception may concern the target company’s financial condition, debts, assets, litigation, tax liabilities, regulatory exposure, customer relationships, intellectual property, related-party transactions or other matters affecting valuation.

Fraud Is Different From an Ordinary Warranty Breach

Not every incorrect statement made during an acquisition constitutes fraud. A seller may breach a contractual warranty without having deliberately deceived the buyer.

This distinction can be crucial because fraud may trigger remedies beyond the contractual warranty and indemnity structure.

Can a Share Purchase Agreement Be Rescinded?

Potentially. Turkish contract law recognizes remedies where consent was obtained through fraud. Depending on the facts and procedural position, the deceived party may seek to avoid being bound by the transaction.

However, unwinding a completed acquisition is significantly more complex than merely establishing that one representation was inaccurate.

The Buyer Must Act Promptly

Timing can become decisive in fraud-based challenges. Once the buyer discovers the alleged deception, the applicable statutory and contractual periods should be reviewed immediately.

The buyer should not continue acting for a prolonged period as though the transaction is unquestionably accepted while simultaneously considering avoidance.

What Types of Seller Conduct Can Create Fraud Claims?

Examples may include deliberately hiding substantial debt, providing manipulated financial information, concealing pending litigation, disguising related-party transactions, hiding regulatory investigations, falsifying customer contracts, concealing tax exposure or misrepresenting ownership of material assets.

The key question is whether the seller intentionally created or maintained a false understanding that materially influenced the transaction.

Concealed Company Debt

Suppose the seller represents that the target has limited financial indebtedness but undisclosed loans, guarantees or liabilities are discovered after closing.

The buyer should determine whether the omission resulted from accounting error, disclosure failure, warranty breach or deliberate concealment.

Manipulated Financial Statements

Revenue acceleration, fictitious sales, concealed expenses or artificially improved EBITDA can significantly distort valuation.

Where the acquisition price was based on financial multiples, manipulated earnings may directly affect the price paid.

Hidden Tax Liabilities

A seller may fail to disclose ongoing tax audits, disputed assessments or historical transactions carrying substantial tax exposure.

The buyer should preserve due diligence responses, tax reports, correspondence and management representations concerning these issues.

Undisclosed Customs and Regulatory Liabilities

For companies engaged in international trade, undisclosed customs debts, classification disputes, origin problems, anti-dumping exposure or regulatory investigations may materially affect enterprise value.

If management knew of the exposure but deliberately withheld it, the issue may extend beyond an ordinary post-closing liability.

Hidden Litigation

Pending or threatened litigation can affect both valuation and the buyer’s willingness to acquire the company.

The buyer should compare the seller’s representations with internal company correspondence, lawyer communications where lawfully available and litigation records.

Fictitious Customer Contracts

A buyer may discover that contracts presented as recurring customer relationships were expired, terminable, fabricated or commercially inactive.

Evidence showing what the seller knew when presenting those contracts can become central to proving fraudulent intent.

Misrepresentation of Major Customers

If the seller claims that a key customer will remain with the target while knowing that the customer has already decided to terminate the relationship, the issue may be particularly significant where that customer represented a substantial portion of revenue.

Undisclosed Related-Party Transactions

Transactions with shareholders, directors, family members or affiliated companies can distort the target’s financial position.

The buyer should investigate whether payments, loans, asset transfers or unusual contracts were intentionally excluded from disclosure.

Hidden Guarantees and Security Interests

A target company may have guaranteed obligations of shareholders or affiliated businesses.

If these commitments were concealed, the buyer may unexpectedly acquire a company exposed to substantial third-party liabilities.

Asset Ownership Misrepresentation

The seller may claim that machinery, intellectual property, real estate or another material asset belongs to the target when it actually belongs to a shareholder or affiliate.

Title and registration records should be compared with representations made during due diligence.

Intellectual Property Problems

A technology acquisition can lose significant value if software, trademarks, patents or other intellectual property represented as company-owned actually belongs to founders, employees or third parties.

Source-code ownership and employee assignment documentation can become particularly important.

Due Diligence Does Not Automatically Eliminate a Fraud Claim

A seller may argue that the buyer had an opportunity to investigate the company and therefore cannot complain afterward.

However, the effect of due diligence depends on what information was available, what was concealed, what questions were asked and whether the seller actively provided misleading responses.

Review the Virtual Data Room

Preserve a complete copy of the data room as it existed during the transaction.

Document uploads, deletions, timestamps, folder structures and versions can become important evidence of what the seller disclosed or withheld.

Preserve Due Diligence Questions and Answers

Written Q&A exchanges can be among the strongest evidence in an M&A fraud dispute.

If the buyer asked a direct question and received an intentionally false answer, proving reliance and deception may become significantly easier.

Review the SPA Representations and Warranties

The SPA should be examined provision by provision. Important warranties may concern accounts, indebtedness, taxes, litigation, compliance, material contracts, employees, intellectual property and undisclosed liabilities.

A single factual problem may potentially support both contractual and fraud-based claims.

Disclosure Letter Analysis Is Essential

The seller may argue that the disputed matter was disclosed before signing.

The buyer should determine whether the disclosure was sufficiently specific and whether it actually communicated the risk now alleged to have been concealed.

Entire Agreement Clauses Require Careful Analysis

Many SPAs contain entire-agreement or non-reliance provisions designed to limit claims based on statements outside the contract.

Their effect should be analyzed carefully where intentional fraud is alleged rather than assuming that boilerplate wording automatically defeats the claim.

Liability Caps May Not Resolve Fraud Claims

SPAs frequently contain caps, baskets, thresholds and survival periods limiting ordinary warranty liability.

Whether and to what extent contractual limitations protect a party accused of intentional fraudulent conduct requires separate legal analysis.

Exclusive Remedy Clauses Should Be Reviewed

Some agreements attempt to make contractual indemnification the buyer’s exclusive remedy.

Where fraud is alleged, the enforceability and scope of such restrictions should be examined rather than assuming that the buyer is confined to the ordinary indemnity mechanism.

Price Adjustment and Fraud Are Different Issues

A working-capital or net-debt adjustment corrects specified purchase-price calculations.

It does not necessarily resolve deliberate concealment of liabilities or manipulation of financial information outside the agreed adjustment mechanism.

Earn-Out Manipulation May Create Separate Claims

If part of the purchase price depends on post-closing performance, fraudulent financial reporting can affect both the original valuation and subsequent earn-out calculations.

The buyer should preserve accounting data and management communications.

How Can Fraudulent Intent Be Proven?

Direct written admission is uncommon. Intent may need to be inferred from surrounding evidence.

Internal emails, inconsistent versions of financial statements, deleted records, management communications, accounting entries and evidence showing that senior management knew of the undisclosed issue can become important.

Preserve Electronic Evidence Immediately

Emails, messaging applications, accounting databases, document-management systems and transaction files should be preserved before personnel changes or routine deletion policies destroy relevant evidence.

Evidence collection must comply with applicable procedural and privacy requirements.

Forensic Accounting Can Be Critical

Complex M&A fraud often requires reconstruction of transactions rather than ordinary financial review.

A forensic accountant may identify fictitious revenue, concealed liabilities, circular transactions, unusual payments or related-party transfers.

Establish Materiality

The buyer should demonstrate why the misrepresentation mattered.

Would the buyer have refused to acquire the company? Would it have paid a lower price? Would different indemnities or closing conditions have been required?

Materiality should be connected with the actual transaction economics.

Establish Reliance and Causation

A successful claim generally requires more than proving that a false statement existed.

The buyer should connect the deception with its decision to sign or close the transaction and with the loss suffered.

Can the Entire Acquisition Be Unwound?

Potentially, but unwinding a completed M&A transaction can be difficult. Shares may have changed hands, management may have changed, assets may have been sold, financing may have been refinanced and third-party rights may have arisen.

The practical feasibility of restoring the parties to their pre-transaction positions should therefore be examined immediately.

Rescission Versus Damages

The buyer may sometimes prefer to keep the acquired company and pursue damages rather than attempt to unwind the entire transaction.

The commercial decision should consider the target’s current value, integration progress, financing structure and recoverability against the seller.

Contractual Indemnification May Be Available

The SPA may provide specific indemnities for identified risks or general indemnification for warranty breaches.

Notice requirements and contractual claim periods should be checked immediately.

Do Not Miss Contractual Notice Requirements

An SPA may require the buyer to notify the seller within a specified period and include particular information concerning the claim.

Even where fraud is alleged, contractual notice provisions should not simply be ignored.

Escrow and Holdback Funds Should Be Protected

If part of the purchase price remains in escrow or is subject to holdback, determine whether the buyer can prevent release while the dispute is pending.

Delay can result in funds being transferred to the seller before protective action is taken.

Deferred Consideration Requires Care

If additional purchase-price installments remain unpaid, the buyer should obtain legal advice before withholding payment unilaterally.

Wrongful non-payment can create a separate contractual dispute.

Emergency Injunctions May Be Necessary

Where there is a credible risk that the seller will dissipate assets, transfer disputed property or take another action threatening recovery, provisional judicial measures may need to be evaluated.

The requirements depend on the relief sought and circumstances.

Asset Preservation Can Be More Important Than Winning Later

A damages judgment has limited practical value if the seller has no recoverable assets when enforcement begins.

The buyer should therefore assess enforcement risk at the beginning of the dispute.

Can Seller Shares or Assets Be Subject to Protective Measures?

Depending on the legal requirements and facts, provisional measures affecting assets may potentially be sought.

The requested measure should be proportionate and connected with the claim being protected.

Criminal Liability May Also Arise

Deliberately fabricated documents, deceptive schemes or other conduct may potentially create criminal-law issues depending on the facts.

A commercial disagreement should not automatically be converted into a criminal complaint, but genuinely fraudulent conduct may require separate criminal analysis.

Civil and Criminal Proceedings Require Coordination

Where both routes are relevant, evidence and statements made in one proceeding can affect the other.

The legal strategy should therefore be coordinated from the outset.

Management Liability Should Be Considered

The seller entity may not be the only relevant actor. Directors, shareholders or executives who personally participated in fraudulent conduct may require separate analysis depending on their actions and the applicable legal basis.

Foreign Buyers Face Additional Enforcement Questions

An international buyer should identify where the seller and its assets are located, which law governs the SPA and what dispute-resolution clause applies.

Winning a dispute and collecting the award or judgment are separate issues.

Governing Law Must Be Checked

Not every SPA concerning a Turkish target is governed by Turkish law.

If the parties selected foreign law, the contractual remedies may need to be analyzed under that law while Turkish mandatory rules and local remedies may still become relevant to particular issues.

Arbitration Clauses Are Common in M&A

Many international SPAs refer disputes to arbitration.

The buyer should determine whether fraud, rescission, indemnity and purchase-price disputes fall within the arbitration clause and whether emergency or interim relief is available.

Turkish Courts May Still Matter

Even where the main dispute is arbitrated, Turkish courts may become relevant to interim protection, evidence, corporate matters or enforcement depending on the circumstances.

Shareholder and Corporate Records Should Be Protected

If control of the target has already transferred, preserve general assembly records, board decisions, accounting books and electronic systems.

These materials may contain evidence concerning the concealed conduct.

Investigate Post-Closing Asset Transfers

If former shareholders or related parties received unusual payments shortly before or after closing, examine whether assets were extracted from the target.

Related-party transactions should be traced carefully.

Review Representations at Signing and Closing Separately

Some SPAs repeat warranties at closing.

A representation that became false between signing and closing can create issues different from a statement that was already false when the SPA was signed.

Disclosure After Signing Does Not Automatically Cure Earlier Fraud

If the seller reveals a problem shortly before closing, determine whether the buyer validly accepted the new information, waived rights or proceeded subject to reservations.

The transaction documents and correspondence should be reviewed carefully.

What Should the Buyer Do Immediately After Discovering Fraud?

The buyer should preserve evidence, restrict unauthorized access to company systems, obtain a complete copy of transaction documentation, identify the suspected misrepresentation, quantify potential exposure, review contractual notice requirements, evaluate limitation periods, examine escrow or unpaid consideration and assess whether urgent asset-protection measures are necessary.

Do Not Confront the Seller Before Preserving Evidence

Immediate confrontation can sometimes result in deletion of communications or movement of assets.

The buyer should first secure legally accessible evidence and establish an organized response strategy.

Prepare a Misrepresentation Matrix

For each suspected false statement, identify the representation made, who made it, when it was made, the true position, evidence showing knowledge, due diligence material, relevant SPA clause and financial consequence.

This creates a clear litigation or arbitration roadmap.

Quantify the Loss

Possible financial analysis may include overpayment, hidden liabilities, remediation expenses, lost value or other recoverable losses depending on the legal basis.

Avoid unsupported headline figures. Damages should be connected with evidence and the applicable remedy.

Frequently Asked Questions

Can a Turkish Share Purchase Agreement be rescinded because of fraud?

Potentially. Intentional deception affecting the buyer’s consent can create grounds to challenge the transaction, subject to the applicable law, evidence and procedural requirements.

Is every false warranty fraudulent misrepresentation?

No. A warranty can be inaccurate without intentional deception. Fraud generally requires additional elements concerning deliberate misleading conduct.

Does due diligence prevent the buyer from bringing a fraud claim?

Not automatically. The effect depends on what the buyer knew, what was disclosed, what was concealed and how the seller responded to due diligence questions.

Can the buyer claim damages instead of rescinding the SPA?

Potentially. Depending on the circumstances, damages or contractual indemnification may be commercially preferable to unwinding the acquisition.

Do SPA liability caps apply to fraud?

The wording and enforceability of contractual limitations must be analyzed carefully where intentional fraud is alleged. Ordinary warranty limitations should not automatically be assumed to resolve the issue.

What evidence is most important?

The SPA, disclosure letter, due diligence Q&A, data-room records, financial statements, internal emails, accounting records and evidence showing the seller’s knowledge can be particularly important.

Can the buyer stop escrow funds from being released?

Potentially, depending on the escrow agreement, SPA and available interim remedies. The issue should be addressed before the scheduled release.

Can fraud in an M&A transaction lead to criminal proceedings?

Potentially, depending on the conduct involved. Fabricated documents or intentional deceptive schemes may require separate criminal-law analysis.

What if the SPA contains an arbitration clause?

The buyer should determine whether the dispute falls within the arbitration agreement and assess available interim measures, emergency relief and enforcement strategy.

What should a foreign buyer do first after discovering suspected fraud?

Preserve the evidence before confronting the seller, identify precisely which representations were false, review the SPA’s notice and remedy provisions, protect any escrow or recoverable assets and decide quickly whether the commercial objective is to unwind the acquisition or retain the company and seek financial compensation.

Client-Focused Legal Support for M&A Fraud and SPA Disputes

Fraudulent misrepresentation in an acquisition can involve SPA rescission, warranty and indemnity claims, concealed liabilities, manipulated financial statements, hidden related-party transactions, escrow disputes, interim injunctions, damages, arbitration and potential criminal exposure.

Fırat Fesih Kaya Law Office assists foreign investors, international companies, shareholders and buyers involved in Turkish M&A and post-closing disputes. Lawyer Fırat Fesih Kaya provides legal assistance in reviewing suspected fraudulent representations, preserving transaction evidence, evaluating SPA remedies, pursuing indemnification and damages, seeking urgent protective measures and coordinating litigation or arbitration strategies.

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