Seller Conceals Related-Party Transactions During an M&A Deal in Turkey: Buyer’s Legal Remedies – 2026 Updated Guide

Hidden Related-Party Transactions in Turkey | M&A Buyer Remedies

Learn what foreign buyers can do when a seller conceals related-party transactions during a Turkish M&A deal, including indemnity, damages, price adjustment and asset recovery.

A foreign buyer may discover after closing an M&A transaction that the seller concealed loans, payments, guarantees, asset transfers or contracts involving related persons or companies.

Undisclosed related-party transactions can reduce the value of the target company, divert profits, create tax liabilities and expose the buyer to unexpected litigation. The available remedy depends on the acquisition structure, the transaction documents, the seller’s knowledge and the financial harm suffered.

This 2026 updated guide explains the legal remedies available to a buyer when related-party transactions were concealed during a Turkish M&A deal.

What Are Related-Party Transactions?

Related-party transactions involve dealings between the target company and persons or entities connected with its shareholders, directors, managers or controlling group.

Examples include management fees, consultancy payments, loans, guarantees, rent, asset sales, licensing agreements, commissions, procurement contracts and transfers of customers or intellectual property.

A related-party transaction is not automatically unlawful. It may be legitimate if it has a genuine business purpose, fair pricing, proper approval and complete documentation.

The central issue is whether the transaction was concealed, unfair, fictitious or materially harmful to the target company.

Why Does the M&A Structure Matter?

In a share purchase, the target company remains the same legal entity. Hidden transactions entered into before closing may therefore continue to affect the company after the foreign buyer acquires the shares.

The buyer may not personally become liable for every historical transaction, but the company’s assets, profits and value may be reduced.

In an asset or business purchase, the buyer may acquire selected assets and operations rather than the entire legal entity. The consequences depend on which liabilities, contracts and business relationships were transferred or assumed.

What Should the Buyer Do Immediately?

The buyer should preserve the acquisition agreement, disclosure schedules, due-diligence reports, data-room documents, seller questionnaires and closing correspondence.

The buyer should identify each hidden transaction, its date, parties, amount, business purpose, approval process and financial effect.

The seller should be notified in writing as soon as possible. The notice should reserve contractual and legal rights and comply with any notice procedure in the M&A agreement.

Can the Buyer Claim an Indemnity?

An indemnity claim may be available if the acquisition agreement protects the buyer against undisclosed liabilities, related-party transactions, financial misstatements or breaches of seller warranties.

The buyer should review liability caps, deductibles, time limits, exclusions, notice requirements and dispute-resolution clauses.

The indemnity may cover repayment of diverted funds, tax exposure, legal fees, expert costs, interest and other losses if the contractual requirements are satisfied.

Can the Purchase Price Be Adjusted?

A purchase-price adjustment may be possible if the transaction documents contain a mechanism for hidden debt, working-capital changes, leakage or inaccurate financial statements.

The buyer may need to prove that the concealed transaction changed the company’s financial position or enterprise value.

An independent valuation and forensic accounting report may help calculate the difference between the value represented by the seller and the company’s actual value.

Can the Buyer Claim Damages?

The buyer may seek damages for breach of contract, misrepresentation, concealment or fraud where the evidence supports the claim.

Potential losses may include the value of diverted assets, reduced company value, lost profits, tax penalties, legal expenses, financing costs and losses caused by the transaction.

The buyer should distinguish direct losses suffered by the buyer from losses suffered by the target company. Some company losses may need to be pursued in the company’s interest.

Can the M&A Deal Be Rescinded?

In serious cases, the buyer may consider rescission, termination or restitution based on fundamental misrepresentation or intentional concealment.

The buyer generally needs to show that the concealed related-party transactions were material, that the seller knew or should have disclosed them and that the omission affected the decision to purchase or the agreed price.

Cancellation is not automatic and may be difficult after substantial integration of the business. Indemnity, damages or a negotiated price adjustment may be more practical.

Can the Target Company Recover Diverted Funds?

If the related-party transaction damaged the target company, the company may have claims to recover money, assets or profits from directors, shareholders, managers or related entities.

The buyer may need to use shareholder rights, corporate approvals, inspection procedures or derivative-style mechanisms depending on the company type and claim.

A forensic accounting review can help determine whether the transaction was genuine, whether the price was fair and where the funds went.

Can the Related Company Be Sued?

A related company is not automatically liable merely because it shares owners or directors with the target.

A claim may be possible if the related company received assets without proper consideration, participated in fraud, assumed obligations or benefited from a transaction that can be legally challenged.

The buyer should establish the specific legal basis, transaction flow and benefit received by the related company.

Can Directors or Sellers Be Held Personally Liable?

The seller may be liable under representations, warranties, indemnities or general principles concerning misrepresentation and concealment.

Directors and managers may face personal liability if they approved unlawful payments, misused company assets, concealed material information or breached their duties.

Shareholders are not automatically personally liable for every company loss. Individual responsibility depends on the person’s conduct, knowledge and benefit.

Can the Buyer Request an Investigation or Special Audit?

The buyer may consider an internal investigation, accounting examination or special audit mechanism where permitted by the company type and applicable requirements.

The investigation should focus on specific transactions rather than seeking unrestricted access to all company information.

Relevant records may include bank statements, invoices, contracts, board minutes, approval records, accounting entries and communications with related parties.

Can an Injunction Protect Company Assets?

An interim injunction or provisional attachment may be considered where there is a risk that money, property or documents will be transferred or destroyed.

Urgent protection may be relevant if the related-party transaction is continuing, the related company is receiving new payments or the target’s bank accounts and assets are being depleted.

The court evaluates urgency, evidence and proportionality. Security may be required.

Are There Tax Consequences?

Concealed related-party payments may create tax, accounting and public-debt risks for the target company.

The buyer should examine whether expenses were genuine, whether services were provided, whether prices were commercially reasonable and whether the transactions were properly recorded.

Tax exposure may include unpaid taxes, penalties, interest and audit costs. The acquisition agreement may allocate these risks between buyer and seller, but a private indemnity does not automatically prevent tax authorities from pursuing the company.

What If the Seller Claims the Buyer Should Have Discovered the Transactions?

The seller may argue that the buyer had access to financial records and should have identified the transactions during due diligence.

The buyer should review what was actually disclosed, whether the records were complete, whether the seller gave specific warranties and whether the transactions were deliberately disguised or omitted.

A due-diligence process does not necessarily excuse intentional concealment or breach of an express disclosure obligation.

What Evidence Matters in 2026?

In 2026, electronic accounting systems, electronic invoices, cloud data rooms, online banking records, corporate emails, digital signatures and business messages may be decisive.

The buyer should preserve original records, document versions, transaction histories and complete communication chains.

A financial expert, valuation expert or digital-forensics specialist may be needed to establish the transaction’s value, authenticity and financial effect.

Can a Foreign Buyer Act from Abroad?

A foreign buyer does not always need to travel to Turkey. A Turkish lawyer may review the M&A documents, inspect company records, notify the seller and pursue indemnity, damages or commercial proceedings under a valid power of attorney.

Depending on the issuing country, legalization, apostille and official translation may be required.

Lawyer Fırat Fesih Kaya assists foreign buyers with concealed related-party transactions, M&A disputes, forensic accounting, seller indemnities and commercial litigation in Turkey.

2026 Legal Considerations

Foreign buyers should treat related-party disclosures, leakage provisions, financial warranties and indemnity clauses as central parts of the acquisition process.

After closing, newly discovered transactions should be documented immediately and assessed for company loss, buyer loss, tax exposure and possible asset recovery.

The applicable rules on M&A contracts, corporate liability, related-party dealings, evidence, tax disputes, arbitration and procedural deadlines should be reviewed before action is taken.

Frequently Asked Questions (FAQ)

1. Is every related-party transaction unlawful?

No. It may be lawful if it has a genuine business purpose, fair terms, proper approval and complete disclosure.

2. Can a foreign buyer claim damages for concealed transactions?

Damages may be available for breach of warranty, indemnity, misrepresentation, concealment or fraud if the evidence supports the claim.

3. Can the purchase price be reduced?

A price-adjustment claim may be possible under the M&A agreement or applicable legal remedies.

4. Can the buyer cancel the acquisition?

Rescission or cancellation may be considered in serious cases involving material concealment, but it is not automatic.

5. Can diverted company funds be recovered?

The target company may pursue recovery from directors, sellers, shareholders or related companies depending on the transaction and evidence.

6. Is a related company automatically liable?

No. Common ownership alone does not create liability. Participation in fraud, receipt of assets or assumption of debt may provide a legal basis.

7. Can directors be held personally responsible?

Personal liability may arise from unlawful payments, misuse of assets, concealment or breach of management duties.

8. Can the buyer request a special audit?

An accounting investigation or special audit mechanism may be available if the company type and legal requirements permit it.

9. Can company assets be protected urgently?

An injunction or provisional attachment may be requested where there is a risk of continued transfers or serious financial harm.

10. Can a foreign buyer pursue the seller without traveling to Turkey?

In many cases, yes. A Turkish lawyer may act under a valid power of attorney.

This article is provided for general informational purposes only and does not constitute legal advice. We recommend consulting a lawyer about your specific circumstances to avoid any loss of rights.

Expert Legal Support for Foreign Buyers

Concealed related-party transactions can cause hidden debt, profit diversion, tax exposure and a significant reduction in the value of a Turkish acquisition.

Fırat Fesih Kaya Law Office provides professional legal support to foreign buyers in M&A due diligence, seller indemnity claims, forensic accounting, asset recovery, injunctions and commercial litigation.

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