Suing Directors for Loss to the Company in Türkiye: The Shareholder's Claim under TCC Article 555

This guide explains the basis of liability in TCC Article 553, the claim in Article 555, cost sharing, bankruptcy, joint liability, the effect of a general assembly release, limitation, the competent court and the mediation step that comes before filing.

1. The Situation: Directors Harm the Company, the Minority Pays the Price

A foreign investor holds a minority stake in a Turkish company. The board, or the managers of a limited company, sell an asset below value, sign a contract with a related business on terms the company would not otherwise accept, let receivables expire, or ignore obligations that the law places on them. The company’s value falls, and the investor’s shares fall with it. The people who caused the loss also control the company, so the company itself may not sue them.

The Turkish Commercial Code (TCC, Türk Ticaret Kanunu, Law No. 6102) answers this situation with a specific rule. Under TCC Article 555(1), compensation for the loss suffered by the company may be claimed by the company and by each shareholder. The same sentence that opens the door also sets its limit: shareholders may ask for the compensation to be paid only to the company.

Readers from common-law systems may think of a derivative action. The TCC does not use that label; Article 555 speaks of the loss suffered by the company and of who may claim it. This guide stays with the statute’s own words.

Joint stock and limited companies. The liability rules sit in the joint stock company part of the TCC, but Article 644(1)(a) applies to limited companies Article 553, on the liability of founders, board members, managers and liquidators, and Articles 554 to 561. The claim for the company’s loss, the cost-sharing rule, the bankruptcy rule, joint liability, the release rules, limitation and venue described below therefore apply to a minority partner in a limited company (limited şirket) as well as to a shareholder in a joint stock company (anonim şirket).

This guide covers, in order:

1. the basis of liability in Article 553 and the duty of care in Article 369;
2. who may sue for the company’s loss and where the money goes (Article 555(1));
3. the cost-sharing rule (Article 555(2));
4. bankruptcy of the company (Article 556);
5. several liable persons (Article 557);
6. the release resolution and its effect (Articles 558, 409, 436 and, for limited companies, 619);
7. formation and capital-increase liabilities (Article 559);
8. limitation (Article 560);
9. the court, the commercial-case rule and mandatory mediation (Articles 561, 4 and 5/A);
10. the practical steps before filing.

2. The Basis of Liability: Breach of Duty Through Fault (TCC Article 553)

Who is liable, and to whom. Under TCC Article 553(1), founders, board members, managers (yöneticiler) and liquidators who breach their obligations arising from the law and the articles of association through their fault are liable for the loss they cause both to the company and to shareholders and to the company’s creditors. The provision therefore has three elements on its face: an obligation arising from the law or the articles of association, a breach of that obligation through fault, and a loss caused to the company, to shareholders or to creditors.

The 2012 amendment. The wording of Article 553(1) changed shortly after the Code was adopted. Law No. 6335 of 26 June 2012 removed the words kusurlarının bulunmadığını ispatlamadıkça (‘unless they prove they were not at fault’) from the paragraph, and inserted the word kusurlarıyla (‘through their fault’) after ‘obligations’. The text in force is the one quoted above. A pleading should be built on that text and should set out the fault it relies on for each person sued.

The duty of care of board members. For joint stock companies, TCC Article 369(1) states the standard against which the board’s conduct is measured: board members and third persons charged with management are under an obligation to perform their duties with the care of a prudent manager and to protect the company’s interests in accordance with the rules of good faith. A claim against a board member will explain which obligation was breached, why the conduct fell short of that standard and how the loss followed.

Delegation as a defence. Boards delegate, and Article 553 deals with it. Under TCC Article 553(2), organs or persons who, relying on the law, delegate to another a duty or power arising from the law or the articles of association are not liable for the acts and decisions of the persons who took over those duties and powers, unless it is proven that they did not exercise reasonable care in selecting them. Two points in the text matter for the claimant:

• the delegation must rest on the law; Article 553(2) speaks of delegation made ‘relying on the law’;
• the exception turns on the care shown in selecting the delegate, and the text speaks of it being proven that reasonable care was not exercised.

Matters outside a person’s control. Under TCC Article 553(3), no one can be held liable for breaches of the law or the articles of association, or for irregularities, that are outside their control; this non-liability cannot be set aside by citing the duty of supervision and care. A board member sued for a loss caused by another person’s act may rely on this paragraph, and the claimant will need to address what was within that board member’s control.

Auditors. Under TCC Article 554, as amended by Law No. 6335, the auditors and special auditors who audit the year-end and consolidated financial statements, reports and accounts of the company and of the group of companies are liable to the company, to shareholders and to the company’s creditors for the loss they cause if they act with fault in performing their statutory duties. Article 554 is among the provisions that Article 644(1)(a) applies to limited companies.

3. Who May Sue for the Company’s Loss, and Where the Money Goes (TCC Article 555(1))

Article 555(1) contains two sentences, and each carries one rule.

First sentence: two claimants. Compensation for the loss suffered by the company may be claimed by the company and by each shareholder. The text says ‘each shareholder’ (her bir pay sahibi): the right belongs to every shareholder individually.

Second sentence: one payee. Shareholders may ask for the compensation to be paid only to the company. The word ‘only’ is the statute’s own: the Turkish text reads tazminatın ancak şirkete ödenmesini isteyebilirler. A shareholder who brings a claim under Article 555 therefore asks the court to order payment to the company, not to the shareholder. The shareholder benefits through the company: the compensation is paid into the company’s assets.

The shareholder’s own loss. Article 553(1) makes the persons it lists liable for the loss they cause both to the company and to shareholders. The wording separates the company’s loss from loss caused to shareholders. A shareholder who claims a loss suffered personally, rather than a loss suffered by the company, relies on the reference to shareholders in Article 553(1); Article 555 is written for the company’s loss. Whether a given harm is the company’s loss or the shareholder’s own loss is a question the court decides on the facts, and the statement of claim should say clearly which of the two is claimed.

Payment to the company in the pleading. Because of Article 555(1), the relief sought should be framed as payment to the company. A claim that asks for payment to the claimant shareholder for the company’s loss departs from the text of the provision.

4. Who Bears the Costs? The Equity Rule in TCC Article 555(2)

A shareholder who sues for the company’s loss takes on the costs of bringing the action, while any compensation is paid to the company. Article 555(2) addresses that imbalance, but it does so under conditions.

Under TCC Article 555(2), if legal and factual reasons justify the shareholder in bringing the action, the court divides the litigation costs and attorney’s fees between the claimant shareholder and the company according to equity, in cases where these costs cannot be imposed on the defendant.

The provision therefore requires two things before the court divides the costs:

1. Justification. Legal and factual reasons must justify the shareholder in bringing the action. The shareholder’s statement of claim and evidence should be prepared with this in mind from the start.
2. Costs cannot be imposed on the defendant. The equity rule applies in cases where the litigation costs and attorney’s fees cannot be imposed on the defendant.

When both conditions are met, the court divides the costs between the claimant shareholder and the company according to equity. The measure of the division is equity, as assessed by the court.

5. If the Company Goes Bankrupt (TCC Article 556)

Bankruptcy changes who controls the claim.

Creditors join the claimants. Under TCC Article 556(1), in the bankruptcy of the company that suffered the loss, the company’s creditors also have the right to request that compensation be paid to the company. However, the claims of shareholders and of company creditors are first asserted by the bankruptcy administration (iflas idaresi).

If the bankruptcy administration does not sue. Under TCC Article 556(2), if the bankruptcy administration does not bring the action referred to in the first paragraph, each shareholder or company creditor may bring it. The provision also sets the order in which the proceeds are distributed, under the Enforcement and Bankruptcy Law (İcra ve İflas Kanunu, İİK):

1. first, to pay the receivables of the creditors who brought the action;
2. the balance, to the claimant shareholders in proportion to their capital shares;
3. any remainder, to the bankruptcy estate.

Assignment of the company’s claims. Under TCC Article 556(3), Article 245 of the İİK, on the assignment of the company’s claims, is reserved.

For a foreign shareholder in a company in bankruptcy, the sequence in Article 556 matters: the claim is asserted first by the bankruptcy administration, and a shareholder’s own action comes into play if the administration does not bring it.

6. Several Directors, One Loss: Joint and Several Liability (TCC Article 557)

Where a loss is caused by several board members, managers or auditors, the TCC sets out how liability is shared.

Liability to the extent attributable. Under TCC Article 557(1), where several persons are obliged to compensate the same loss, each of them is jointly and severally liable with the others to the extent the loss can be personally attributed to them according to their fault and the circumstances. The joint and several liability of each person is therefore measured by what can be personally attributed to that person, according to fault and the circumstances.

Suing together. Under TCC Article 557(2), the claimant may sue several liable persons together for the whole loss and may ask the judge to determine each defendant’s compensation liability in the same action. For a shareholder facing a board of several members, a manager and perhaps an auditor, this allows one action instead of several.

Recourse among the defendants. Under TCC Article 557(3), recourse among several liable persons is determined by the judge, taking into account all the circumstances of the case.

When preparing the claim, the shareholder should identify each person’s role in the loss, because Article 557(1) ties each person’s liability to what can be personally attributed to that person.

7. The Release Resolution: Who Loses the Right to Sue (TCC Articles 558, 409 and 436)

A key document in a claim against directors may be a general assembly resolution adopted before anyone thought of suing: the release (ibra) of the board.

Release is a regular agenda item. Under TCC Article 409(1), the ordinary general assembly of a joint stock company meets within three months from the end of each financial period, and among the matters deliberated and decided at that meeting is the release of the board members. The release question therefore comes before the ordinary general assembly for each financial period.

Who may not vote. Under TCC Article 436(2), board members and persons in management who have signing authority cannot exercise the voting rights attached to their own shares in resolutions on the release of board members. In limited companies, under TCC Article 619(1), those who have participated in the company’s management in any way cannot vote on resolutions on the release of managers.

A release cannot be revoked by the general assembly. Under TCC Article 558(1), a release resolution cannot be revoked by a general assembly resolution; Article 445 is reserved. Under TCC Article 445, the persons listed in Article 446 may file an action for the annulment of general assembly resolutions that are contrary to the law or the articles of association, and in particular to the rule of good faith, within three months of the resolution date, at the commercial court of first instance where the company’s seat is.

The effect of the release. TCC Article 558(2) is the central provision. The general assembly’s resolution on release from liability, in respect of the disclosed facts covered by the release (ibranın kapsadığı açıklanan maddi olaylara ilişkin olarak), removes the right of action of:

• the company;
• the shareholders who voted in favour of the release; and
• the shareholders who acquired their shares knowing of the release resolution.

The rights of action of the other shareholders lapse when six months have passed from the date of the release. The Turkish verb is düşer (lapses). Article 560, discussed below, uses a different verb for the general time limit: zamanaşımına uğrar (becomes time-barred).

Three practical consequences follow from the wording:

1. How you voted matters. A shareholder who voted in favour of the release loses the right of action for the disclosed facts covered by the release. A minority shareholder who does not support the release should vote against it and keep evidence of that vote.
2. What was disclosed matters. Article 558(2) attaches the effect of the release to the disclosed facts covered by the release. The minutes, the annual report and the documents presented to the meeting show what was disclosed, and they should be collected.
3. The six-month rule. For the other shareholders, the right of action lapses six months after the release date. A shareholder who did not vote for the release and who wants to sue on disclosed facts covered by it should count from that date.

The table summarises the positions under Article 558(2).

8. Liabilities from Formation and Capital Increase (TCC Article 559)

A separate rule protects claims arising from the company’s formation and from capital increases.

Under TCC Article 559, the liabilities of founders, board members and auditors arising from the company’s formation and from capital increases cannot be removed by settlement and release (sulh ve ibra) until four years have passed from the date of the company’s registration. After that period, settlement and release become valid only with the approval of the general assembly. Even then, if shareholders representing one tenth of the share capital (in publicly held companies, one twentieth) oppose the approval of the settlement and release, the general assembly does not approve it.

For a minority shareholder, Article 559 has two uses. First, a release adopted within the four-year period cannot remove liabilities from formation and capital increase. Second, after four years, a minority holding the stated fraction of the capital can prevent the general assembly from approving a settlement and release of those liabilities.

9. Time Limits: Limitation under TCC Article 560

The general rule. Under TCC Article 560(1), the right to claim compensation from the persons liable becomes time-barred (zamanaşımına uğrar):

• two years from the date the claimant learned of the loss and of the person liable; and
• in any event five years from the date of the act causing the loss.

A longer criminal period. The same paragraph adds that if the act requires a penalty and is subject to a longer prosecution limitation period under the Turkish Criminal Code, that period applies to the compensation action as well.

Two clocks after a release. Where a release resolution has been adopted, a shareholder who is not among those whose right is removed by Article 558(2) must keep two time limits in view: the six-month period after which the right of action lapses under Article 558(2), and the limitation periods in Article 560(1). The two provisions use different verbs, and each date should be recorded separately.

Recording the dates. The two-year period runs from when the claimant learned of both the loss and the person liable. A shareholder should keep a record of when and how each piece of information reached them: the general assembly meeting, the annual report, a letter, a document received.

10. The Court, the Commercial-Case Rule and Mandatory Mediation (TCC Articles 561, 4 and 5/A)

Venue. Under TCC Article 561, an action against the persons liable may be filed at the commercial court of first instance (asliye ticaret mahkemesi) where the company’s seat is. For a foreign shareholder, this points to the commercial court of first instance in the Turkish city where the company has its seat.

A commercial case. Under TCC Article 4(1)(a), civil actions arising from matters provided for in the TCC are commercial cases, regardless of whether the parties are merchants. A claim under Articles 553 and 555 arises from matters provided for in the TCC. Under TCC Article 5(1), unless otherwise provided, the commercial court of first instance is competent to hear all commercial cases regardless of the value or amount of the subject matter.

Mediation before filing. Under TCC Article 5/A(1), added by Law No. 7155 and amended by Law No. 7445, in commercial cases listed in Article 4 and in other laws whose subject is a sum of money concerning a receivable, compensation, annulment of an objection, a negative declaratory claim or restitution, applying to a mediator before filing the action is a condition of the action (dava şartı). A claim for compensation for the company’s loss is a claim for a sum of money, so the mediation step should be completed before filing.

The mediation timetable. Under TCC Article 5/A(2), the mediator concludes the application within six weeks from the date of appointment; in compulsory cases, the mediator may extend this period by at most two weeks.

The mediation step and the time limits run alongside each other. A shareholder who is close to the end of the six-month period in Article 558(2) or of a limitation period in Article 560(1) should plan the mediation application with those dates in view.

11. Practical Steps for a Foreign Minority Shareholder

Before anything else, gather the evidence:

1. Collect the company documents you hold or can lawfully obtain: general assembly invitations, agendas and minutes, the annual report, financial statements and any board resolutions or correspondence that show the transaction or omission.
2. Identify each person and their role. List the board members or managers, any person to whom tasks were delegated, and the auditor. Article 557(1) ties each person’s liability to what can be personally attributed to them according to their fault and the circumstances, and Article 553(2) and (3) turn on delegation and control.
3. State the obligation and the breach. Link each person to an obligation arising from the law or the articles of association, and explain the fault (Article 553(1)); for board members of a joint stock company, measure the conduct against the care of a prudent manager and the duty to protect the company’s interests in good faith (Article 369(1)).
4. Separate the company’s loss from your own. Article 555 is written for the company’s loss, with payment to the company; Article 553(1) refers to loss caused to shareholders as well.

Then check the release resolutions:

1. Find every release resolution for the periods in which the acts occurred, and note its date.
2. Check how you voted, and when and how you acquired your shares (Article 558(2)).
3. Check what was disclosed to the general assembly about the facts you rely on (Article 558(2)).
4. Check who voted. In a joint stock company, board members and signing managers cannot vote their own shares on the release of board members (Article 436(2)); in a limited company, those who participated in management cannot vote on the release of managers (Article 619(1)). An action for annulment under Article 445 has its own three-month period from the resolution date.
5. Check formation and capital-increase matters against the four-year rule in Article 559.

Then apply to mediation:

1. Diary the time limits: the six-month period under Article 558(2), the two-year and five-year periods under Article 560(1), and any longer criminal period.
2. Apply to a mediator before filing, as Article 5/A(1) requires in commercial cases whose subject is a sum of money, such as compensation, and allow for the six-week period with a possible extension of at most two weeks (Article 5/A(2)).

Finally, file the action:

1. Choose the court: the commercial court of first instance where the company’s seat is (Article 561).
2. Ask for payment to the company (Article 555(1)).
3. Name all the persons you consider liable and ask the judge to determine each defendant’s liability in the same action (Article 557(2)).
4. Set out the legal and factual reasons that justify the action, which is the first condition for cost sharing under Article 555(2).

A claim under Article 555 is one of several tools available to shareholders. For an overview of minority rights, see our guide to corporate shareholder disputes and minority rights, and for profit distribution, our guide to minority shareholder dividend rights.