Being a partner in a company does not mean that working in the same field as the company is forbidden in every case. In a joint-stock company, a member of the board of directors is subject to the statutory non-compete obligation; in a limited liability company, the manager is. For a person who is merely a shareholder, the type of company, the articles of association and any separately assumed obligations are examined. Obtaining permission does not mean that company secrets may be used freely, or that the company's customers may be steered to another business by any means.
In a competition dispute, the decisive questions are in what capacity, on what date and for which activity the person acted, whether a valid permission exists, who suffered the loss and which legal claim is being asserted. In particular, applying the three-month and one-year limitation periods specific to joint-stock companies to every partnership dispute may lead to a wrong assessment of the right to sue. This review addresses the distinctions between joint-stock and limited liability companies within the framework of the Turkish Commercial Code (TTK), the Turkish Code of Obligations (TBK) and the relevant case law. [1, 2]
To Whom Does the Non-Compete Obligation Apply?
The same person may be a partner, a manager and an employee under a separate contract at once. Each of these capacities must be assessed separately. It cannot be assumed that the transfer of a share automatically ends a managerial position, or that leaving a managerial position automatically ends the status of partner.
| Person's capacity | Basis of the prohibition | Decisive point to examine |
|---|---|---|
| Mere shareholder in a joint-stock company | There is no general statutory non-compete obligation | Separate contract, the principle of good faith and unfair competition |
| Member of the board of directors of a joint-stock company | TTK Art. 396 | Commercial transactions within the company's field of business, and general assembly permission |
| Partner who is not a manager in a limited liability company | Prohibition introduced by the articles of association; TTK Art. 613 | An express prohibition clause; in addition, the duties of confidentiality and loyalty |
| Manager of a limited liability company | TTK Art. 626/2 | Activity competing with the company; exception by contract or permission |
| Person working under an employment contract | During employment, TBK Art. 396; after leaving, TBK Arts. 444–447 | Dependent employment relationship and a valid written non-compete covenant |
Holding shares in a joint-stock company does not by itself create a prohibition
TTK Art. 396 is directed at members of the board of directors. A person who holds shares in the company but does not serve on the board does not breach Art. 396 merely by investing in a competing company. However, the unlawful use of trade secrets, steering customers by misleading statements or breach of a valid contract may have separate legal consequences.
Adding to a joint-stock company's articles of association a clause that bars all shareholders from competing without limit is also not a safe solution. The mandatory provisions of TTK Arts. 340 and 480 and the principle of the single obligation (tek borç ilkesi) must be considered. A covenant not to compete that shareholders have assumed under a separate contract, on the other hand, cannot be treated as a partnership obligation arising automatically from the articles of association; the parties to the contract, its validity and its scope are determined separately. [1]
In a limited liability company, the duty of loyalty and the non-compete obligation are distinguished
Under TTK Art. 613, partners of a limited liability company must protect the company's secrets and refrain from conduct that may harm the company's interests. However, for a partner who is not a manager to be subject to a general non-compete obligation, the articles of association must contain a provision to that effect. The duty of confidentiality cannot be lifted by the articles of association or by a general assembly resolution.
Accordingly, starting a new business in the same sector and carrying the company's confidential pricing information over to the new business are not the same event. Whether the first act is prohibited depends on the contract and the capacity of the person, whereas the second act additionally engages the provisions on loyalty and unfair competition. Deriving from the duty of loyalty an unlimited non-compete obligation that is not in the articles of association would also erase this distinction. [1]
Which Activities Breach the Non-Compete Obligation?
For members of the board of directors of a joint-stock company
TTK Art. 396 regulates two basic situations: the member, on his or her own account or on behalf of another, carrying out a transaction of the type of commercial business that falls within the company's field of operation, and joining as a partner with unlimited liability a company engaged in the same type of commercial business. Remaining passive in practice on the board does not, on its own, provide an exemption for as long as the membership continues.
Merely acquiring shares in a competing joint-stock or limited liability company is not the same as the prohibition on joining as a partner with unlimited liability. However, where the acquisition of shares is accompanied by managing the competing business, preparing offers for the company's customers or steering the company's work to that business, it is examined whether a transaction constituting competition has been carried out on another's account. The defense that "my liability is limited, so every activity is permitted" is not sufficient.
The review should not stop at the broad list of activities in the trade registry. The products and services actually offered, the target customer group, the existing business and the concrete commercial opportunity are taken into account. An activity that the company has never carried out and that is written into its articles only as a possibility cannot automatically be turned into a prohibited area. By contrast, transferring a concrete business opportunity developed for the company to one's personal account is separately significant in terms of the duty of care and loyalty. [1, 9]
For managers of a limited liability company
TTK Art. 626/2 prohibits, in general terms, any activity that competes with the company. Whether the manager is also a partner does not change the outcome. The absence of a non-compete obligation for partners in the articles of association does not release the manager from his or her own statutory obligation.
The fact that a competing company is established in the name of a spouse, a child or another person is likewise not proof of a breach by itself. It is investigated who in fact manages the activity, and to which person the financing, the offers, the customer communications and the collections are linked. Instead of relying on kinship, the manager's concrete participation and the link of interest must be shown.
Not every employee with the title "sales manager" or "general manager" is a company manager in the sense of commercial law. Without establishing the appointment resolution, the power of representation, the management function and the employment relationship, TTK Art. 626/2 should not be applied directly. The duty of care and loyalty of other persons entrusted with management, and the obligations arising from a service, mandate or commercial representation relationship, are assessed separately. [1, 2]
Dealing with the company is different from competing with the company
A board member selling his or her own property to the company may concern the prohibition on dealing with the company in TTK Art. 395; selling the same product to the company's customer through his or her own business may concern the non-compete obligation in Art. 396. Although the two provisions may be discussed together in the same event, their conditions and consequences are not identical. It should not be assumed in advance that the permission given for one transaction also lifts the other prohibition. [1]
The non-compete obligation and unfair competition are not the same review
The non-compete obligation is a restriction imposed on a person by reason of a particular capacity or contract. Unfair competition, on the other hand, concerns deceptive conduct or conduct contrary to the principle of good faith that affects economic relations, within the scope of TTK Arts. 54–55. A former partner who is not bound by a specific non-compete obligation may also be liable for unfair competition by unlawfully using trade secrets or making misleading statements. Conversely, not every competing transaction carried out without permission gives rise to all unfair competition claims without a separate assessment.
In unfair competition, depending on the conditions, a declaration, prevention, removal of the unlawful situation and, if there is fault, compensation of the loss may be requested. The holder of these claims, the subject of proof and the limitation period are determined separately from the specific non-compete obligation. A permission to compete granted by the company does not make unfair competition against third parties lawful. [1]
How Is Permission to Compete Granted, and Who Cannot Vote?
General assembly permission in a joint-stock company
For the purposes of TTK Art. 396, the body that grants permission is the general assembly. Stating in an intelligible manner the person, the activity, the other company where necessary, the duration and the limits in the permission resolution, and indicating the period to which the resolution relates, reduces disputes. Permission given by the board of directors among its own members does not take the place of general assembly permission.
If the board member to be granted permission is also a shareholder, the exclusion from voting under TTK Art. 436/1 must be observed in the resolution adopted in his or her own favor. If several members are to be granted permission, the voting right and the quorum must be examined separately for each. It is not correct to confuse the prohibition in Art. 436/2 on voting on discharge (ibra) with the assessment of personal interest in a permission to compete.
The existence of permission does not make lawful every transaction that harms the company. For example, the fact that permission has been given to take office in a competing company is not deemed in itself to be permission for the company's confidential offers or customer data to be transferred to that company. The text of the permission and the duties of care, confidentiality and the rules on unfair competition are assessed together. [1]
In a limited liability company, a majority decision is not always sufficient
For a manager of a limited liability company, it is first examined whether the articles of association contain a provision that lifts or restricts the prohibition. If there is no such provision, the written permission of all the other partners is required. The articles of association may provide for general assembly approval instead of individual written approvals.
Where the general assembly route has been validly provided for, TTK Art. 621/1-g applies: at least two-thirds of the votes represented and an absolute majority of the entire share capital carrying voting rights must be obtained together. If the person to be granted permission is a partner, he or she cannot vote on a resolution in his or her own favor; Art. 619/3 is taken into account. In the permission under Art. 613/4 concerning a partner who is not a manager, the distinction between the written approval required by law and the general assembly alternative provided for in the articles of association is likewise preserved. [1]
In its decision of the 11th Civil Chamber of the Court of Cassation (Yargıtay 11. Hukuk Dairesi) dated 1 June 2022, E.2021/1602, K.2022/4312, the majority upheld the non-annulment of the general assembly resolution in the case. The dissenting opinion, however, argued that because the articles of association contained no provision allowing the general assembly to grant permission, the written permission of all the other partners was required for the manager. The reasoning in the dissent cannot be reported as if it were the reasoning of the majority. This divergence of views shows that a permission should not be based merely on a calculation of the majority, and that the authorization in the articles of association and the written permissions must be separately verified. [6]
What Claims May the Company Make in Case of a Breach?
In a joint-stock company, the elective rights belong to the company
Under TTK Art. 396, the company may request compensation for the loss arising from the breach or, under the conditions set out in the law, that the transaction be treated as having been made on the company's behalf and that the benefits arising from contracts made on behalf of third parties be surrendered to the company. The power of election belongs to the members of the board of directors other than the member who committed the breach.
If compensation is requested, not only the prohibited activity but also the loss and the causal link between the act and the loss must be shown. The entire turnover of the competing company is not, by itself, the loss of the injured company. The orders alleged to have been diverted, the likelihood of their materializing, production capacity, costs and the profit that could have been earned must be made concrete.
The request that the transaction be treated as made on the company's behalf should likewise not be presented as a step that automatically changes all the parties to the contract made with the third party. The economic result of the claim, the transfer of the rights and benefits obtained and the rights of third parties are examined together. It is not possible to obtain double recovery by stacking elective claims for the same economic loss. [1, 9]
In a limited liability company, the application of the special elective rights is disputed
In regulating the prohibition, TTK Art. 626 does not list one by one all the elective rights specific to a breach. TTK Art. 644 likewise contains no express reference to Art. 396. In the legal literature, there are views that advocate the application of the elective rights in Art. 396 by analogy and views that emphasize proceeding from the general liability provisions. Murat Sahin examines this debate in particular with regard to the right to claim, standing to sue and limitation. [10]
On the other hand, the express reference of Art. 644/1-a to Art. 553 et seq. is important with regard to loss caused to the company by the manager's culpable conduct. Therefore, it is not correct to tie all claims in limited liability companies directly to TTK Art. 396 and the three-month period. It must be determined which claim rests on the express statutory liability provisions, and which on a disputed analogy or on a separately concluded contract. [1, 10]
A competition breach may also require the removal of the manager or the restriction of his or her powers. Under TTK Art. 630, each partner may, if there are just causes, ask the court to remove or restrict the right of management and the power of representation. Compensation, removal and exclusion from the company are different outcomes; a competition allegation does not automatically terminate a person's shares. [1]
May a Partner Sue in His or Her Own Name?
That the company has suffered a loss does not give every partner the power to assert all of the company's claims in his or her own name. The special rights in TTK Art. 396 belong to the company. In a liability action under TTK Arts. 553 and 555, however, the shareholder may request that the company's loss be remedied; but he or she requests that the compensation be paid to the company, not to himself or herself. In a limited liability company, these provisions apply through the reference in Art. 644. [1]
In its decision of the 11th Civil Chamber of the Court of Cassation dated 26 March 2026, E.2025/4723, K.2026/1754, the judgment that the shareholders lacked standing to sue (active standing) in the action they had brought on claims of breach of the non-compete obligation and unfair competition was upheld. In the dispute reviewed, it was also specifically considered that the material facts on which an action based on the manager's general liability would be built had not been put forward. [7]
The practical significance of this decision is that merely adding the number of Art. 553 to the statement of claim is not sufficient. The concrete conduct attributed to the manager, the duty breached, the loss, causation and to whom payment is to be made must be set out clearly. At the same time, the decision cannot be extended to the effect that a shareholder cannot bring any of the liability actions regulated by law.
If the company's representative is also the person accused of the breach, the conflict of interest must also be resolved. The ability of the other authorized managers to decide and represent, a change of organs and, where necessary, the need for judicial representation are assessed concretely. Being a partner alone does not give the power to issue a power of attorney in the company's name.
How Is the Limitation Period Calculated in Non-Compete Actions?
| Legal basis of the claim | Basic period | Starting point and important distinction |
|---|---|---|
| Special rights under TTK Art. 396 | Three months and in any case one year | The other members learning of the relevant transaction or participation; the outer period runs from the occurrence of the transaction or participation |
| Manager liability based on TTK Art. 553 et seq. | Two years and in any case five years | Learning of the loss and of the person liable; the outer period runs from the act causing the loss |
| Unfair competition actions under TTK Art. 56 | One year and in any case three years | The right holder learning of the arising of the right; the outer period runs from the arising of the right |
| Receivable arising from the partnership contract, under TBK Art. 147/4 | Five years | As a rule, the date the receivable falls due; the nature of the contract and of the claim is examined separately |
The periods in TTK Art. 396 are limitation periods; they should not be called preclusive periods (hak düşürücü süre). The two periods are assessed together. That three months from learning have not yet elapsed does not remove the effect of the lapse of one year from the event. For manager liability and unfair competition, a longer limitation period for criminal prosecution may apply if the conditions in the law are met. [1]
Repeated customer diversions arising from a single act of participation should not be calculated from the same date. The date of each transaction, the document showing when the person learned of it, the nature of the continuing conduct and the claim to which it is linked are determined separately. Sending a notarial notice does not by itself interrupt the limitation period. In mediation that is a condition precedent to litigation, the limitation period is suspended from the application to the mediation office until the final report; this does not restart a period that has already expired. [2, 4]
In its decision of the 11th Civil Chamber of the Court of Cassation dated 26 September 2024, E.2023/4877, K.2024/6822, applying the one-year period for unfair competition to a dispute based on a contractual non-compete obligation was not found correct; the five-year period tied to the partnership contract was considered. However, the case was ultimately dismissed because of the invalidity of the underlying prohibition under competition law and the other features of the case. That the period has not expired does not mean that the contract is valid or that the claim has arisen. [8]
Does the Non-Compete Obligation Continue After Leaving Office?
The office-based prohibition and the contractual prohibition must be distinguished
The statutory prohibition tied to membership of the board of directors or to the managerial position is, as a rule, limited to the continuation of the relevant capacity. However, liability that arose from a breach during office is not erased by resignation. Continued partnership may keep alive a prohibition in the articles of association that is specific to partners. The unlawful use of company secrets and unfair competition do not become free either because the office has ended. [1, 9]
When preparing a contract for the period after office, the interest to be protected, the prohibited activity, the customer or product area, the geographical scope and the duration must be specified. Provisions covering an entire professional life, or sectors in which the company has no interest, raise problems in terms of personality rights and the limits of freedom of contract. Adding a high contractual penalty to an invalid prohibition does not make the prohibition valid. [2]
In addition, arrangements that force partners not to compete in different markets may, depending on their concrete circumstances, also be examined under Law No. 4054. The Court of Cassation's 2024 decision above shows that appearing in the articles of association does not by itself protect a provision that restricts competition. Not every non-compete obligation is invalid for the same reason; the function and economic effect of the provision are decisive. [5, 8]
The two-year yardstick for employees does not automatically apply to all managers
TBK Arts. 444–447 concern the employee's non-compete obligation after the employment relationship. In addition to a written agreement, the employee must have the opportunity to learn about the customer circle or business secrets, and the use of that information must be capable of causing the employer significant harm. Proportionality is required as to place, duration and type of work; except in special circumstances and conditions, a two-year limit applies. The employer's no longer having a real interest in the continuation of the prohibition, and the termination grounds specified in the law, may end the prohibition. [2]
The relationship of a manager who is an organ of the company is not always an employment contract. For this reason, the two-year period cannot be presented as an absolute statutory upper limit for all former partners and managers. The organ relationship, the service relationship and the contractual prohibition accompanying a share transfer must be assessed separately. Whether the employee provisions apply directly or by analogy likewise depends on this legal characterization.
How Are Proof, Mediation and Interim Protection Planned?
Which documents should be examined together?
| Issue to examine | Documents and records of importance |
|---|---|
| Capacity and period | Appointment and removal resolutions, resignation notice, registry records, share transfer documents |
| Scope of the prohibition and permission | The version of the articles of association in force on the relevant date, written approvals, general assembly minutes and vote calculation |
| Actual competition | Offers, contracts, invoices, customer correspondence, links of duties and financing |
| Loss and causation | Order history, cost and profit records, cancelled jobs, capacity and alternative causes |
| Start of the limitation period | Correspondence, meeting records, delivery or notification documents showing when the person learned |
A customer's working with another company is not, by itself, proof of unlawful diversion. Price, quality, delivery delay or the customer's independent preference must also be considered. Likewise, the growth of a competing company does not by itself replace a loss calculation. The claim and the defense should be built on concrete transactions and periods.
The lawful obtaining of electronic records is important. Unauthorized access to personal e-mail or private accounts may affect the admissibility of the evidence and may also give rise to liability. HMK Art. 189/2 prevents the consideration of unlawfully obtained evidence. For records at risk of being lost, preservation of evidence under HMK Art. 400 et seq. and the court's ordering the production of commercial books and specific documents may be considered. [3]
Competent court and mediation
Disputes over the non-compete obligation and liability of company organs arising from the TTK are commercial cases; as a rule, they are heard by the commercial court of first instance. Territorial jurisdiction is determined by the nature of the claim. In manager liability, TTK Art. 561 regarding the company's registered seat, and, in cases limited to the partnership relationship, HMK Art. 14/2 and other relevant provisions, are examined together. [1, 3]
In commercial receivable and compensation actions whose subject is a sum of money, application to a mediator is required before filing the action. A claim solely for a declaration of the act or for prevention of the activity does not automatically fall within the monetary condition precedent merely because the dispute is commercial. Each of the claims asserted together, and any arbitration clause, must be assessed separately. In disputes based on an employment relationship, the review of jurisdiction and conditions precedent is likewise conducted under its own regime. [1, 4]
An injunction request should not aim to stop competition as a whole
Filing an action does not by itself stop the competing activity. Interim protection may be requested under HMK Art. 389 et seq. and, for unfair competition, additionally under TTK Art. 61. A proportionate request should be made, tied to confidential files shown to be in use, specific misleading statements or work unlawfully diverted. A request that the entire business be shut down for an indefinite period creates problems in terms of prima facie proof and the balance of interests.
Enforcement of the injunction order must be requested within one week of the pronouncement (tefhim) or service of the decision on the requesting party. In a pre-action injunction, the main action must be filed within two weeks of the date enforcement was requested, and the relevant document submitted to the enforcing officer. The effect of mediation as a condition precedent on this second period is regulated in HUAK Art. 18/A/16; it should not be assumed that an application to mediation suspends all injunction periods. Security, expert expenses, court fees and liability that may arise from an unjustified injunction must also be assessed at the outset. [3, 4]
Conclusion
The non-compete obligation in companies cannot be applied without establishing the person's capacity and the legal basis of the claim. In a joint-stock company, the shareholder and the board member; in a limited liability company, the partner and the manager; and the statutory prohibition during office and the contractual restriction after office must be kept apart. A valid permission, a correct vote calculation and clear limits on the activity can prevent disputes. When a breach occurs, the company's right, the partner's ability to sue, provable loss and the applicable period must be built together. A process started without determining which claim will be asserted by whom may end without the merits of an otherwise strong competition allegation ever being reached.
Related articles: Shareholders' Agreement: Voting, Tag-Along and Exit; Unauthorized Signature and Transactions in the Company's Name: Legal Consequences; Removal of a Limited Liability Company Manager and Limiting Authority; Liability of the Company Manager and Board of Directors and Compensation.
Frequently Asked Questions
Can a partner in a limited liability company set up another company?
For a partner who is not a manager, the non-compete provision in the articles of association is examined. The absence of such a provision does not give freedom to use company secrets or to harm the company's interests unlawfully. If the person is also a manager, TTK Art. 626 applies in addition.
Can a board member of a joint-stock company acquire shares in a competing company?
Holding shares with limited liability alone is different from managing a competing business or carrying out transactions on its account. Activity beyond acquiring shares, and any general assembly permission, must be assessed.
In a limited liability company, is a 51 percent majority enough to grant permission to compete?
It is not sufficient on its own. First, the permission procedure in the articles of association is examined. Where the written permission of all the other partners is required, a majority decision does not take its place. On the general assembly route, too, the special quorum in Art. 621 and the exclusion from voting are observed.
Can a person who has been granted permission to compete use trade secrets?
Permission does not automatically authorize the unlimited use or sharing of trade secrets. In a limited liability company, the duty of confidentiality cannot be lifted by the articles of association or by a general assembly resolution.
Can a partner claim the profit the company lost for his or her own account?
In a liability action under TTK Art. 555 brought for the company's loss, payment is requested to the company. An allegation that the partner has a direct personal loss must rest on separate facts and a separate legal ground.
Is the period for bringing an action on the non-compete obligation always three months?
No. The three-month and one-year periods concern the special rights in TTK Art. 396. The periods for manager liability, unfair competition and contractual receivables may differ; the debate on application by analogy in limited liability companies must also be taken into account.
Does resigning as manager eliminate past breaches?
No. Liability that arose during office continues. For new activities after office, the continuing partnership obligations, a valid contract and the provisions on unfair competition are examined separately.
Sources
- Turkish Commercial Code No. 6102 (6102 sayılı Türk Ticaret Kanunu), in particular Arts. 4–5/A, 54–61, 340, 369, 395–396, 436, 480, 553, 555, 560–561, 613, 619, 621, 626, 630 and 644. Ministry of Justice Legislation and Case Law Program.
- Turkish Code of Obligations No. 6098 (6098 sayılı Türk Borçlar Kanunu), in particular Arts. 26–27, 146–149, 154, 179–182, 393, 396 and 444–447. Ministry of Justice legislation text.
- Code of Civil Procedure No. 6100 (6100 sayılı Hukuk Muhakemeleri Kanunu), in particular Arts. 14, 189–190, 219–222 and 389–400. Ministry of Justice legislation text.
- Law No. 6325 on Mediation in Civil Disputes (6325 sayılı Hukuk Uyuşmazlıklarında Arabuluculuk Kanunu), in particular Art. 18/A/15–18. Ministry of Justice legislation text.
- Law No. 4054 on the Protection of Competition (4054 sayılı Rekabetin Korunması Hakkında Kanun), Arts. 4 and 56. Competition Authority, text of the Law.
- Court of Cassation, 11th Civil Chamber (Yargıtay 11. Hukuk Dairesi), 1 June 2022, E.2021/1602, K.2022/4312; majority and dissenting opinion. De Jure text of the decision.
- Court of Cassation, 11th Civil Chamber, 26 March 2026, E.2025/4723, K.2026/1754. De Jure text of the decision.
- Court of Cassation, 11th Civil Chamber, 26 September 2024, E.2023/4877, K.2024/6822. De Jure text of the decision. Access to the De Jure links may require an account.
- Pinar Asik, "Prohibition of Competition in Joint-Stock Companies (TTK Art. 396)" (Anonim Şirketlerde Rekabet Yasağı (TTK m.396)), Ankara Barosu Dergisi, 2017/4, pp. 163–202; in particular the scope in terms of person, activity and time, and the consequences of a breach. Text of the article.
- Murat Sahin, "Exercise of Rights of Action in Cases of Limited Liability Company Managers' Conduct in Breach of the Non-Compete Obligation" (Limited Şirket Müdürlerinin Rekabet Yasağına Aykırı Davranışlarında Dava Haklarının Kullanılması), Journal of the Institute of Social Sciences of Pamukkale University (Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi), 2021, issue 42, pp. 334–349, DOI:10.30794/pausbed.795268; in particular pp. 339–346. Text of the article.