A company manager or board member does not automatically become liable to pay damages because the company has suffered a loss. Unlawful or culpable conduct in breach of the law or the articles of association, the loss, and the causal link between that conduct and the loss are assessed together. Restoring the reduction in the company's assets may be requested by the company and by each shareholder; however, a shareholder must ask that the amount corresponding to the company's loss be paid to the company. The liability provisions of the Turkish Commercial Code (TTK) also apply to limited company managers. [1]
In an action brought by a shareholder who claims that "money was taken out of the company and the value of my shares has fallen", the first question is whether the loss belongs directly to the shareholder or to the company. The manager's duties, the date of the transaction, the calculation of the loss, any discharge resolution and the time limits are then examined. Where a discharge has been granted, a six-month preclusive period may be decisive for certain shareholders, ahead of the general statute of limitations. [1]
Under what conditions does the liability of a manager or board member arise?
Breach of the duty of care and loyalty
For joint-stock companies, TTK Article 369 requires board members and other persons entrusted with management to act with the care of a prudent manager and to safeguard the company's interests in good faith. For limited companies, TTK Article 626 regulates the duty of care and loyalty of managers and persons entrusted with management. Fault-based liability under TTK Article 553, and the complementary provisions of Articles 555–561, also apply to limited companies pursuant to Article 644. [1]
Sales to a related person at a price markedly below market conditions, payment for a service that was never provided, or the unjustified failure to take steps that would secure the collection of a company receivable may be subject to liability review. However, the mere fact that a transaction looks suspicious is not enough. The duty that was breached, the manager who took part in the process and the loss the company actually suffered must be shown.
Separating commercial failure from culpable management
The failure of a new investment to produce the expected return is not, in itself, proof of fault. The information available on the date the decision was made, the research carried out, the risk assessment, any conflict of interest and the company's interests are examined together. A market downturn that emerges later does not by itself make a decision that was reasonable at the outset unlawful. Conversely, transferring company resources to a company of the manager's own without any review cannot be explained merely by the phrase "commercial discretion". This assessment applies the statutory standard of care to the concrete transaction. [1]
The company's debt and the manager's liability for damages are different matters. An invoice that the company has not paid does not make the manager the debtor of that same invoice. A separate personal undertaking by the manager, a special statutory liability or the fulfilment of the conditions for a harmful act is required. Public debts and personal guarantees are subject to legal regimes separate from the company-loss action discussed in this article.
How are direct and indirect company losses distinguished?
The nature of a loss is determined not by how the claimant feels victimised, but by which asset base first suffered the reduction. If the company's money or property has decreased, the company suffers a direct loss. A fall in the economic value of the shares as a result is, as a rule, an indirect loss for the shareholder. [1][2] This should be considered together with Claims to Dividends from the Company.
| Situation | Basis of the claim | Asset to which the compensation is directed |
|---|---|---|
| Transfer of company property at an undervalue | The company's own loss; TTK Articles 553 and 555 | The company |
| Fall in a shareholder's share value due to the same transaction | The shareholder's claim to remedy the company's loss; TTK Article 555 | The company |
| Independent breach of a shareholder's personal right and resulting loss | Direct loss linked to the concrete breach | The injured shareholder, if the conditions are met |
| Creditor's difficulty in collection due to a reduction in company assets | Bankruptcy regime under TTK Article 556 for claims based on company loss | The allocation rules of the bankruptcy regime |
Hypothetical example: Suppose a machine belonging to the company was sold to a related person below its value. A shareholder holding 20 percent cannot convert the indirect loss into a personal claim by claiming 20 percent of the calculated company loss for themselves. The claim to remedy the company's loss is brought in favour of the company. The actual loss is determined by examining the value of the machine as well as the terms of the sale, the collection of the price and the economic substance of the transaction.
The Court of Cassation's approach to the form of the claim
In a decision of the 11th Civil Chamber of the Court of Cassation (Yargıtay 11. Hukuk Dairesi) dated 4 June 2024, E.2023/1197, K.2024/4631, a shareholder alleged that company resources had been transferred to other companies and asked that the amount corresponding to their share of the loss be paid to them. The rejection was upheld on the ground that the loss was direct for the company and indirect for the shareholder, and that the claim had to be made in favour of the company. The first-instance assessment described in the decision also stated that a general assembly resolution was not required for a shareholder's liability action. [2]
This decision does not mean that the transfer allegations were proven on the merits. What it shows is the importance, for the hearing of the case, of a payment claim that corresponds to the nature of the loss. A reference to non-distribution of profits likewise does not turn every allegation about a reduction in company resources into a personal dividend claim.
Who may bring the liability action, and against whom?
The right to sue of the company and of each shareholder
TTK Article 555 gives each shareholder, alongside the company, the right to request compensation for the company's loss. No minimum shareholding percentage is required for this right. A shareholder becomes a claimant not because they represent the company, but on the basis of the right the law grants them. In an action brought by the company itself, the will of the competent organ to sue, the power of representation and any conflict of interest with the managers must be examined separately. The debate about the organ's decision to sue in the company's name must not be confused with the shareholder's independent right to sue. [1][2][6]
The defendants are the persons alleged to be responsible for the breach of duty that caused the loss. The board of directors is not presented as a separate defendant with its own legal personality; the members and managers whose liability is asserted are identified. The fact that the manager of a limited company is not a shareholder does not remove managerial liability. Leaving office does not automatically erase breaches committed during the term. On the other hand, holding a majority stake alone is not enough to treat a person as liable, as a manager, for every transaction. [1] Details of this stage are also discussed in the article Annulment of a Company General Assembly Resolution.
Distinguishing the creditor's position in bankruptcy
Under TTK Article 556, in the bankruptcy of a company, creditors are also granted the right to request compensation for the company's loss. However, the claims of shareholders and creditors are first raised by the bankruptcy administration. If the administration does not bring the action, a shareholder or creditor may sue under the conditions set by law. There is a special order for allocating the amount obtained among the claimant creditors, the claimant shareholders and the bankruptcy estate, and Article 245 of the Enforcement and Bankruptcy Law (İİK) is also reserved. [1]
The company's insolvency, or enforcement proceedings started against it, does not by itself replace this bankruptcy regime. If a creditor alleges a direct loss to its own assets caused by an independent act of the manager, the conditions of that claim are assessed separately. Presenting the non-collection of a company receivable as a direct loss under a different label is not enough. For a broader framework, see the article Liability of a Liquidator and Their Removal from Office.
How are transfers of duties and managers' defences assessed?
In a joint-stock company, the delegation of management is assessed together with the articles of association and the internal regulations under TTK Article 367. Documents showing the sharing of authority must explain not only who signed, but also who bears responsibility for research, decisions and implementation. TTK Article 553(2) provides that, in a lawful delegation of duties or powers, the delegating manager is not held responsible for the acts and decisions of the delegate, unless it is shown that reasonable care was not taken in choosing the delegate. [1]
This protection does not mean that a non-delegable duty has been delegated. For joint-stock companies, the duties under Article 375 are assessed separately, and for limited companies, those under Article 625. Conversely, TTK Article 553(3) expressly states that a person cannot be held responsible for irregularities outside their control. Unlimited liability cannot be derived from an abstract duty of supervision. [1]
In practice, each defence must be tested against documents:
• "I did not carry out the transaction" defence: The period of office, the signing arrangements, the board resolution and the actual role in the process are examined together.
• "I cast a dissenting vote" defence: It is important that the dissent is recorded in the minutes; in addition, it is examined whether the person had a separate omission.
• "I relied on the expert report" defence: The scope of the report, its independence, the data it used and any visible warning signs are assessed.
• "The general assembly approved it" defence: The scope of an approval is different from a discharge. For limited companies, TTK Article 625(2) states that an approval by the general assembly, where one is provided for, does not remove or limit the manager's liability; the provisions of the Turkish Code of Obligations (TBK) Articles 51–52 on determining compensation are reserved. [1]
How is liability shared among several managers?
The differentiated joint liability under TTK Article 557 prevents each manager from being automatically held liable to the same extent for the same loss. The loss that can be attributed to a person is determined by that person's fault and the circumstances of the event. The claimant may sue several liable persons together for the whole loss and ask that each person's compensation obligation be determined in the same action. [1]
This system is not a division of the loss by the number of managers. For example, a person who plans the transfer of resources, a person who gives the payment instruction and a person who neglects a specific supervisory duty may hold different positions. For each defendant, the duty, the act or omission, the date and the effect on the loss must be explained. Where a manager takes office after the transaction, this is also taken into account; if there is a separate breach in a later period that increased the loss, its basis must be shown.
The recourse relationship between the liable persons is not the same as their obligations towards the injured party. Since the same loss cannot be recovered more than once from several persons, payments made and collections obtained in other proceedings must be tracked.
How is company loss proven and calculated?
Linking the transaction, the duty and the evidence
Article 190 of the Code of Civil Procedure (HMK) sets out the general rule on burden of proof, and Article 194 regulates the particularisation of facts. Instead of stating that "the company was badly managed", the date, parties and amount of the transaction, the obligation it breached and the supporting evidence must be set out. The current text of TTK Article 553 is fault-based. A case cannot be built on a general presumption that a manager is at fault merely because they hold office. The assessment of proof of fault is carried out together with the legal basis of the claim and the concrete obligation. [1][3]
At the outset of the review, the articles of association, trade registry records, the allocation of duties, signing authorities and board resolutions are gathered. For a disputed transaction, the contract, invoice, bank movements, delivery records and correspondence are compared. A bank outflow alone does not prove that a payment was made without any return; an invoice alone does not in every case prove that the service was actually received.
Where a document is not in the claimant's possession, a request for the whole company archive without explanation is not a reason for the court to order its production. Production is requested under Articles 219–221 of the HMK, stating where the document is and which fact it would show. The consequences of non-production are assessed under the conditions set by law; not every failure to produce leads to automatic acceptance. Data obtained unlawfully, however, may not be used under Article 189(2) of the HMK. [3] Readers facing a similar situation may find the article Right to Information and Inspection in Limited and Joint-Stock Companies useful.
Making the loss calculation auditable
The loss report must explain what the company's assets would have been had the disputed transaction not taken place. For a sale at an undervalue, a comparable valuation is examined; for an uncollected receivable, collectability; for an allegedly unperformed service, actual performance. Lost-profit calculations should not rest solely on an optimistic business plan; the likelihood of realisation must be supported by concrete data.
If the transaction also brought some economic benefit to the company, that is not ignored. Amounts refunded, collections and payments that cover the same loss are separated out. An expert may carry out the technical and financial calculations; the final assessment of which conduct gives rise to liability in law belongs to the court. [3]
A shareholder's right to information and inspection can help bring documents to light. However, waiting for the outcome of an information request or a special audit application should not be assumed, by itself, to preserve the time limits for the liability action.
How do discharge and limitation affect the right to sue?
The scope of discharge and the six-month period
Under TTK Article 558(2), a discharge removes the right to sue of the company, of the shareholders who voted in favour of it and of those who acquired shares knowing of the discharge resolution, in respect of the matters covered by the discharge and disclosed as facts. For the other shareholders, the right lapses when six months have passed from the date of the discharge. Voting against a discharge does not give an unlimited period to sue. [1]
For that reason, the date of the discharge resolution matters, as do the information presented to the general assembly, the agenda and minutes, the balance sheet disclosures and how each person voted. In a joint-stock company, approval of the balance sheet under Article 424 may produce the effect of a discharge under its conditions; the deliberate concealment situations set out in the Article prevent that effect. Not having been discharged, however, does not by itself prove the manager's fault or liability for damages. [1]
A discharge resolution cannot simply be set aside by a later general assembly resolution; the annulment provisions are reserved under TTK Article 558(1). Time limits for challenging the discharge resolution and for the damages action must be tracked separately. In liability for incorporation and capital increases, the special settlement and discharge limitations in Article 559 must also be observed. [1] For more detail on this topic, see our article Statute of Limitations and Preclusive Periods.
Two years, five years and longer criminal-law limitation
| Period | Starting point or scope | Legal effect |
|---|---|---|
| Six months | Date of the discharge, for other shareholders under TTK Article 558(2) | Preclusive period for the relevant right to sue |
| Two years | Claimant learns of the loss and of the person responsible | Limitation period under TTK Article 560 |
| Five years | Date on which the loss-causing act occurred | General outer limit under TTK Article 560 |
| Longer criminal-law limitation period | Where the act constitutes a crime and a longer period applies under the Turkish Penal Code (TCK) | Special application under TTK Article 560 |
The date of learning, the date of the act and the date of the discharge need not coincide. In a file containing several transactions, periods are assessed transaction by transaction. Lodging a criminal complaint does not show that the act necessarily constitutes an offence, or that all periods are automatically extended. [1]
Where mediation was applied to as a condition of suit, limitation is suspended from the date of the application to the mediation office until the final minutes are drawn up, and the preclusive period does not run during that time. This protection does not revive a right that has already expired; the remaining period must be calculated from the application date and the date of the final minutes. [4]
How are the competent court, mediation and the type of action determined?
Jurisdiction, venue and condition precedent
A dispute over a manager's liability arising under the TTK is a commercial case. TTK Article 561 provides for the action to be brought before the commercial court of first instance at the place where the company's head office is located. That provision should not be read as establishing exclusive jurisdiction in every possible situation. The jurisdictional regime of the specific action, including the application of Article 14(2) of the HMK because of the partnership relationship and the capacity of the parties, is also checked separately. [1][3]
For a commercial damages claim for a sum of money, pre-litigation mediation is in principle a condition of suit under TTK Article 5/A. Special situations, such as arbitration agreements, are assessed separately. The application must clearly identify the persons alleged to be liable, the subject of the dispute and the payment sought in favour of the company. The final minutes recording the failure to reach agreement are attached to the petition; a case in which no application was made at all is not the same procedural situation as one in which the minutes exist but were not attached to the petition. [1][4]
Where the amount of loss is not fixed at the outset
Because of the amendment that entered into force on 31 July 2026, it is not correct to propose, in new actions, an indeterminate-claim action based on former HMK Article 107. Law No. 7589 repealed that article and added a fourth paragraph to HMK Article 109. Where a divisible claim is partly sued, the claim may be increased once in the same action, before the investigation phase closes, without being subject to the prohibition on extending the claim; the limitation for the increased part is deemed interrupted as of the filing date. [3][5]
Provisional Article 1(10) of Law No. 7589 preserves the application of former Article 107 to actions opened before the amendment entered into force. Old and new files therefore cannot be handled with the same approach. The right to bring a partial action also does not remove the need to explain the transactions, the loss items and the claim sought. The increase of the claim, court fees, interest and the defendant's right to defend are considered separately. [5]
What do interim protection and enforcement of the decision provide?
Protecting evidence and the possibility of recovery
Where there is a risk that ledgers or electronic records will be lost, or that their examination will become significantly more difficult, preservation of evidence may be considered under HMK Article 400 et seq. The data to be protected and the danger must be specified. A preservation order does not mean that compensation is due. [3]
To secure the collection of a money claim, precautionary attachment is assessed under Articles 257 et seq. of the Enforcement and Bankruptcy Law (İİK) and its conditions. The approximate proof of the claim and of the ground for attachment, together with the security regime, are taken into account. A general suspicion that assets are being moved away does not in itself justify an unlimited measure over all of a manager's assets. The interim injunction under the HMK and the precautionary attachment provided for money claims under the Enforcement and Bankruptcy Law (İİK) are not automatic equivalents of each other. [3][7]
Compensation returns to the company's assets
A judgment accepting a company-loss claim ensures that the amount awarded is collected for the company's benefit. The fact that a shareholder conducted the case does not authorise them to use the money personally or to withdraw it in proportion to their shares. Alpaslan's study discusses the relationship between a shareholder's independent position as claimant and the enforcement of the judgment; it explains the view that a shareholder may bring the judgment into enforcement, together with the requirement that payment be made to the company. At the enforcement stage, the status of the parties and the operative part of the judgment must be examined together. [1][6]
Filing a shareholder's damages action does not automatically remove the manager from office. For continuing management risks, removal or restriction of authority is treated separately. Legal liability is also not automatic criminal liability; where a crime is alleged, the elements of the relevant offence are investigated separately. [1]
Costs may require the shareholder to fund the action. Cost sharing according to equity under TTK Article 555(2) applies on condition that legal and factual reasons justify the action and that the costs cannot be charged to the defendant. The provision does not create an up-front fee exemption or a free-litigation guarantee for each shareholder. [1]
To clarify transactions that remain unexplained, appointment of a special auditor is available; for continuing management risks, removal of a limited company manager is available. Both are separate remedies subject to their own conditions.
Conclusion
In a liability action against a company manager or board member, the right starting point is to identify the concrete transaction and the asset base that suffered the loss. Compensation for company loss is requested in favour of the company; each manager's personal duties, faults and contributions to the loss are examined separately. Discharge, the six-month period and limitation must be handled together with the process of gathering evidence.
Preparation of the file should rest on a chronology of transactions and duties, an auditable loss calculation, the correct parties, mediation and the applicable procedure. In this way, the outcome that can be obtained is clear from the outset: it is not a change of management or a personal payment to a shareholder, but a determination of which loss must be remedied and in whose favour.
This article is for general information only. In a specific file, the claim, the parties and the time limits must be examined separately on the basis of the company's documents.
Frequently Asked Questions
If the company makes a loss, does the manager pay the full amount of the loss?
No. The culpable breach of duty, the loss and the causal link are assessed. The occurrence of a commercial risk alone is not sufficient; where there are several liable persons, the loss attributable to each one is determined separately. [1]
Can a minority shareholder bring a liability action alone?
Under TTK Article 555, each shareholder may request that the company's loss be remedied. No minimum percentage is required; the compensation is sought to be paid to the company. [1][2]
Because of a company loss, can I claim for myself the amount corresponding to my share?
A company loss reflected in the value of shares is, as a rule, an indirect loss. In that case, payment is sought to the company. A personal payment requires separate conditions for an independent direct loss. [1][2]
If I vote against a discharge, does my period to sue become unlimited?
No. For the other shareholders under TTK Article 558(2), there is a six-month preclusive period from the date of the discharge for the events that were explained and covered by the discharge. [1]
If the manager resigns, can an action not be brought for earlier transactions?
Resignation does not remove breaches committed during the period of office. Whether the breach can be attributed to a period of office and to a person, the loss, the discharge and the time limits are assessed separately. [1]
Can a company creditor always pursue the manager directly?
No. A company debt does not automatically become the manager's debt. For a claim based on company loss, the bankruptcy regime under TTK Article 556 applies; for a direct personal loss or a special liability claim, the separate conditions are examined. [1]
Sources and legal bases
- Law No. 6102 on the Turkish Commercial Code (Türk Ticaret Kanunu, TTK), especially Articles 4–5/A, 367, 369, 375, 424, 553–561, 625–626, 630 and 644. Ministry of Justice, UYAP Legislation and Case-Law Program, text consulted and table of amendments: Official text or publication link
- 11th Civil Chamber of the Court of Cassation (Yargıtay 11. Hukuk Dairesi), 4 June 2024, E.2023/1197, K.2024/4631. Ministry of Justice UYAP, official full text: Official text or publication link
- Law No. 6100 on the Code of Civil Procedure (Hukuk Muhakemeleri Kanunu, HMK), especially Articles 14, 107–109, 189–194, 219–221, 266, 389 and 400. Ministry of Justice UYAP: Official text or publication link
- Law No. 6325 on Mediation in Civil Disputes, especially Article 18/A, paragraphs 2, 15, 16 and 18. Ministry of Justice UYAP: Official text or publication link
- Law No. 7589, Articles 19–20, provisional Article 1(10) and Article 26; text as adopted by the Grand National Assembly of Türkiye and Official Gazette record information: Official text or publication link ; Official text or publication link
- Mehmet Emin Alpaslan, “The Legal Status of Shareholders’ Liability Actions Against Board Members for Company Losses and the Enforcement of Judgments Obtained in Those Actions” (Pay Sahiplerinin Şirket Zararı Nedeniyle Yönetim Kurulu Üyelerine Karşı Açtıkları Sorumluluk Davalarındaki Hukukî Statüsü ve Bu Davalarda Alınan İlâmların İcrası), TBB Journal (TBB Dergisi), 2024, issue 170, pp. 223–266: Official text or publication link
- Law No. 2004 on Enforcement and Bankruptcy (İİK), especially Articles 257–259. Ministry of Justice UYAP: Official text or publication link