What Legal Remedies Are Available Against a Shareholder or Manager Who Diverts a Company’s Customers to Their Own Business?

When Does Diverting Customers Become Unlawful?

Operating in the same sector is not prohibited in itself

The system of free competition does not, as a rule, prevent persons from operating in the same sector using their professional knowledge and experience. A former shareholder, manager or employee who has left the company lawfully may work with different customers, set up his or her own business and make use of general professional experience. The mere establishment of a competing business, the preference of some of the former company’s customers for the new business, or the parties’ being in the same market is not sufficient to reach a finding of unfair competition.

In its decision dated 04.03.2010, the 11th Civil Chamber of the Court of Cassation (Yargıtay) emphasised that one cannot be content with comparing customer lists; the characteristics of the sector, whether the customers had previously worked only with the claimant, and whether they left the relationship because of the respondents’ acts must be investigated. The decision shows that the distinction between “customer overlap” and “unlawful customer transfer” is central in terms of proof. 3

Unlawfulness is determined by the method and the information used

There is no property right in a customer base; the customer is free to choose with whom to work. However, this freedom does not legitimise the use of confidential information acquired within the company, of a relationship of trust, or of management authority in a manner contrary to the rule of good faith. Depending on the characteristics of the specific case, the following conduct may be an indicator of unlawfulness:

• Copying the company’s current customer list, CRM data, direct contact details of decision-makers or purchasing habits.
• Making targeted offers using company-specific pricing, discounts, costs, profit margins, quotation templates or renewal dates.
• Making statements to customers contrary to the truth, to the effect that the former company has closed, cannot provide services, has lost its authority, or that the work is being continued by the new business.
• Transferring the company’s e-mail account, domain name, telephone line, social media account or customer communication channel to the new business, or creating in the customer a mistaken impression of continuity.
• Moving the company’s employees or sales team to the new business in a planned and collective manner in order to carry the company’s customer relationships with them.
• Redirecting to an affiliated business an order that should have come to the company, or concealing the opportunity from the company, while the shareholding or managerial role continues.

General knowledge and experience must be distinguished from trade secrets

A person’s professional accumulation, sector experience and the general knowledge remaining in his or her memory cannot be regarded as belonging wholly to the former company. A company seeking protection must explain what information is not generally known, has economic value, has been kept secret by the company, and how it was used in the specific act. In its decision dated 09.05.2017, the 11th Civil Chamber of the Court of Cassation accepted that carrying on a new activity with general knowledge and experience did not constitute unfair competition, since “which trade secret or confidential information was used, in which job and how” could not be proved concretely. 4

The Person’s Capacity in the Company Changes the Applicable Law

An ordinary shareholder of a joint-stock company has no automatic non-competition obligation

Merely being a shareholder of a joint-stock company does not, as a rule, give rise to the non-competition obligation specific to board members under TCC Art. 396. However, if the shareholder is also a board member, manager, employee or a party to a shareholders’ agreement, additional obligations arising from these capacities may apply. A shareholder’s unlawfully obtaining company secrets, diverting customers by misleading statements, or abusing his or her dominance over the company’s organs may also be subject to the general provisions on unfair competition and liability.

The duty of loyalty and non-competition of a joint-stock company board member is heavier

Board members are obliged to perform their duties with the care of a prudent manager and to look after the company’s interests in accordance with the rule of good faith. Unless the general assembly permits, they cannot, on their own or another’s account, carry out the type of commercial business falling within the company’s business purpose, and cannot enter a company engaged in the same type of business as a shareholder with unlimited liability. In case of breach, the company may consider one of the options of damages, treating the transaction as having been made on the company’s account, or having the benefit arising from a contract made on a third party’s account left to the company. For these special rights, the three-month period from becoming aware, and in any case the one-year period, must be observed separately. 1

The duty of loyalty of a limited liability company shareholder is broader than a non-competition obligation

Shareholders of a limited liability company are obliged to protect the company’s secrets and to refrain from conduct that may harm the company’s interests. The company agreement may also provide for a non-competition obligation for the shareholders. For this reason, the absence of an express non-competition obligation in the company agreement does not automatically make lawful a shareholder’s covertly transferring company customers to another business, or transactions of private benefit that harm the company’s purpose. The duty of loyalty under TCC Art. 613 and a contractual non-competition obligation must be assessed separately. 1

A manager of a limited liability company is under an express non-competition obligation

A manager of a limited liability company, and a person charged with management, is obliged to look after the company’s interests within the framework of the rule of good faith. Unless provided otherwise in the company agreement or unless all the other shareholders have given written permission, the manager cannot engage in an activity that competes with the company. A serious breach of loyalty is important in terms of the manager’s removal, restriction of management and representation authority, and liability for damages. 1

For a departing employee, consultant or manager, a distinction is made by contract and period

The duty of loyalty while the employment relationship continues and the non-competition obligation after the employment relationship are not the same. A post-termination non-competition obligation may be subject to the special conditions of Turkish Code of Obligations (TBK) Art. 444-447. A contractual prohibition arising from a shareholding or share transfer relationship cannot automatically be characterised under the provisions on an employee’s non-competition. Where a person is at the same time a shareholder, manager and employee, it must be separated out which act was done in which period, in which capacity and in breach of which contract.

How Do the Unfair Competition Provisions Apply to Diverting Customers?

The protection of honest and undistorted competition is the basic principle

TCC Art. 54 regards as unfair and unlawful deceptive conduct or commercial practices contrary to the rule of good faith that affect relationships between competitors or between suppliers and customers. For unfair competition, a direct competitive relationship between the parties, a gain by the perpetrator or the actual occurrence of loss is not always required; the danger of loss may also give rise to a claim for protection. On the other hand, how the conduct distorts honest competition must be made concrete. 1

Inducing breach of contract and enticing away employees are examined separately

Inducing a customer to breach an existing contract, inducing the company’s employees to disclose the employer’s production or business secrets, or transferring company personnel together with the customer base in a planned way may be assessed as unfair competition. However, not every recruitment or every winning of a customer is “enticement”. It must be shown which contract was breached by what conduct and for what purpose.

Unauthorised use of quotations, calculations, plans and trade secrets may give rise to protection

Unauthorised use of quotations, calculations, plans and work products ready for marketing that have been entrusted or unlawfully obtained, and the unlawful disclosure or exploitation of production and business secrets, are among the examples of unfair competition under TCC Art. 55. Unlike the company’s standard price list, customer-specific quotation history, renewal date, special discount threshold and decision-maker information may receive stronger protection depending on the access and confidentiality conditions. 1

Misleading statements and disparagement distort the freedom of customer choice

Making false, misleading or needlessly offensive statements about a competing company, product, employees or managers may constitute unfair competition because it influences the customer’s decision by dishonest means. In a dispute in which allegations of disparaging the claimant company’s products and using its customer portfolio together with trade secrets were supported by witnesses and other evidence, the Court of Cassation reviewed the finding of unfair competition. 5

How Should Evidence Be Collected and Preserved?

The claim must be made concrete by person and event

General statements such as “our customers were stolen” or “the CRM data was used” are not sufficient. For each customer or transaction, as far as possible, the following link should be established: the earlier relationship with the company, the access authority of the person who knew the information, the time the data was obtained, the contact by the new business, the characteristics of the offer made, the customer’s reason for the decision, the sale made and the financial effect on the company.

E-mail, WhatsApp and digital records must be obtained lawfully

Under the Code of Civil Procedure (HMK) Art. 199, data in electronic form may have the character of a document. At the same time, it is examined by whom, from which device and on what date a screenshot was taken; the integrity of the conversation; the identity of the account holder; whether the file has been altered; and whether the record was lawfully obtained. Corporate e-mails on company systems, access logs, CRM export records and file download movements are different from unauthorised access to personal accounts. The review should be limited to authority and purpose; personal data and the confidentiality of communications must be respected. 2

CRM and access logs are used to build a timeline

It should be determined which customer file the user accessed, whether he or she made bulk exports, whether the access was consistent with the duty, and whether there was unusual downloading or forwarding before departure. So that no impression arises that the logs were produced afterwards, the system clock, retention policy, authorisation records and backups should be preserved together.

Quotations, contracts, invoices and bank records show the economic relationship

The date, scope, product, discount and delivery terms of the quotations given by the old and the new business to the same customer can be compared. Invoices, bank movements, order records, shipping documents, meetings with the customer and the sales staff’s bonus records help establish the link between the act and the economic result. If the commercial books are kept properly, they are important in the assessment of evidence under HMK Art. 222. 2

Customer and employee statements should be assessed together with objective records, not alone

Why the customer changed supplier, who called whom and when, and what statement was made can be established by witness testimony. But an employment relationship, personal hostility or an economic tie with the parties can affect the weight of a statement. Statements should be supported by e-mails, quotations, meeting records, telephone traffic and commercial records.

Merely comparing customer lists is not enough

The 11th Civil Chamber of the Court of Cassation has expressly stated that the similarity of customer lists will not lead to a result without examining the structure of the sector, the number of customers, whether the customers work with more than one supplier and the reason the relationship changed. Particularly in markets with a limited number of buyers, it may be natural for two competitors to sell to the same customers. An expert review must assess not only lists but also data on time, price, access, conduct and causation together. 3

First Legal and Corporate Steps When a Violation Is Suspected

First review and protection steps

The internal review must not turn into a means of producing evidence

The internal review should assess existing records through protected and authorised access. Entering a person’s private account without permission, making fake customer contact, creating untrue correspondence or unlawfully inspecting a personal device may impair the admissibility of the data obtained as a basis for the judgment, and may also give rise to liability.

A notarial notice may be useful, but it is not mandatory in every case

A notice is functional in making the violation concrete, in conveying the demand to cease and the confidentiality of the information. However, if there is urgent loss of evidence or customer transfer is continuing, merely waiting for the result of a notice may increase loss that is difficult to repair. The options of notice, injunction and evidence preservation should be planned together according to the specific risk timeline.

What Legal Routes Can Be Used?

Declaration of unfair competition

A declaration of whether the act is unfair may be requested to remove continuing uncertainty even if the conduct has ended, or to establish the basis of later claims. The legal interest, the effect of the act and the scope of the claim must be shown clearly.

Cessation of unfair competition and removal of the material situation

Cessation of continuing customer contacts, misleading messages, and the use of a domain name or communication channel can be requested. Removal of the material situation resulting from unfair competition may lead to results such as correcting false statements, removing infringing content, preventing the use of unlawfully obtained data and, where necessary, destruction of effective means. The claim must be framed so that it is technically workable and proportionate. 1

Material damages and the benefit obtained by the respondent

Where there is fault, the company’s actual loss caused by the act and the profit it has been deprived of can be claimed. TCC Art. 56 allows the judge also to award, as damages, the equivalent of the benefit the respondent is considered likely to have obtained as a result of the unfair competition. This option is not an automatic method of recovery in every case in which the calculation of loss is uncertain; the benefit the respondent obtained from the relevant activity and its link with the violation must be examined. 1

Liability of managers and company-internal claims

If the act was committed by a board member or manager during the term of office, manager liability under TCC Art. 553 may also come into play alongside unfair competition claims. In a limited liability company, a serious breach of loyalty may be the basis for a request that the court remove or restrict the manager’s management and representation authority. The company’s loss and the shareholder’s direct personal loss must be separated; payment of the company’s loss to the shareholder should not be requested.

Interim injunction and evidence preservation

If, because of a change that may occur in the existing situation, obtaining the right would become significantly more difficult, or delay would cause serious harm, an interim injunction can be requested under HMK Art. 389. For unfair competition, TCC Art. 61 separately regulates measures such as preserving the existing situation, preventing the conduct and correcting false statements. If there is a possibility that the evidence will be lost or its presentation will become difficult, evidence preservation under HMK Art. 400 may be considered. 12

Possibility of criminal liability

TCC Art. 62 provides for criminal liability for the intentional commission of certain acts of unfair competition, upon the complaint of one of the persons entitled to sue. The connection of the act with trade secrets, an information system or personal data may also bring other types of offences into play. A criminal complaint should not be used to cure a lack of proof in the civil case; the act, intent and the time limit for complaint must be examined separately. 1

Who Can Bring the Action and Against Whom Is the Claim Directed?

If the main loss arose in the company’s assets, the claimant is as a rule the company

The loss of customers and turnover occurs in the economic sphere of the company as a legal entity. Claims for declaration, cessation and remedying the company’s loss are therefore, as a rule, asserted by the company. An indirect decrease in the value of a shareholder’s share is not in itself sufficient for the shareholder to claim the company’s loss in his or her own name. If the shareholder has a direct personal loss or an independent contractual right of his or her own, that claim is assessed separately.

The person who carried out the act and the new business that benefited may be assessed together

Alongside the shareholder, manager or employee who carried out the diversion of customers, the liability of the new business that knowingly used trade secrets, continued the misleading statements or benefited from the act may also come into play. Which respondent took part in which act, and fault and the causal link for damages, must be shown separately.

The employer’s liability and the customers’ right to sue

If the act of unfair competition was committed by an employee in the course of his or her work, claims for declaration, cessation and removal of the material situation can also be directed against the employer under the conditions of TCC Art. 57. Customers whose economic interests are harmed or threatened with harm may also have the right to sue within the limits of TCC Art. 56. 1

How Are Loss and Causation Calculated?

A fall in turnover alone does not prove loss and causation

Turnover may change for many reasons, such as market contraction, price increases, service quality, staff changes, supply problems, the customer’s own budget or the entry of new competitors. A comparison of sales before and after the violation should therefore be made taking into account sector data, customer-based movement, gross profit, variable costs and substitute sales.

The loss calculation should be built by customer and period

The earlier order frequency of the customer alleged to have been lost, the contract term, the probability of renewal, the margin and the actual volume of business that moved to the new business should be determined. Gross turnover cannot be treated entirely as loss; expenses saved and costs not incurred must be deducted. The respondent’s gain and the claimant’s loss do not have to be the same amount.

The question to the expert should not take the legal characterisation away from the court

Instead of asking the expert merely for an abstract legal opinion such as “is there unfair competition?”, technical matters such as customer transition times, the nature of the data used, price similarity, commercial book movements and profit calculation should be asked. The determination of unlawfulness and of the applicable norm belongs to the court.

Critical Distinctions in Terms of Time Limits, Jurisdiction and Mediation

Unfair competition actions have special time limits

Under TCC Art. 60, civil actions must be brought within one year from the date the person entitled to sue learns of the act and the perpetrator, and in any case within three years from the occurrence of the act. If the act also constitutes an offence subject to a longer criminal limitation period, this period may also apply to civil actions. For continuing or repeated acts, the time and effect of each act must be examined separately. 1

A shorter special period may apply to a board member’s non-competition obligation

The company’s options under TCC Art. 396 must be exercised within three months from the other members’ learning of the transaction and in any case within one year from the occurrence of the transaction. The same event may have other time limits in terms of unfair competition or manager liability; the claims should not be reduced to a single time limit. 1

The court with jurisdiction and the condition precedent to suit are determined by the type of claim

Actions arising from unfair competition are, as a rule, commercial cases. However, where the dispute is combined with an employment contract, a shareholding, a share transfer agreement or another special relationship, the assessment of jurisdiction may be affected. Mediation as a condition precedent to suit applies to commercial receivable and damages claims whose subject is money; for claims for declaration, cessation, injunction and mixed claims, each claim should be classified separately. An interim injunction and evidence preservation may be requested separately according to the need for urgent protection before the main action.

Basic Principles Emerging from Court of Cassation Decisions

Importance in practice of selected Court of Cassation decisions

The decisions show that not every customer move is unfair competition; conversely, protection may be available where company secrets, misleading statements and planned transfer are shown with concrete evidence. It is not correct to apply a single decision mechanically to a different sector and contract structure.

Preventive Corporate Measures to Protect the Customer Base

• Which customer data, pricing, cost, quotation and renewal records are confidential should be determined by written policy and access classes.
• Role-based access, export logging, two-step verification and regular authorisation checks should be applied in CRM and on the file server.
• The confidentiality, non-competition, intellectual property, data return and non-solicitation of customers provisions in shareholder, managerial, employment and consultancy contracts should be prepared according to the person’s actual capacity.
• On departure from office, access should be terminated the same day; corporate devices, accounts, physical documents and authorisation documents should be taken back by record.
• Customer relationships should not be left with a single person; corporate e-mail, a shared CRM and backed-up authorisation should be used.
• In the company agreement and the shareholders’ agreement, the mechanisms of loyalty, non-competition, decision-making authority, evidence preservation and dispute resolution should be built so that they do not contradict one another.

Conclusion

In an allegation of diverting a company’s customers to one’s own business, the decisive question is not “who worked with the same customer?” but by what method the customer was reached, what information was used, whether there was an obligation arising from the person’s capacity in the company, and what concrete effect the conduct had on the company. Establishing a new business in the same sector and a customer’s changing supplier may be part of free competition. By contrast, the use of company secrets, special pricing information, management authority or misleading statements may give rise to unfair competition, breach of the duty of loyalty and liability of managers. Effective legal protection comes not merely from bringing a case after the event has arisen, but from keeping access records in advance, preserving evidence lawfully, correctly separating claims and time limits, and assessing the need for an injunction without delay.

Frequently Asked Questions

Is it prohibited in every case for a former shareholder to work with the company’s customers?

No. Customers may choose freely, and a former shareholder’s operating in the same sector is not by itself unfair competition. Additional elements are required, such as the use of company secrets, a misleading statement, a contractual prohibition or a breach of loyalty during the term of office.

Is the presence of the customer list in the new company enough to win the case?

As a rule, it is not enough. The confidential nature of the list, how it was obtained, to which customer, when and with what information an offer was made, the structure of the sector and the customer’s reason for changing must be proved together.

Can a WhatsApp screenshot be evidence?

Electronic correspondence may have the character of a document under HMK Art. 199. However, the identity of the account and of the parties, the integrity of the conversation, the way it was obtained and whether the screenshot has been altered are assessed. Relying on a single cropped screenshot alone is risky.

Can the company request that CRM records be deleted or not used?

Prevention of the use of unlawfully obtained or used data and removal of the material situation may be requested. A deletion or return request should be made concrete, taking into account the data’s character as a company secret and as personal data, and technical feasibility.

Can a manager be removed if he or she redirects customers to another company?

If the act amounts to a serious breach of the duty of care and loyalty, removal of the manager of a limited liability company or restriction of management and representation authority may come into play. The general assembly and court routes are assessed according to the company agreement and the specific conditions.

Is it mandatory to send a notice before bringing an action?

There is no general requirement for every claim. A notice may be useful for notifying the violation, for a demand to cease and in terms of default. If there is a loss of evidence or continuing loss, an injunction and evidence preservation should be considered without waiting for the notice.

How is compensation calculated in an unfair competition action?

The actual loss, the lost profit or, under the statutory conditions, the benefit the respondent is considered likely to have obtained may be taken as the basis. Gross turnover is not directly loss; expenses, market effect and causation are assessed.

Is it necessary to go to a mediator before bringing an action?

Mediation as a condition precedent to suit applies to commercial receivable and damages claims whose subject is money. The position of claims for declaration, cessation, injunction and mixed claims must be assessed separately. The application plan should be built after the claims have been separated.

Can unfair competition constitute an offence subject to complaint?

The intentional acts of unfair competition listed in TCC Art. 62 may give rise to criminal liability upon the complaint of a person entitled to sue. Whether the specific act constitutes another, more serious offence and the time limit for complaint must be examined separately.

Sources

1. Turkish Commercial Code No. 6102 — Art. 5/A, 54-63, 369, 396, 553, 613, 626, 630. Source

2. Code of Civil Procedure No. 6100 — Art. 189, 199, 222, 389-399, 400-405. Source

3. Court of Cassation 11th Civil Chamber, E.2008/6503, K.2010/2412, dated 04.03.2010 — A comparison of customer lists alone is not sufficient; examination of the sector and causation. Source

4. Court of Cassation 11th Civil Chamber, E.2016/1951, K.2017/2738, dated 09.05.2017 — Concrete proof of the use of trade secrets and the distinction between general knowledge and experience. Source

5. Court of Cassation 11th Civil Chamber, E.2015/14696, K.2017/2739, dated 09.05.2017 — The mere establishment of a commercial relationship with a customer is not sufficient. The citation has been verified; there is no direct link record.

6. Court of Cassation 11th Civil Chamber, E.2015/11283, K.2016/6338, dated 08.06.2016 — Assessment of trade secrets, the customer portfolio and disparaging statements. The citation has been verified; there is no direct link record.