Setting Up a Limited Liability Company in Türkiye: Structure and Director Liability

The limited liability company (limited şirket) is the most common vehicle for foreign investment in Türkiye. Its defining feature is limited shareholder liability — but the exceptions to that principle are significant and frequently overlooked.

Shareholder liability

Under Article 573 of the Turkish Commercial Code No. 6102, shareholders are not liable for company debts. They are obliged only to pay the capital shares they have subscribed and to perform any additional payment or ancillary obligations set out in the articles of association.

Where the capital contribution has been paid, a shareholder cannot be pursued personally for the company’s commercial debts.

Director liability

The position of directors is different. By virtue of the reference in Article 644, Article 553 — governing the liability of joint stock company board members — applies to limited company directors. Directors are liable to the company, the shareholders and the company’s creditors for damage arising from the culpable breach of their duties under the law or the articles of association.

Situations most frequently giving rise to liability in practice:

• Failure to maintain commercial books properly,
• Breach of capital maintenance rules,
• Use of company assets contrary to the company’s interest,
• Failure to notify the court where the company is over-indebted,
• Neglect of general assembly resolutions and statutory obligations.

Public receivables: the key exception

Tax and social security debts follow an entirely different regime. Under repeated Article 35 of Law No. 6183 on the Collection Procedure of Public Receivables, public receivables that cannot be collected in whole or in part from the assets of a legal entity are collected from the personal assets of its legal representatives.

This is the most significant exception to limited liability. Article 35 of the same law further provides that limited company shareholders are directly liable for public debts in proportion to their capital shares.

On resignation from directorship

1. The resolution must be registered with the trade registry and announced; an unregistered resignation cannot be asserted against third parties.
2. Resignation does not automatically extinguish liability for obligations arising during the term of office.
3. Financial statements and company books should be handed over under a formal record.

Careful drafting of the articles of association, clear delimitation of the directors’ representative authority and orderly maintenance of the resolution book prevent the great majority of later liability disputes.

This article is for general information only and does not constitute legal advice. Legislation and case law change; your situation must be assessed on its own facts. Please consult a lawyer before acting.