In Turkish M&A practice, a disclosure letter is one of the most important documents in a share sale, even though it is often treated as secondary to the share purchase agreement itself. Buyers usually focus first on price, closing conditions, and the representations and warranties package. Sellers, on the other hand, often see the disclosure letter as the main tool for preventing the warranty section from becoming an open-ended insurance policy. In legal terms, the disclosure letter is where the seller explains which facts, risks, exceptions, and circumstances qualify the warranties given in the SPA. In commercial terms, it is where the seller tries to convert unknown liability into known and allocated risk. Under Turkish law, this matters because contractual freedom is broad, but seller liability for defects, inaccurate qualities, and contractual breach remains real unless risk is properly reallocated.
A useful starting point is that Turkish law does not create a separately codified statutory instrument called a “disclosure letter” for share purchase agreements. Instead, disclosure letters operate as a contractual device within the broader framework of the Turkish Code of Obligations. Article 26 allows parties to determine the content of their contract freely within the limits of the law, while Article 27 invalidates arrangements contrary to mandatory law, morality, public order, personality rights, or impossibility. That is the core reason disclosure letters are workable in Turkish M&A: the law gives parties room to define how warranties are given, how risks are carved out, and how disclosure affects later claims. At the same time, the law does not allow every clause to work regardless of context, which is why the drafting quality of the disclosure letter matters so much.
This topic is especially important in Türkiye because acquisitions are frequently implemented through Turkish joint stock companies and limited liability companies, and official investment guidance confirms that foreign investors generally face the same business-establishment and share-transfer conditions as local investors. That means Turkish SPA practice often looks familiar to international dealmakers at a high level. But the legal consequences of disclosure still have to be read through Turkish contract law rather than only through foreign drafting habits. A disclosure letter that looks market-standard in a common-law deal may not perform the same way in Türkiye unless it is aligned with Turkish rules on breach, defect liability, buyer knowledge, notice, and time limits.
What a disclosure letter does in a Turkish SPA
In practice, a disclosure letter is the seller’s formal statement that certain warranties are given subject to specifically disclosed facts. For example, the SPA may say that the company has no litigation, no undisclosed tax exposure, valid title to its assets, or full compliance with applicable law. The disclosure letter then says, in effect, that these warranties are qualified by the matters set out in the letter and its schedules. The buyer is therefore not receiving an absolute promise detached from reality. It is receiving a promise shaped by identified exceptions. In a Turkish transaction, this device is particularly important because Article 219 of the Code of Obligations makes the seller liable not only for qualities it expressly represented, but also for material, legal, or economic defects that remove or significantly reduce the value or utility expected by the buyer, even if the seller did not know of the defect. A disclosure letter is one of the main contractual tools used to narrow and organize that risk.
Disclosure letters also matter because Turkish law pays attention to what the buyer knew or should have known. Article 222 states that the seller is not liable for defects known by the buyer at the time of contract formation. The same article adds that the seller is also not liable for defects the buyer could have discovered through sufficient inspection, unless the seller separately undertook that such a defect did not exist. That legal background is one of the clearest reasons disclosure letters are so important in Turkish SPA practice. They help create a documentary record of what the buyer was told before signing and which risks were therefore moved out of the ordinary warranty claim framework.
A disclosure letter is therefore not merely a list of bad facts. It is a legal bridge between due diligence and warranties. If due diligence identifies a tax audit, a threatened employment claim, a regulatory gap, a weak IP assignment chain, or a customer dispute, the seller has several choices. It can fix the issue before signing, price it into the deal, accept a specific indemnity, or disclose it as a qualification to the broader warranties. In Turkish practice, these choices often overlap, but the disclosure letter is where they are documented and made visible in the deal record. That visibility becomes critical later if a post-closing dispute arises over whether the buyer knew of the relevant matter.
The legal basis: breach, defects, and contractual risk allocation
The Turkish law foundation for disclosure letters is not limited to Article 219 and the defect regime. Articles 112 and 114 of the Code of Obligations provide the broader framework for contractual breach. Article 112 states that where an obligation is not performed at all or not duly performed, the obligor must compensate the creditor’s loss unless it proves absence of fault. Article 114 adds that the debtor is generally liable for all fault and that tort-law principles may apply by analogy in cases of contractual breach. In M&A terms, this means that inaccurate warranties, incomplete disclosure, and breach of specific disclosure-related undertakings may all become breach-of-contract issues under Turkish law. The disclosure letter is therefore part of the seller’s defense architecture against later arguments that the SPA was breached.
At the same time, Turkish law sets important limits on how far contractual exclusions can go. Article 115 states that advance agreements excluding liability for gross fault are absolutely null. Article 221 adds a parallel rule in the sale context: if the seller transferred the sold item defectively with gross fault, any agreement eliminating or limiting liability for defects is absolutely null. These rules matter greatly for disclosure letters. A disclosure letter can qualify warranties and reallocate risk, but it is not a magic device that safely cures deliberate concealment or grossly careless non-disclosure. If the seller knew of a serious problem, failed to disclose it properly, and then tried to rely on broad liability exclusions, Turkish mandatory-law limits may cut back those protections.
This is why Turkish disclosure letters should be drafted as instruments of honest and structured qualification, not as camouflage. If they are used to hide rather than disclose, they become legally weaker precisely when the seller needs them most. The practical lesson is simple: a strong disclosure letter in Turkey is one that makes warranty risk more precise, not one that tries to make bad facts disappear in dense drafting.
General disclosures and specific disclosures
In transactional practice, disclosure letters usually contain both general disclosures and specific disclosures. General disclosures often refer to matters already visible from public registers, filed financial statements, company books, constitutional documents, or shared data-room materials. Specific disclosures, by contrast, identify concrete issues that qualify one or more specific warranties, such as a named tax inspection, a specific labor dispute, a known permit deficiency, or an identified defect in title to an asset.
Under Turkish law, specific disclosures are usually the more defensible part of the letter because they align more closely with Article 222’s logic on buyer knowledge and Article 223’s logic on notice and defect handling. A specific disclosure makes it easier to argue that the buyer knew of the issue and accepted that the warranty was given subject to that disclosed fact. General disclosures can still be useful, but they are more vulnerable to later arguments that the buyer was not fairly informed about the actual problem. This is not because Turkish law prohibits general disclosures, but because Turkish law is more interested in real knowledge and real contractual allocation than in abstract disclaimers.
That distinction is especially important where the seller wants to disclose by reference to a virtual data room. In many deals, the disclosure letter states that matters fairly disclosed in the data room qualify the warranties. In Turkish practice, that can work as part of the contractual bargain, but it is safer when the disclosure letter cross-references clearly identified documents, folders, or schedules rather than relying on a broad statement that “all information made available” is deemed disclosed. The broader and less specific the wording becomes, the easier it is for the buyer to argue later that the relevant issue was not actually brought to its attention with enough clarity.
Why “fair disclosure” matters even in a Turkish-law deal
The phrase “fair disclosure” is not a codified Turkish statutory term. It is a deal-practice concept. But the underlying idea fits well with Turkish legal principles. If the law cares about what the buyer knew, what the buyer could reasonably discover, and what the seller actually promised, then the quality of disclosure matters. A vague upload of hundreds of documents to a data room is not the same thing as a clear disclosure of a concrete legal problem. Under Articles 222 and 223, Turkish law distinguishes between discoverable matters, known matters, and latent issues. A disclosure process that is organized, specific, and understandable is therefore much more likely to be persuasive if the dispute later turns on buyer knowledge.
This is why the best Turkish disclosure letters do not only identify the issue. They also explain its legal relevance. If there is pending litigation, the letter should say what it is, which warranty it qualifies, and why. If there is a permit gap, the letter should identify the permit, the current status, and which compliance warranty it qualifies. If there is a tax risk, the letter should explain the period, the authority, and the current procedural posture. This level of clarity does not make the seller weaker. On the contrary, it often makes the seller’s defense stronger because it shows that the buyer was put on concrete notice rather than left to infer risk from fragments.
Disclosure letters and due diligence are not substitutes
Another common misunderstanding is that due diligence and disclosure letters do the same work. They do not. Due diligence is the buyer’s investigation. The disclosure letter is the seller’s formal legal statement about how the warranties are qualified. In a Turkish law deal, both matter because buyer knowledge can shape later liability, but neither fully replaces the other. A buyer cannot assume that all diligence findings automatically qualify the warranties unless the SPA and disclosure letter say so. Likewise, a seller cannot assume that all diligence materials were actually understood, absorbed, or treated as disclosed unless the record is clear. Turkish law’s emphasis on knowledge and proper notice makes this distinction especially important.
For that reason, a disciplined Turkish sale process usually treats due diligence and disclosure as two linked but separate steps. The due diligence process identifies what exists. The disclosure letter decides what of that material will qualify the warranties and how. The gap between the two is where many post-closing disputes are born. If a matter existed in the company, appeared in some corner of the data room, but was not clearly carried through into the disclosure process, the parties may later disagree sharply over whether the buyer accepted that risk or the seller remained liable for it.
Time limits, notice, and the importance of procedural drafting
Disclosure letters do not operate in isolation from claim procedure. Article 223 requires the buyer to inspect the sold item as soon as possible according to the ordinary course of business and to notify the seller within an appropriate time if it finds a defect engaging seller liability. If the buyer fails to inspect or notify, the sold item is deemed accepted, subject to latent-defect logic. Article 231 further states that, unless the seller assumed a longer period, claims arising from defect liability become time-barred after two years from transfer, even if the defect appears later, while a grossly at-fault seller cannot benefit from that shorter period. These provisions are crucial in Turkish SPA drafting because they mean the parties should not leave the relationship between disclosure, notice, and time limits vague.
In practice, Turkish SPAs usually refine these default rules. They may state that claims for ordinary business warranties must be notified within a fixed period, that tax or title claims survive longer, and that certain specifically disclosed matters are excluded from the general warranty regime altogether unless treated as specific indemnity items. The disclosure letter is a central part of that structure because it determines which issues fall into which category. If a matter is disclosed and accepted as a general exception, it may be outside the ordinary warranty claim framework. If it is disclosed but ring-fenced through a special indemnity, the procedural rules may differ. This is one reason disclosure letters should always be read together with the claim-notice and limitation sections of the SPA.
Disclosure letters in Turkish JSC and LLC transactions
The function of a disclosure letter is broadly similar whether the target is a Turkish JSC or LLC, but the corporate backdrop still matters. Official Turkish investment guidance and the Ministry of Trade guide both confirm that JSCs and LLCs are the most common company types, and the Ministry guide notes that share transfer in JSCs is generally more flexible, while LLC share transfers require additional approval and notarization steps. That does not change the basic logic of disclosure letters, but it does affect which issues may need special disclosure. In an LLC, for example, the seller may need to disclose prior approval defects, transfer formalities, or partner-consent issues more carefully because those matters can affect the legal integrity of the share chain itself.
Similarly, where foreign investors are involved, official guidance states that foreign-issued documents generally require legalization and notarized Turkish translation for local use. That means corporate authority and execution readiness may also become disclosure topics if they are not fully in place at signing. In Turkish M&A, therefore, disclosure letters are not only about operational liabilities such as tax, employment, or litigation. They may also need to qualify warranties on share title, authority, corporate organization, and transfer validity.
How sellers should use disclosure letters strategically
For sellers, the disclosure letter is usually the most important protection after the warranty schedule itself. A strong Turkish disclosure strategy usually does four things. First, it identifies which matters should be remediated before signing instead of merely disclosed. Second, it separates matters that qualify general warranties from matters better handled through specific indemnities or price adjustments. Third, it uses clear and documentable cross-references rather than relying only on vague general disclosure language. Fourth, it aligns the disclosure letter with the SPA’s claim-procedure and survival provisions.
This strategic use matters because a disclosure letter is not supposed to defeat the deal. It is supposed to make the deal more precise. A seller that discloses too little creates litigation risk. A seller that dumps undifferentiated material into the record without structure creates confusion and may still lose the argument on buyer knowledge. In Turkey, the strongest position is usually one of disciplined specificity: disclose enough to qualify the warranty clearly, but do it in a way that a court, tribunal, or expert can later understand.
How buyers should read disclosure letters carefully
For buyers, the biggest mistake is treating the disclosure letter as routine seller paper. In Turkish law, because buyer knowledge can matter, the disclosure letter may become one of the central documents in a post-closing dispute. Buyers should therefore test whether disclosures are sufficiently specific, whether they truly qualify the relevant warranties, whether they rely too heavily on general data-room incorporation, and whether any disclosed issue is serious enough that it should move out of the warranty framework into a separate indemnity, escrow, or purchase price adjustment. Articles 222 and 223 make that discipline especially important because they already embed the concepts of known and discoverable defects into the legal background.
A careful buyer should also ask whether the disclosure letter is trying to do too much. If the letter converts almost every business imperfection into a disclosure, the warranties may lose meaningful value. That does not automatically make the disclosure letter ineffective, but it does mean the buyer should revisit the broader economic bargain. In Turkish SPA practice, the disclosure letter is often the place where the real warranty package is defined. Buyers who negotiate only the warranty wording and then skim the disclosures are often negotiating the wrong document.
Conclusion
Disclosure letters in Turkish share purchase agreements are not a peripheral annex. They are a central risk-allocation instrument operating within the Turkish law of contract and seller liability. Articles 26 and 27 of the Code of Obligations allow parties to structure the disclosure and warranty bargain freely within legal limits. Articles 112 and 114 provide the broader breach framework. Articles 219, 221, 222, 223, and 231 explain why seller liability, buyer knowledge, notice, and time limits matter so much to how disclosure works in practice. Taken together, these rules make disclosure letters both commercially essential and legally consequential in Turkish M&A.
The practical lesson is simple. In a Turkish SPA, the disclosure letter should be drafted and reviewed with the same seriousness as the warranty schedule itself. For sellers, it is the document that prevents the SPA from turning into an unlimited retroactive guarantee. For buyers, it is the document that reveals which risks are truly being transferred and which are being left with the company or accepted as part of the bargain. In Turkey, the quality of the disclosure letter often determines whether the warranty package is a real protection mechanism or only a drafting illusion.
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