A company manager has authority to represent the company.

But does that authority allow the manager to sell company property to his brother, spouse, child, friend or another company controlled by someone close to him?

Consider a typical dispute.

A Turkish limited liability company owns:

• valuable real estate;
• vehicles;
• machinery;
• inventory;
• trademarks;
• receivables; and
• other commercially valuable assets.

Relations between the shareholders deteriorate.

The managing shareholder controls the company and has sole signature authority.

Without consulting the other shareholders, the manager transfers a company-owned property worth TRY 30 million to his brother for TRY 5 million.

The other shareholders later discover the transaction.

The manager’s defence is simple:

“I was authorised to represent the company. I had authority to sell company property. The sale is therefore valid.”

Under Turkish law, that defence may be far from sufficient.

A company manager’s power of representation is not a licence to sacrifice corporate assets for the benefit of himself, his relatives or connected persons.

Depending on the facts, such a transfer may result in:

• cancellation or non-binding effect of the transaction;
• re-registration of the asset in the company’s name;
• payment of the asset’s value back to the company;
• personal liability of the manager;
• removal of the manager;
• restriction of management and representation authority;
• liability of other participants in the transaction;
• and, in serious cases, criminal investigation.

The critical issue is not simply whether the manager had signature authority, but whether that authority was exercised for the company’s interests or abused for a private purpose.

1. A Manager Does Not Own the Company’s Property

The starting point is the separate legal personality of the company.

A limited liability company owns its own assets.

Even if a person:

• owns 90% of the company;
• established the company;
• serves as its sole manager; and
• has sole representation authority,

the company’s property does not become that individual’s personal property.

A company-owned apartment belongs to the company.

A company-owned vehicle belongs to the company.

Money in the company’s bank account belongs to the company.

The manager is therefore not free to deal with corporate property as though it were his personal wealth.

This distinction becomes particularly important in closely held Turkish companies, where majority shareholders sometimes treat company accounts and company assets as an extension of their personal estate.

Corporate law does not accept that approach.

2. The Core Rule: Duty of Care and Loyalty

Article 626 of the Turkish Commercial Code imposes a duty of care and loyalty on managers and persons responsible for management of a limited liability company.

Managers must perform their duties with the care expected of them and protect the interests of the company in good faith.

This is much more than a formal administrative obligation.

It means that a manager must normally prioritise the company’s interests when exercising management and representation powers.

A manager who sells company property worth TRY 20 million for TRY 3 million merely because the buyer is his brother may therefore violate the duty of loyalty even if the manager technically possesses authority to sign the sale agreement.

The Court of Cassation has expressly applied this principle to transfers of company assets.

In Court of Cassation 11th Civil Chamber, E. 2020/2149, K. 2022/1158, dated 16 February 2022, the dispute involved transfers of company-owned real estate and vehicles by a limited company manager. The Court emphasised that even though the Turkish Commercial Code does not impose an absolute prohibition on every transaction involving a limited company manager, the manager remains subject to the duty of care and loyalty under Article 626. The court must therefore examine whether the transfers were contrary to the company’s interests and the principle of good faith.

This decision is particularly important because it prevents managers from relying solely on formal representation authority.

3. Is a Sale to a Relative Automatically Invalid?

No.

The mere fact that the buyer is:

• the manager’s brother;
• spouse;
• child;
• parent;
• friend;
• business partner; or
• a company connected with the manager

does not automatically make the transaction invalid.

A legitimate related-party transaction may exist.

For example, a company may sell a vehicle to the manager’s sibling at its genuine market price, receive the entire purchase price by bank transfer and document a legitimate commercial reason for the disposal.

That transaction cannot automatically be characterised as unlawful merely because the parties are relatives.

But the relationship substantially increases the importance of examining the economic reality of the transaction.

The key questions become:

Was the price realistic?

Was the price actually paid?

Why was this particular buyer selected?

Was the asset openly marketed?

Was an independent valuation obtained?

Did the company need to sell the asset?

Who ultimately benefited from the transaction?

Did the manager continue using or controlling the asset after the supposed sale?

The closer the relationship between manager and purchaser, the harder it may become to explain unusual commercial terms.

4. The Most Important Question: Was the Company Harmed?

Suppose company property has a market value of TRY 50 million.

The manager sells it to his son for TRY 48 million.

The purchase price is fully paid into the company bank account.

An independent valuation report supports the price.

The company needed liquidity to repay substantial bank debt.

That is very different from:

Property market value: TRY 50 million

Sale price: TRY 5 million

Purchaser: manager’s brother

No independent valuation

No evidence showing payment

Company remains in possession of the property

Brother transfers the property six months later for TRY 45 million

In the second case, the facts strongly indicate that the manager may have sacrificed corporate interests to confer a benefit on a connected person.

The amount of the company’s loss may ultimately be calculated through expert valuation.

5. Signature Authority Does Not Necessarily Protect an Abusive Transaction

A common defence in these cases is:

“The manager was authorised to represent the company alone, so whatever he signed binds the company.”

Turkish law takes a more sophisticated approach.

Article 629 of the Turkish Commercial Code provides that the rules governing representation of joint-stock companies apply by analogy to limited company managers.

Under Article 371, persons authorised to represent the company generally have broad authority to enter transactions on behalf of the company.

This protects commercial security and bona fide third parties.

However, the Court of Cassation has also developed an important principle concerning abuse of representation authority.

In Court of Cassation 11th Civil Chamber, E. 2021/9053, K. 2023/3534, the Court held that where a manager, contrary to his duty of care and loyalty, performs a transaction against the interests of the company, the transaction may fall outside the proper scope of the representative function. In the circumstances of that case, the transaction was held not to bind the company because the manager had acted contrary to corporate interests without corporate authorisation or subsequent ratification.

The same principle was applied in Court of Cassation 11th Civil Chamber, E. 2022/737, K. 2023/3635, involving a manager who used a company obligation in connection with personal and related-party debts.

This jurisprudence can be particularly important where a manager transfers assets to a relative who knows exactly why the transaction is being carried out.

6. Why the Relative’s Good or Bad Faith Matters

The position becomes more complicated when a third party receives the asset.

Commercial law normally protects third persons who transact in good faith with authorised company representatives.

Therefore, an internal restriction on a manager’s authority does not automatically defeat the rights of every third party.

But the position of a genuinely independent third-party purchaser may be very different from that of the manager’s brother participating in a transaction designed to strip assets from the company.

Evidence that the purchaser knew about the abuse may include:

• close family relationship;
• an extraordinarily low sale price;
• absence of payment;
• simultaneous transactions;
• purchaser’s lack of financial capacity;
• continued possession by the company or manager;
• immediate onward transfer;
• written communications between the parties;
• purchaser’s involvement in company management;
• common addresses;
• common companies;
• unexplained circular money transfers.

Family relationship by itself is not conclusive evidence of bad faith.

But family relationship combined with an economically inexplicable transaction can become powerful circumstantial evidence.

7. A Transfer of Almost All Company Assets Is Even More Serious

Not every corporate asset sale falls exclusively within day-to-day management authority.

A manager cannot necessarily dispose of the company’s entire productive structure and later argue that this was merely an ordinary management decision.

The Court of Cassation has taken an especially strict approach where disposal of company assets is so extensive that it effectively results in liquidation or makes continuation of the business impossible.

In the 2022 judgment mentioned above, the 11th Civil Chamber stated that disposal of company assets on a scale capable of causing the dissolution and liquidation of a limited company must be examined in light of the general assembly’s non-delegable authority under the applicable provisions of the Turkish Commercial Code.

The facts were particularly significant because the company lost its equity and became over-indebted shortly after the asset transfers.

Accordingly, courts should investigate the causal relationship between:

asset transfers → disappearance of company equity → inability to continue business → insolvency or dissolution.

This can dramatically strengthen a challenge.

8. Example: Selling the Company’s Only Factory

Assume a limited company manufactures industrial equipment.

Its most important asset is its factory.

The manager holds sole representation authority.

Without a general assembly resolution, he sells the factory to a company owned by his wife.

After the transfer:

• manufacturing stops;
• the company loses almost all revenue;
• employees leave;
• bank debt becomes unpayable;
• the company becomes insolvent.

In such circumstances, the issue is no longer an ordinary property sale.

The transaction may effectively amount to disposal of the company’s essential business assets.

The absence of appropriate general assembly involvement may therefore become a major ground for challenging the transaction.

9. Can the Asset Be Returned to the Company?

Potentially, yes.

Depending on the exact legal defect and the position of the transferee, litigation may seek:

• a declaration that the transaction does not bind the company;
• cancellation of the transfer;
• cancellation of registration;
• re-registration of real estate in the company’s name;
• return of vehicles or other property;
• restitution;
• or, where restitution is no longer possible, payment of the asset’s value.

The 2022 Court of Cassation decision itself arose from claims seeking cancellation of transfers of company real estate and vehicles and re-registration in the company’s name, or alternatively payment of their value to the company.

The exact remedy depends on factors including:

• type of asset;
• registration status;
• whether the recipient remains owner;
• whether the asset has subsequently been transferred;
• whether subsequent purchasers acted in good faith;
• legal basis of invalidity;
• and whether the company has ratified the transaction.

10. What If the Relative Has Already Sold the Asset?

This does not necessarily end the dispute.

Suppose the manager transfers company property to his brother.

The brother then sells it to an unrelated purchaser.

Several different possibilities arise.

If the later purchaser is legally protected as a bona fide acquirer, recovery of the physical asset may become substantially more difficult or impossible.

The focus may then move toward:

• compensation against the manager;
• compensation against participants in the unlawful transaction;
• recovery of sale proceeds;
• unjust enrichment claims where applicable;
• and other remedies depending on the facts.

This is one reason why urgent action may be essential.

If there is a continuing risk of onward transfer, provisional measures should be considered immediately.

11. Interim Measures Can Be Critical

A shareholder who discovers an abusive transfer should not merely begin preparing a damages calculation while the asset continues to change hands.

Depending on the nature of the dispute and satisfaction of procedural requirements, an application for an interim injunction (ihtiyati tedbir) may be considered.

For real estate, the objective may be to prevent further transfer while litigation is pending.

For vehicles or registered assets, comparable restrictions may be sought where legally available.

For corporate powers, measures concerning management or representation authority may also become relevant.

The case should therefore be approached as an asset-preservation dispute from the first day.

12. Personal Liability of the Manager

Even if the asset cannot ultimately be returned, the manager may face personal financial liability.

Article 553 of the Turkish Commercial Code provides that founders, board members, managers and liquidators who culpably breach obligations arising from the law or articles of association are liable for damage caused to the company, shareholders and creditors.

Article 644 makes the relevant liability provisions applicable to limited liability companies.

The current wording of Article 553 requires a culpable breach and a causal link between the breach and the loss.

A typical liability case may therefore examine four fundamental elements:

Breach

Did the manager violate a statutory or contractual duty?

Fault

Was the manager intentionally or negligently responsible?

Damage

What loss did the company suffer?

Causation

Was the loss caused by the manager’s conduct?

13. How Is the Company’s Damage Calculated?

Assume:

Market value of company property: TRY 40 million

Price stated in sale agreement: TRY 10 million

Amount actually paid: TRY 4 million

If expert evidence establishes these values, several calculations may become relevant.

At the simplest level, the company may have lost the difference between the value it should reasonably have received and the value it actually received.

But damages can sometimes extend further.

Suppose the property was the company’s warehouse and losing the warehouse forced the company to:

• rent another facility;
• suspend production;
• cancel customer contracts;
• pay contractual penalties;
• lose substantial revenue.

Causally connected losses may require separate examination.

The damage analysis should therefore not automatically be limited to the difference in sale price.

14. Can an Individual Shareholder Sue the Manager?

Yes, but the distinction between direct and indirect loss is crucial.

When the manager removes TRY 20 million from company assets, the immediate victim is ordinarily the company.

The shareholder suffers because the value of the company—and therefore the economic value of his participation—decreases.

That is typically an indirect loss.

Article 555 of the Turkish Commercial Code allows both the company and each shareholder to seek compensation for loss suffered by the company, but where a shareholder brings the action for the company’s loss, compensation must be paid to the company, not personally to the shareholder.

Court practice similarly recognises that shareholders may bring such managerial liability actions while demanding restoration of the company’s assets.

This distinction should be handled correctly in the statement of claim.

A shareholder should not automatically demand:

“The company lost TRY 10 million, therefore pay TRY 10 million to me.”

If the loss is the company’s loss, the claim should generally seek payment to the company.

15. What If the Manager Controls the Company and Refuses to Sue Himself?

This is precisely why shareholder standing is important.

In closely held companies, the wrongdoing manager often controls:

• company representation;
• corporate records;
• bank accounts;
• general meetings;
• and litigation decisions.

If the only person permitted to sue were the company represented by the manager himself, liability provisions would be practically ineffective.

Turkish company law therefore gives shareholders mechanisms to pursue corporate loss under the statutory conditions even where management refuses to act.

16. Can the Manager Be Removed?

Yes.

Article 630 of the Turkish Commercial Code provides an important remedy in limited liability companies.

The general assembly may remove managers and restrict their management or representation authority.

More importantly, each shareholder may apply to the court where there is just cause and request that a manager’s management and representation powers be removed or restricted.

Article 630 expressly treats serious violation of:

• the duty of care;
• the duty of loyalty;
• statutory duties;
• or duties arising from the articles of association

as potential just cause.

A manager who secretly transfers valuable company property to relatives at an undervalue may therefore face not only a damages action but also loss of management authority.

17. A Practical Litigation Strategy: Do Not File Only a Damages Claim

Where an abusive related-party transfer is discovered, the dispute should usually be analysed on several levels simultaneously.

Potential remedies may include:

1. Challenging the asset transfer

Seek cancellation, non-binding effect, restitution or re-registration where legally available.

2. Interim protection

Prevent further disposition of the asset.

3. Managerial liability

Seek compensation under TCC Articles 553, 555 and 644.

4. Removal or restriction of the manager

Rely on Article 630 where just cause exists.

5. Access to company records

Obtain accounting books, bank transactions and transfer documentation.

6. Criminal-law assessment

Determine whether the conduct goes beyond a civil corporate dispute.

A single legal theory may not adequately protect the company.

18. Could the Manager Face Criminal Liability?

Potentially.

But not every breach of fiduciary duty is automatically a crime.

Criminal liability requires the constituent elements of a criminal offence to be separately established.

One potentially relevant offence is breach of trust arising from service or professional relations under Article 155/2 of the Turkish Penal Code.

Court of Cassation case law provides examples where a company manager who diverted company money for personal purposes was convicted of aggravated breach of trust.

For example, in Court of Cassation 23rd Criminal Chamber, E. 2015/5762, K. 2016/4108, the accused was a company manager and shareholder who used company credit and company receivables for his own benefit. The Court upheld the finding that the conduct constituted breach of trust under Article 155/2.

However, the existence of a suspicious related-party transaction does not by itself establish criminal guilt.

The criminal court must consider matters such as:

• the scope of the manager’s authority;
• purpose of the transaction;
• whether the company received consideration;
• intention to appropriate or benefit from company property;
• whether the transaction was commercially genuine;
• and whether the dispute is fundamentally civil in nature.

Recent Court of Cassation criminal jurisprudence also demonstrates that the scope of authority and the factual purpose of an asset transfer must be carefully investigated before criminal liability is determined.

A criminal complaint should therefore be based on concrete financial evidence rather than merely being added to a shareholder dispute as a pressure mechanism.

19. What If the Manager Says the Company Owed Money to His Relative?

This is a common defence.

Suppose the manager transfers a company-owned vehicle to his sister and claims:

“The company owed my sister TRY 3 million. I transferred the vehicle in payment of that debt.”

The next questions should be:

Where is the underlying agreement?

When was the debt created?

Is it recorded in the company books?

Was money actually advanced to the company?

Was the debt disclosed in earlier financial statements?

Why was an asset transferred instead of making a normal payment?

Was the vehicle’s market value equivalent to the alleged debt?

Did other shareholders know about the debt?

Was the creditor truly the relative or effectively the manager himself?

A fabricated company debt can sometimes be used to disguise extraction of corporate assets.

Accounting records therefore become critical.

20. What If the Sale Price Appears in the Contract but Was Never Paid?

The contractual price and the actual payment must be distinguished.

A deed may state:

Sale price: TRY 20 million.

That does not necessarily establish that TRY 20 million entered the company’s bank account.

A forensic review should investigate:

• bank transfer records;
• cash entries;
• general ledger records;
• buyer’s bank account;
• buyer’s financial capacity;
• shareholder current accounts;
• subsequent transfers back to the buyer;
• loans allegedly used to fund the transaction.

A sale may look commercially normal on paper but become highly suspicious when the money trail is examined.

21. Important Evidence in a Related-Party Asset Transfer Case

The following documents should normally be secured as early as possible:

1. Trade registry records;
2. articles of association;
3. historical representation records;
4. general assembly resolutions;
5. managers’ resolutions;
6. land registry records;
7. vehicle registry records;
8. sale agreements;
9. invoices;
10. independent valuation reports;
11. bank statements;
12. SWIFT and EFT records;
13. company general ledger;
14. journal records;
15. trial balances;
16. fixed-asset registers;
17. related-party accounts;
18. tax declarations;
19. purchaser’s corporate records;
20. evidence of relationship between manager and purchaser;
21. WhatsApp messages and emails concerning the transaction;
22. evidence concerning subsequent resale;
23. documents concerning company solvency before and after the transaction.

The litigation will often be won by reconstructing the financial chronology rather than relying on a single corporate document.

22. Red Flags Courts Should Examine

No single fact automatically establishes an abusive transaction.

But the following combination can be particularly significant:

• buyer is a close relative;
• asset is sold substantially below market value;
• no independent valuation exists;
• no genuine payment can be identified;
• manager has sole signature authority;
• other shareholders are kept uninformed;
• company urgently loses important assets;
• business operations deteriorate immediately afterwards;
• relative resells the asset at a much higher price;
• proceeds never reach the company;
• manager retains practical use of the asset.

The stronger this factual pattern becomes, the more difficult it is to characterise the transaction as an ordinary exercise of business judgment.

23. Example: The Manager Transfers Vehicles to His Brother

A limited company owns ten commercial vehicles.

The manager is also a 60% shareholder.

Relations with the 40% shareholder break down.

The manager transfers eight vehicles to his brother.

Market value: TRY 16 million.

Recorded sale price: TRY 5 million.

No payment can be identified in the company bank accounts.

One month later, the brother sells four vehicles to unrelated purchasers.

The company can no longer perform several customer contracts.

Possible legal consequences include:

• challenge to the original transactions;
• return or re-registration of vehicles still owned by the brother;
• compensation for assets that cannot be recovered;
• liability of the manager for corporate loss;
• possible removal of the manager;
• claims concerning loss caused by interruption of business;
• and, if evidence indicates intentional appropriation, criminal-law examination.

24. Example: A Transaction That May Be Defensible

Now change the facts.

The company owns an unused apartment.

An independent valuation puts the property’s market value at TRY 12 million.

The company requires liquidity.

Several buyers are contacted.

The manager’s sister offers TRY 12.5 million.

The full price is paid through the banking system before transfer.

The transaction is accurately recorded in the company’s books.

The money is subsequently used to repay company bank debt.

Although the transaction involves a relative, there may be no corporate loss at all.

The relevant legal question is therefore not:

“Was the buyer related to the manager?”

It is:

“Did the manager sacrifice the company’s interests for the benefit of the related party?”

25. What Should a Minority Shareholder Do Immediately?

Where there is suspicion that company assets are being transferred to the manager’s relatives, speed matters.

The first objective should be to determine:

What was transferred?

When?

To whom?

For what price?

Was the price paid?

What was the market value?

Who authorised the transaction?

Where is the asset now?

Where is the money now?

Only after answering these questions can the correct combination of cancellation, restitution, managerial liability and protective relief be chosen.

Conclusion

A Turkish limited company manager’s authority to represent the company is broad, but it is not unlimited.

The manager must exercise that authority consistently with the company’s interests and with the statutory duties of care and loyalty.

A transfer to a relative is not automatically invalid.

But where a manager:

• transfers company assets at an undervalue;
• receives no genuine consideration;
• favours himself or connected persons;
• strips the company of essential operating assets;
• causes insolvency;
• conceals the transaction from shareholders;
• or otherwise uses representation authority against the company’s interests,

the consequences may be substantial.

The transaction itself may be challenged.

The asset may potentially be returned to the company.

The manager may be personally liable for the company’s loss.

The manager’s authority may be removed or restricted.

And where corporate assets have intentionally been appropriated or diverted, criminal liability may also require investigation.

The central principle is therefore straightforward:

A manager may have the signature authority to sell a company asset—but signature authority does not give him the right to give the company’s wealth to his family.