Foreign investors buying an existing business in Turkey generally have two main options:
buy the shares of the existing company or acquire the business/assets directly.
Both structures are legally possible, but they create different risks. Foreign investors are generally subject to the same share-transfer rules as domestic investors in Turkey.
1. What Is a Share Deal?
In a share deal, the investor purchases the shares of the existing Turkish company.
The company itself does not change. It continues to own its assets, employ its workers and remain a party to its existing contracts.
The main risk is that the company also keeps its historical liabilities, including:
- tax debts;
- SGK liabilities;
- lawsuits;
- bank loans;
- employee claims;
- guarantees; and
- commercial debts.
Therefore, a share deal can be convenient, but it requires detailed legal, financial and tax due diligence.
For Turkish limited liability companies, share transfers are also subject to specific formal requirements under Article 595 of the Turkish Commercial Code, including written form, notarised signatures and, unless otherwise provided, general assembly approval.
2. What Is a Business or Asset Transfer?
Instead of purchasing the company itself, the investor may acquire the business, machinery, trademarks, customer relationships or other selected assets.
This can sometimes allow the buyer to avoid taking over certain unwanted corporate liabilities.
However, an asset or business transfer is not automatically risk-free.
Under Article 202 of the Turkish Code of Obligations, a person acquiring a business together with its assets and liabilities may become responsible for existing business debts after the required notification or announcement. The previous owner may also remain jointly liable for a certain period.
3. What Happens to Employees?
If the transaction qualifies as a transfer of a workplace or part of a workplace, existing employment contracts generally transfer automatically to the new employer together with their rights and obligations.
Article 6 of the Turkish Labour Law also provides for joint liability in relation to certain employee debts arising before the transfer.
Therefore, choosing an asset deal does not necessarily eliminate employment liabilities.
4. Which Structure Is Safer?
There is no single answer.
A share deal may be more suitable where:
- the company has valuable licences;
- contracts are difficult to transfer;
- the business has a clean legal history; or
- continuity is commercially important.
A business or asset transfer may be preferable where:
- the target company has significant historical liabilities;
- the investor only wants specific assets;
- there are serious shareholder or corporate risks; or
- the buyer wants greater control over what is acquired.
However, statutory liabilities may still transfer depending on how the transaction is structured.
5. Due Diligence Comes First
Before choosing between a share deal and a business transfer, the investor should investigate:
- tax and SGK debts;
- lawsuits and enforcement proceedings;
- employees;
- licences;
- leases;
- major contracts;
- intellectual property;
- real estate;
- bank loans; and
- guarantees.
The safest transaction structure can only be determined after these risks are identified.
Conclusion
Neither a share deal nor a business transfer is automatically safer.
A share deal provides continuity but may expose the investor economically to the company’s historical liabilities.
A business or asset transfer may provide greater flexibility, but Turkish law can still transfer certain business debts and employee obligations to the buyer.
For this reason, foreign investors should decide what they want to acquire and which liabilities they are willing to assume before signing the purchase agreement.
This article provides general information and does not constitute legal advice. The appropriate acquisition structure should be determined according to the target company, its liabilities and the nature of the transaction.
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