One of the most sensitive legal issues in startup relationships arises when a founder leaves the company and decides to establish, invest in or work for a competing business.

The problem can be particularly serious for technology startups.

A founder may have spent several years learning the startup’s source code, pricing strategy, customer portfolio, product roadmap, investor discussions, algorithms, trade secrets and commercial strategy. If that founder leaves and establishes an almost identical business the following week, the original startup may suffer substantial financial damage.

This raises an important question for entrepreneurs and investors:

Can a startup founder be legally prevented from establishing a competing company in Turkey?

The answer is yes in certain circumstances, but not automatically and not without limits.

Under Turkish law, whether a founder is subject to a non-compete obligation depends heavily on the founder’s legal position within the startup.

A founder may simultaneously be:

• a shareholder,
• a board member of a joint stock company,
• a manager of a limited liability company,
• an employee,
• a consultant,
• or a party to a shareholders’ agreement.

Each of these capacities may create different legal consequences.

A founder who is merely a shareholder in a Turkish joint stock company is not necessarily subject to the same statutory non-compete obligation as a founder who serves on the board of directors.

Likewise, a founder who manages a Turkish limited liability company may be subject to statutory loyalty and non-compete duties even where the shareholders’ agreement contains no specific clause.

After the founder leaves the company, the legal position changes again. Statutory duties associated with management may end, while contractual post-termination restrictions may continue if they have been properly drafted.

For this reason, a startup non-compete clause should never simply state:

“The founder may not establish a competing company.”

A legally effective clause should instead define the prohibited activities, duration, geographical scope, consequences of breach and relationship between the non-compete restriction, confidentiality obligations and trade-secret protection.

This article explains how founder non-compete agreements in Turkey operate, when a startup founder may establish a competing company and what legal remedies may be available to the original startup.

Why Is Founder Competition a Serious Risk for Startups?

A startup can be more vulnerable to founder competition than an established corporation.

In a large company, knowledge is distributed among departments, employees and management teams.

In a startup, critical information may be concentrated in only two or three founders.

For example, one founder may know:

• the complete source code architecture,
• future product features,
• customer acquisition costs,
• pricing models,
• customer contracts,
• investor expectations,
• supplier arrangements,
• employee salaries,
• technical weaknesses,
• intellectual property strategy,
• and the startup’s future expansion plans.

If this person leaves and immediately launches an identical company, the new competitor does not begin from zero.

The departing founder may already understand:

• which product features customers want,
• which marketing channels work,
• which investors are interested,
• which employees are valuable,
• and where the original company is commercially vulnerable.

This creates a genuine need for legal protection.

At the same time, Turkish law does not generally permit a business to prevent a person from participating in economic life indefinitely.

The law therefore requires a balance between:

protecting the legitimate commercial interests of the startup

and

protecting the founder’s freedom to work, invest and conduct business.

Is Every Startup Founder Automatically Subject to a Non-Compete Obligation?

No.

The term “founder” is not itself a separate corporate status under Turkish law that automatically creates a universal non-compete obligation.

The founder’s legal capacity must first be identified.

For example:

Founder A may own 25% of an A.Ş. but have no management position.

Founder B may own 25% and also be a board member.

Founder C may own 25%, serve as CEO and work under an employment agreement.

Founder D may own 25% and act as a manager under a consultancy arrangement.

Although all four individuals are described commercially as “founders”, the legal rules applicable to their competitive activities may be different.

This distinction is essential when preparing a founders’ agreement or evaluating whether a departing founder can launch a competing startup.

Founder Competition in a Turkish Joint Stock Company

A Turkish joint stock company, known as an anonim şirket or A.Ş., is frequently used by investment-oriented startups.

An important distinction exists between:

• ordinary shareholders, and
• members of the board of directors.

Is an Ordinary A.Ş. Shareholder Subject to a Statutory Non-Compete Obligation?

As a general principle, merely holding shares in a joint stock company does not automatically subject the shareholder to the same statutory non-compete obligation imposed on directors.

This results partly from the structure of joint stock company law.

Article 480 of the Turkish Commercial Code reflects the principle that, subject to statutory exceptions, the articles of association cannot generally impose obligations on shareholders beyond payment of the share price or relevant premium.

Accordingly, where startup founders want an ordinary shareholder to be contractually restricted from competing with the company, this issue is frequently addressed through a shareholders’ agreement or founders’ agreement rather than relying exclusively on shareholder status.

This distinction becomes particularly important where the founder resigns from management but continues holding shares.

The founder may no longer be a director, but the contractual non-compete provision in the shareholders’ agreement may remain relevant depending on its wording.

Non-Compete Obligation of A.Ş. Board Members

The position is significantly different where the founder is also a member of the board of directors.

Article 396 of the Turkish Commercial Code specifically regulates competition by board members.

Under this provision, without authorisation from the general assembly, a board member may not engage, for their own account or for another person, in commercial transactions falling within the company’s field of business. The provision also restricts participation as an unlimited-liability partner in another company conducting the same type of commercial business.

This is therefore a statutory non-compete obligation.

Imagine that Founder A is both:

• a 40% shareholder, and
• a board member of a fintech startup.

While continuing to serve on the board, Founder A secretly establishes another business offering essentially the same fintech product and begins directing potential customers to that new business.

This may create a direct issue under Article 396.

The company may have several statutory remedies.

Depending on the circumstances, it may seek:

• compensation for its loss,
• treatment of the competing transaction as having been made on behalf of the company,
• or transfer to the company of benefits obtained from transactions carried out for third parties.

The statutory remedies under Article 396 are also subject to short limitation periods: the relevant rights generally expire three months after the other board members learn of the competing transaction and, in any event, one year after the transaction occurred.

For this reason, a startup that discovers competitive conduct by a board member should act quickly.

Does the Statutory Non-Compete Obligation Continue After a Board Member Resigns?

The statutory obligation under Article 396 is linked to board membership.

Therefore, a founder who has validly ceased being a board member cannot necessarily be prevented from competing indefinitely merely by relying on Article 396.

This is where contractual protection becomes important.

If the founders want restrictions to continue for a certain period following departure, those restrictions should ordinarily be addressed through:

• a shareholders’ agreement,
• founders’ agreement,
• share sale agreement,
• investment agreement,
• employment agreement,
• or another appropriate contract.

The post-termination clause must itself satisfy the relevant requirements of Turkish law.

Competition Rules for Limited Liability Company Founders

The position of founders in a Turkish limited liability company, or Ltd. Şti., is different.

The Turkish Commercial Code contains specific loyalty and competition provisions concerning both shareholders and managers.

Loyalty Duties of Limited Liability Company Shareholders

Article 613 of the Turkish Commercial Code provides that limited liability company shareholders must protect company secrets.

It also provides that shareholders may not engage in conduct capable of damaging the company’s interests, particularly transactions that provide a special personal benefit while harming the company’s purpose.

Importantly, the articles of association may specifically require shareholders to refrain from transactions and conduct competing with the company.

This creates an important difference from the ordinary shareholder position in many joint stock company structures.

For an Ltd. Şti., the articles of association can therefore play a significant role in regulating competition between shareholders and the company.

For example, where three founders establish a software Ltd. Şti., the articles may contain appropriately structured provisions preventing the founders from simultaneously operating directly competing businesses.

Non-Compete Obligation of Limited Company Managers

The rules are even clearer where the founder is a manager.

Article 626 of the Turkish Commercial Code provides that managers and persons responsible for management must perform their duties with due care and protect the company’s interests in accordance with the principle of good faith.

Unless otherwise provided by the articles of association or all other shareholders have provided written consent, managers may not carry out activities competing with the company.

Therefore, a founder-manager of a Turkish limited company cannot simply assume that establishing a second competing business is lawful because the shareholders’ agreement contains no non-compete clause.

A statutory restriction may already apply.

Court practice has also treated serious breaches of the manager’s loyalty and non-compete obligations as potentially constituting just cause for removal or restriction of management and representation authority.

Can a Founder Receive Permission to Operate a Competing Business?

In some circumstances, yes.

The Turkish Commercial Code permits competition restrictions applying to directors or managers to be lifted through the relevant approval mechanisms.

For an A.Ş. board member, Article 396 contemplates permission from the general assembly.

For a limited liability company manager, Article 626 provides that the prohibition may be displaced where the articles of association provide otherwise or the necessary consent is given in accordance with the statutory framework.

This can be relevant where a founder already owns another business before joining the startup.

For example:

Founder A owns a software development consultancy.

Founder A later becomes a manager of a SaaS startup operating in a related sector.

Rather than leaving the position legally ambiguous, the parties should expressly identify:

• the existing business,
• permitted customers,
• permitted activities,
• excluded markets,
• intellectual property boundaries,
• and conflicts requiring additional approval.

A clear written exception can prevent future disputes over whether the founder violated a non-compete obligation.

What About a Founder Who Is Also an Employee?

Many founders work operationally for the company.

Where an employment relationship exists, the Turkish Code of Obligations contains specific rules governing post-employment non-compete agreements.

Article 444 provides that an employee may undertake in writing not to compete with the employer following termination of employment, including by establishing a competing business, working for a competitor or entering another type of relationship with a competing enterprise.

However, such an agreement is valid only where the employment relationship gives the employee access to information concerning customers, production secrets or the employer’s business and the use of that information could cause substantial damage to the employer.

This requirement is particularly relevant for startup founders because they frequently have access to exactly this type of sensitive information.

How Long Can an Employee Non-Compete Clause Last in Turkey?

Article 445 of the Turkish Code of Obligations provides that an employee non-compete clause may not contain inappropriate restrictions concerning:

• place,
• time,
• or type of activity

that unfairly endanger the employee’s economic future.

Except where special circumstances justify otherwise, the duration may not exceed two years. The court may limit an excessive restriction after considering all relevant circumstances.

This is an important drafting rule.

A clause stating:

“The founder may not work in the technology industry anywhere in the world for ten years.”

would present serious enforceability concerns.

A much more defensible restriction could identify:

• the particular competing product,
• the relevant customer market,
• a reasonable geographical area,
• and an appropriate duration.

Does the Two-Year Limit Apply to Every Founder Non-Compete Agreement?

Not necessarily.

This distinction is important.

The statutory two-year rule in Article 445 directly concerns non-compete obligations arising from an employment relationship.

A founder may instead be subject to a non-compete obligation under:

• a shareholders’ agreement,
• a share purchase agreement,
• an investment agreement,
• or another commercial contract.

The legal assessment of such contractual restrictions is not necessarily identical to an employee non-compete analysis.

Nevertheless, this does not mean that shareholders can agree to unlimited restrictions.

General principles concerning contractual freedom, mandatory law, personality rights, proportionality and public policy remain relevant.

Article 26 of the Turkish Code of Obligations recognises contractual freedom, while Article 27 limits contracts that violate mandatory law, morality, public order or personality rights.

Therefore, excessively broad founder non-compete clauses may still face enforceability challenges.

What Should a Founder Non-Compete Clause Cover?

A professionally prepared founder non-compete provision should not rely solely on the word “competition”.

It should explain precisely what activity is prohibited.

For example, the agreement may address whether the founder may:

• establish a competing company,
• become a shareholder in a competitor,
• work as an employee of a competitor,
• serve as a director or manager of a competitor,
• provide consultancy services to a competitor,
• finance a competing business,
• assist another person in establishing a competing company,
• solicit customers,
• solicit employees,
• or use confidential information to compete.

Each of these activities may require separate treatment.

Defining the Competing Business

One of the most important drafting questions is:

What counts as a competing business?

Suppose the startup provides artificial intelligence software for restaurants.

Would a general AI company be a competitor?

What about an AI company working only with hospitals?

What about a food delivery application?

What about a software consultancy that has one restaurant customer?

If the clause simply prohibits participation in “any technology company”, it may be excessively broad.

The prohibited activity should therefore be defined in relation to the startup’s actual business.

For example:

“a business developing AI-based demand forecasting software specifically for restaurant and food-service operators”

is considerably more precise than:

“any technology-related business”.

Geographic Scope of the Restriction

Geography is another important issue.

A startup operating only in Turkey may have difficulty justifying a worldwide restriction unless its legitimate commercial interests genuinely extend internationally.

By contrast, a digital SaaS company may provide services to customers in thirty countries.

The appropriate territory may therefore differ considerably between startups.

Possible geographical structures include:

• Turkey,
• the European Economic Area,
• specified countries,
• countries where the startup currently has customers,
• or countries where the company has demonstrable active business plans.

The goal should be to protect actual commercial interests rather than prohibit competition more broadly than necessary.

Duration of a Founder Non-Compete Clause

The duration should also be carefully considered.

Possible periods may include:

• six months,
• one year,
• eighteen months,
• two years,
• or another justified period depending on the contractual relationship.

The longer the restriction, the more important it becomes to demonstrate why that duration is commercially necessary.

Startup founders should avoid treating extremely long restrictions as automatically stronger.

A provision that is narrower and legally defensible may provide substantially more protection than a dramatic five-year worldwide prohibition that becomes difficult to enforce.

Non-Compete and Confidentiality Are Not the Same Thing

This distinction is extremely important.

A non-compete clause restricts participation in competitive activity.

A confidentiality clause restricts disclosure or use of confidential information.

A founder may no longer be subject to an enforceable non-compete restriction but may still remain legally prohibited from using:

• source code,
• algorithms,
• pricing information,
• customer lists,
• product roadmaps,
• financial projections,
• investor information,
• supplier terms,
• internal strategy,
• and trade secrets.

For this reason, startups should not rely exclusively on non-compete clauses.

In many disputes, protecting confidential information and trade secrets may be more important than trying to prevent the former founder from participating in the industry entirely.

Trade Secrets and Unfair Competition

The Turkish Commercial Code also provides protection against unfair competitive practices.

Article 54 states that the purpose of unfair competition rules is to ensure honest and undistorted competition for the benefit of all market participants.

Deceptive or otherwise dishonest conduct affecting relations between competitors, suppliers and customers may constitute unlawful unfair competition.

This means that establishing a competing company is not, by itself, necessarily unlawful.

Competition is generally part of commercial life.

The legal problem arises where the competing activity involves unlawful conduct.

Examples might include:

• misuse of trade secrets,
• misleading customers,
• unlawful use of another company’s commercial materials,
• exploitation of confidential business information,
• imitation creating unlawful confusion,
• or other conduct violating the rules of honest competition.

This is an important distinction.

A startup cannot necessarily stop a former founder merely because the founder has become a competitor.

It may, however, have substantial legal rights if the founder competes using information, assets or conduct that the law protects.

Can a Former Founder Contact the Startup’s Customers?

This depends on the circumstances.

If there is a valid non-solicitation clause, contacting customers may violate the agreement.

Even without such a clause, the method through which customer information was obtained may be important.

For example:

Founder A leaves the startup.

Before leaving, Founder A downloads the confidential CRM database containing customer contacts, pricing history and contract renewal dates.

Founder A then launches a competitor and systematically approaches those customers using the confidential database.

This is very different from Founder A independently competing in the market using publicly available information.

The startup may potentially rely on:

• contractual confidentiality provisions,
• trade-secret protections,
• unfair competition rules,
• data protection obligations,
• and other applicable legal remedies.

Can a Former Founder Recruit the Startup’s Employees?

Employee solicitation should also be considered separately.

Startups often depend on small technical teams.

A departing founder who persuades three key software engineers to leave simultaneously may seriously damage the company.

Shareholders’ agreements can therefore contain appropriately drafted non-solicitation provisions covering employees.

These clauses should define:

• which employees are protected,
• what conduct constitutes solicitation,
• the duration of the restriction,
• and any exceptions.

Again, a proportionate restriction is generally preferable to a clause attempting to prevent any contact with any former employee indefinitely.

Intellectual Property Creates a Separate Risk

A startup founder may establish a competing company without violating intellectual property rights.

However, the founder cannot simply assume that software, trademarks or other IP developed for the original startup may be transferred to the new company.

Startups should determine ownership of:

• source code,
• databases,
• algorithms,
• AI models,
• mobile applications,
• trademarks,
• domain names,
• designs,
• inventions,
• technical documentation,
• and copyright-protected materials.

Suppose Founder A writes the startup’s original software before incorporation.

The founders never execute an intellectual property assignment.

Founder A later leaves and establishes a competitor using the same software.

The dispute may then involve not only competition but also the fundamental question:

Who legally owns the software?

For this reason, intellectual property assignments should be completed at the beginning of the startup relationship rather than after a dispute develops.

What Happens If the Founder Uses the Same Business Idea?

Business ideas themselves require careful analysis.

A founder may say:

“You cannot create another marketplace because the original marketplace was my idea.”

However, the law does not necessarily give one party an exclusive monopoly over every abstract business idea.

Protection may instead arise from specific legal rights or confidential information, such as:

• copyrighted software,
• trademarks,
• patents,
• registered designs,
• trade secrets,
• contractual confidentiality,
• databases,
• or unfair competition rules.

Therefore, the question is often not simply whether the new company uses a similar idea.

The real issue is whether protected rights or confidential assets have been unlawfully used.

What Remedies Are Available If a Founder Breaches a Non-Compete Clause?

The remedy depends on the legal basis of the restriction.

Possible remedies may include:

• compensation for damages,
• contractual penalties,
• claims for cessation of prohibited conduct,
• corporate remedies,
• manager or director liability,
• removal from management,
• claims concerning unfair competition,
• or enforcement of other obligations contained in the shareholders’ agreement.

Where the restriction arises from an employment relationship, Article 446 of the Turkish Code of Obligations provides that an employee violating a valid non-compete obligation is liable for losses caused to the employer.

Where a contractual penalty has been agreed, the relevant rules governing the penalty also apply.

The employer may additionally seek cessation of the competing conduct where this remedy has been expressly reserved in writing and the statutory conditions are satisfied.

This drafting point is particularly important.

If the startup expects to seek an injunction or cessation rather than merely compensation, the contract should be prepared accordingly.

Contractual Penalties in Founder Non-Compete Agreements

Startup agreements often contain a contractual penalty for breach.

For example, the agreement might state that a founder who violates the competition restriction must pay a specified amount.

This can provide an important deterrent.

However, the penalty should not be drafted arbitrarily.

An extremely disproportionate amount may lead to legal disputes concerning enforceability or judicial reduction under the applicable rules.

A well-structured contract may also clarify whether:

• the penalty applies per violation,
• continuing violations create additional consequences,
• payment of the penalty releases the founder from the non-compete obligation,
• additional damages may be claimed,
• and cessation of the violation may separately be requested.

These issues should be addressed explicitly rather than left to interpretation after the dispute occurs.

Can the Startup Obtain an Interim Injunction?

Potentially, depending on the circumstances.

Suppose a former founder is preparing to launch a competing platform using confidential source code that clearly belongs to the original startup.

Waiting several years for a final judgment may make the eventual judgment commercially meaningless.

Turkish procedural law provides mechanisms for interim protection where statutory requirements are established.

A startup may therefore consider seeking urgent judicial measures where there is a concrete risk that protected rights will suffer serious or difficult-to-remedy harm.

The availability and scope of an injunction depend on:

• the legal basis of the claim,
• evidence,
• urgency,
• proportionality,
• and the specific conduct being challenged.

The company should therefore preserve evidence immediately.

What Evidence Should a Startup Preserve?

Evidence in founder competition disputes is frequently digital.

Relevant evidence may include:

• WhatsApp conversations,
• emails,
• Slack messages,
• GitHub activity,
• source-code logs,
• CRM downloads,
• access records,
• cloud logs,
• investor messages,
• customer communications,
• company laptops,
• domain registration records,
• bank transactions,
• social media announcements,
• and corporate registry records.

Suppose a founder secretly downloads the entire customer database one day before resignation.

System logs showing this activity may later become critical evidence.

Startups should therefore maintain:

• access controls,
• audit logs,
• document permissions,
• and clear offboarding procedures.

Legal protection is significantly easier where the company can prove exactly what occurred.

When Does an Employee Non-Compete Obligation End?

Article 447 of the Turkish Code of Obligations provides important limitations.

A non-compete obligation ends where the employer no longer has a genuine interest in maintaining the restriction.

It also ends where the employment relationship is terminated by the employer without a justified reason or where the employee terminates the relationship because of a reason attributable to the employer.

This can be particularly important in founder disputes.

Imagine that a founder is also an employee.

The majority shareholders unlawfully remove that founder from the company and then attempt to enforce a broad post-employment non-compete clause.

The circumstances surrounding termination may directly affect enforceability.

Therefore, the company cannot analyse the non-compete provision without also analysing how and why the founder’s employment ended.

Can a Founder Invest Passively in a Competitor?

This question should be addressed expressly in the agreement.

There is a significant difference between:

• establishing and managing a direct competitor,

and

• owning a small passive investment in a publicly traded technology company.

A non-compete clause may therefore contain exceptions for passive investments.

For example, the founders may agree that holding less than a specified percentage in a publicly traded company does not constitute prohibited competition.

Without such exceptions, overly broad wording can create unnecessary uncertainty.

Can a Founder Work for a Venture Capital Fund Investing in Competitors?

Modern startup careers are complex.

A departing founder may not establish a new startup personally but may join:

• a venture capital fund,
• accelerator,
• corporate venture arm,
• consultancy,
• or investment company.

The founder may then encounter businesses competing with the original startup.

A sophisticated non-compete agreement should consider whether such activities are:

• prohibited,
• permitted,
• permitted subject to information barriers,
• or permitted only with prior consent.

Again, the goal should be to protect genuine commercial interests without unnecessarily preventing the founder from continuing a professional career.

Non-Compete Clauses During a Startup Acquisition

Founder restrictions become particularly significant when the startup is sold.

A buyer purchasing a startup may be unwilling to pay millions of euros if the founder can immediately establish an identical competing company.

Therefore, sale transactions often contain separate founder non-compete obligations.

For example:

An international technology company acquires 100% of a Turkish SaaS startup.

The founders receive substantial consideration for their shares.

The purchaser may require the founders not to establish a directly competing SaaS business for an agreed period.

The legal analysis in this situation may differ from a standard employee non-compete because the restriction forms part of a commercial acquisition transaction.

However, proportionality, legitimate business interests and competition-law considerations may still be relevant.

The exact restriction should therefore be negotiated as part of the share purchase agreement.

How Should a Startup Draft a Founder Non-Compete Clause?

A good founder non-compete structure should answer at least the following questions:

Who Is Bound?

Does the restriction apply to:

• founders,
• shareholders,
• managers,
• board members,
• employees,
• or all of them?

What Is the Competing Business?

The relevant market should be clearly defined.

What Activities Are Prohibited?

Does the clause prohibit:

• establishment,
• management,
• employment,
• consultancy,
• investment,
• financing,
• or assistance?

Where Does the Restriction Apply?

Turkey?

Europe?

Specific markets?

How Long Does the Restriction Continue?

Does it apply:

• during share ownership,
• during management,
• during employment,
• and for a defined period afterwards?

What Exceptions Apply?

For example:

• passive investments,
• pre-existing businesses,
• approved activities,
• or non-competing geographical markets.

What Happens If the Founder Breaches?

The agreement should address:

• damages,
• contractual penalties,
• cessation,
• share-related consequences where legally permissible,
• and dispute resolution.

How Does the Clause Interact With Confidentiality?

The agreement should contain separate confidentiality and trade-secret protections.

What Happens After the Founder Sells All Shares?

If the post-exit restriction continues, its duration should be clearly stated.

Common Mistakes in Startup Non-Compete Agreements

Several drafting mistakes appear frequently.

The first is using extremely broad language.

For example:

“The founder shall never participate in any business competing directly or indirectly with the company anywhere in the world.”

This may appear protective but creates substantial uncertainty.

Other common mistakes include:

• failing to define the company’s competing activities,
• failing to specify duration,
• failing to specify territory,
• failing to distinguish shareholders from managers,
• assuming every founder is automatically subject to the same statutory rules,
• relying only on the articles of association,
• failing to include confidentiality obligations,
• failing to protect intellectual property,
• failing to regulate customer solicitation,
• failing to regulate employee solicitation,
• using an excessive contractual penalty,
• failing to coordinate the non-compete with founder vesting,
• and failing to regulate what happens after the founder leaves.

Example: Founder Establishes a Direct Competitor While Still Managing the Startup

Consider a Turkish Ltd. Şti. with two founders.

Founder A owns 50% and acts as a manager.

Founder B owns 50% and also acts as a manager.

Without obtaining the required consent, Founder A establishes another company offering exactly the same software service.

Founder A then begins directing new customers to the second business.

Because Founder A remains a manager, Article 626 of the Turkish Commercial Code becomes directly relevant.

The conduct may also constitute a serious breach of the duty of loyalty.

Depending on the circumstances, the company or other shareholder may consider remedies involving:

• removal or restriction of management authority,
• compensation,
• corporate claims,
• and potentially unfair competition.

Turkish court practice has recognised that serious violations of loyalty and non-compete duties may support a finding of just cause in proceedings concerning a limited company manager’s authority.

Example: Founder Resigns and Establishes a New Startup

Now consider a different situation.

Founder A owns 30% of a Turkish A.Ş.

Founder A resigns from the board and later sells all shares.

There is no shareholders’ agreement.

There is no employment non-compete clause.

There is no confidentiality breach.

Founder A then establishes a business in the same general industry using independently developed technology.

In these circumstances, the original startup cannot automatically assume that Founder A may be prohibited from competing merely because Founder A was previously a founder.

The existence of a former founder relationship does not necessarily create a permanent prohibition on competition.

The analysis would instead focus on whether:

• a contractual restriction exists,
• confidential information is being misused,
• intellectual property rights are being infringed,
• unfair competition is occurring,
• or another legal obligation has been breached.

This example demonstrates why proper startup documentation should be completed before a founder leaves.

Founder Non-Compete Clauses Should Work Together With Vesting

Non-compete provisions can also be coordinated with founder vesting.

For example, the shareholders’ agreement may classify serious prohibited competition as a bad leaver event.

If a founder secretly establishes a competing business while still participating in the startup, this may activate contractual rights affecting unvested equity.

However, the agreement should not automatically assume that shares simply disappear.

As with all vesting arrangements, the share transfer mechanism must be legally enforceable under the applicable Turkish corporate rules.

The contract may instead use:

• call options,
• transfer undertakings,
• repurchase arrangements,
• or other appropriately structured mechanisms.

The Best Protection Is a Combination of Legal Tools

A startup should not rely on a single non-compete sentence.

A stronger legal structure normally combines several mechanisms:

• founder non-compete provisions,
• confidentiality obligations,
• intellectual property assignments,
• trade-secret protections,
• employee and customer non-solicitation clauses,
• vesting arrangements,
• good leaver and bad leaver provisions,
• share transfer restrictions,
• access controls,
• and effective founder offboarding procedures.

Each mechanism protects a different risk.

For example:

Non-compete: limits specified competing activity.

Confidentiality: protects information.

IP assignment: protects ownership of technology.

Non-solicitation: protects employees and customers.

Vesting: protects the cap table.

Trade-secret rules: protect valuable confidential commercial information.

This combined approach is generally far more effective than attempting to prevent every possible future problem through one broadly worded prohibition.

Conclusion: Can a Startup Founder Be Prevented from Establishing a Competing Company in Turkey?

A startup founder can be prevented from engaging in certain competing activities in Turkey, but the restriction does not arise merely because the person is described as a founder.

The legal position depends on the founder’s role.

A board member of a Turkish joint stock company may be subject to the statutory non-compete obligation in Article 396 of the Turkish Commercial Code.

A manager of a Turkish limited liability company is subject to statutory loyalty and competition rules under Article 626.

Limited liability company shareholders are also subject to loyalty obligations, and the articles of association may provide for additional restrictions against competition under Article 613.

By contrast, an ordinary shareholder in a joint stock company is not automatically subject to the same statutory non-compete regime merely because that person owns shares. Contractual arrangements therefore become particularly important.

Where the founder also works as an employee, Articles 444 to 447 of the Turkish Code of Obligations impose additional requirements on post-employment non-compete agreements. In particular, such restrictions must protect a genuine employer interest, must be appropriately limited and ordinarily may not exceed two years except under special circumstances.

The most important practical lesson is that startup founders should not wait until one of them announces:

“I am leaving and starting my own company.”

At that stage, the founders may already have conflicting financial interests.

The better approach is to determine the rules when the startup is established or when the first professional investment enters the company.

A properly drafted founder agreement should answer:

• whether founders may compete while they remain shareholders,
• whether they may compete while serving as managers or directors,
• whether restrictions continue after resignation,
• how long the restrictions last,
• what businesses constitute competitors,
• which territories are covered,
• whether passive investments are allowed,
• what confidential information must remain protected,
• whether customers and employees may be solicited,
• and what consequences follow if the founder breaches the agreement.

The agreement should also be coordinated with the startup’s articles of association, employment agreements, intellectual property assignments and vesting arrangements.

Ultimately, Turkish law does not prohibit competition merely because one company dislikes having a new rival.

What the law protects are legitimate corporate interests, contractual obligations, duties of loyalty, intellectual property, confidential information and fair competition.

A startup that structures these rights correctly has a much stronger position if a founder later establishes a competing business.

A startup that relies only on personal trust may discover, after the founder leaves, that preventing competition is substantially more difficult than expected.