Introduction

Representations, warranties and indemnities are among the most heavily negotiated provisions in Turkish mergers and acquisitions.

A buyer acquiring shares in a Turkish company generally acquires the target together with its historical legal, tax, employment, regulatory and commercial liabilities. Even extensive legal and financial due diligence cannot identify every possible risk. Transaction documents therefore allocate unknown and known risks between the buyer and seller through representations, warranties, indemnities and related liability provisions.

The importance of these provisions increases significantly in share acquisitions because the target company continues to exist after closing. Its tax history, employment relationships, litigation, contracts and regulatory exposure remain with the same legal entity.

A properly drafted Turkish share purchase agreement should therefore answer four fundamental questions:

• What statements is the seller making about the target?
• What happens if those statements are incorrect?
• Which identified risks remain economically with the seller?
• For how long and up to what amount can the buyer bring a claim?

These questions should be addressed together with the Turkish Code of Obligations No. 6098, the Turkish Commercial Code No. 6102 and the specific transaction structure.

What Are Representations and Warranties?

In international M&A practice, sellers commonly provide a detailed set of statements concerning the target company and the shares being sold.

These may be described as:

• Representations;
• Warranties;
• Representations and warranties;
• Seller assurances.

Under Turkish law, the contractual consequences depend primarily on the substance of the clause rather than the English terminology used in the agreement.

The parties should therefore clearly define what remedy applies if a statement proves incorrect.

Typical seller warranties concern:

• Ownership of the shares;
• Authority to enter into the transaction;
• Corporate records;
• Financial statements;
• Taxes;
• Employment;
• Material contracts;
• Litigation;
• Intellectual property;
• Real estate;
• Regulatory compliance;
• Personal data;
• Environmental matters;
• Insurance;
• Anti-corruption compliance.

A buyer should not assume that importing standard English-law warranty language into a Turkish-law agreement automatically produces the same legal consequences as it would under English law.

Fundamental Warranties

Certain warranties are considered fundamental because they concern the seller’s ability to complete the transaction itself.

Typical fundamental warranties include:

• The seller legally owns the shares;
• The shares are validly issued;
• The shares are free from undisclosed pledges or attachments;
• The seller has authority to sell;
• The agreement constitutes a binding obligation;
• No third-party consent prevents the transfer.

These warranties normally receive stronger protection than ordinary business warranties.

The seller may accept:

• A higher liability cap;
• A longer claim period;
• Fewer disclosure qualifications;
• Fewer materiality thresholds.

For example, a buyer acquiring 100% of a company will normally expect the seller to provide an unqualified warranty that it owns 100% of the transferred shares.

A seller should not usually be able to limit liability for defective title to the same small percentage of the purchase price that may apply to an ordinary commercial warranty.

Business Warranties

Business warranties concern the historical operation of the target company.

These may cover the target’s:

• Corporate compliance;
• Financial position;
• Assets;
• Contracts;
• Employees;
• Intellectual property;
• Litigation;
• Regulatory licences;
• Information technology;
• Data protection;
• Insurance;
• Environmental compliance.

The scope depends on the industry and transaction.

A software company will require extensive intellectual property and cybersecurity warranties. A manufacturing acquisition will require more detailed environmental, product liability and occupational safety provisions.

A regulated financial services acquisition may require extensive warranties concerning licences, regulatory reporting, capital requirements and customer compliance.

The warranty schedule should therefore be tailored to the target rather than copied from an unrelated acquisition.

Corporate Warranties

Corporate warranties generally confirm that the target:

• Is validly incorporated;
• Has legal capacity to conduct its business;
• Has properly maintained corporate records;
• Has issued only the disclosed shares;
• Has no undisclosed options or convertible rights;
• Has complied with capital requirements;
• Has no undisclosed subsidiaries;
• Has properly adopted material shareholder and board resolutions.

The buyer should reconcile these warranties with legal due diligence findings.

For example, if the share ledger has not been properly maintained, the issue should either be remedied before closing or expressly disclosed.

The buyer should avoid accepting a broad corporate warranty that is immediately contradicted by the contents of the disclosure letter.

Financial Statement Warranties

The buyer commonly requires assurances concerning the target’s financial statements.

The seller may warrant that the financial statements:

• Have been properly prepared;
• Are consistent with applicable accounting principles;
• Fairly reflect the target’s financial position;
• Contain appropriate provisions;
• Do not omit material liabilities;
• Properly record assets and receivables.

Financial warranties should be coordinated with the purchase-price mechanism.

Where the transaction uses completion accounts, certain financial matters will be adjusted through the purchase-price calculation rather than warranty claims.

Where the transaction uses a locked-box mechanism, leakage warranties become particularly important.

Tax Warranties

Tax liabilities can be one of the most significant historical exposures in a Turkish acquisition.

Tax warranties may address:

• Corporate tax;
• VAT;
• Withholding tax;
• Stamp tax;
• Social security contributions;
• Customs duties;
• Transfer pricing;
• Tax filings;
• Tax inspections;
• Tax disputes;
• Related-party transactions;
• Tax incentives.

The seller may warrant that all required returns have been filed and taxes paid when due.

However, tax matters are often protected through a separate tax indemnity or tax covenant rather than relying exclusively on general warranties.

The tax indemnity may provide that the seller remains economically responsible for taxes relating to periods before closing, even if the assessment is issued after closing.

Employment Warranties

Employment claims frequently arise after acquisitions.

The seller may provide warranties concerning:

• Employee numbers;
• Salaries;
• Bonuses;
• Overtime;
• Annual leave;
• Severance exposure;
• Independent contractors;
• Social security registration;
• Occupational health and safety;
• Collective bargaining;
• Employee litigation;
• Key employee arrangements.

A common risk arises where employees receive unofficial payments that do not appear in payroll records.

Another issue may involve workers classified as independent contractors despite functioning as employees.

Due diligence findings should therefore determine whether the buyer requires a general employment warranty or a specific indemnity for an identified issue.

Intellectual Property Warranties

Intellectual property warranties are particularly important in technology and consumer-brand acquisitions.

The seller may warrant that:

• The target owns the material intellectual property used in its business;
• Registered rights are valid;
• Employees and contractors have assigned necessary rights;
• No third party has challenged ownership;
• The target does not knowingly infringe third-party rights;
• Licence agreements remain valid;
• Software is appropriately licensed;
• No material source-code ownership dispute exists.

A buyer should verify these matters independently through registry searches and contract review.

A warranty is not a substitute for confirming ownership of the target’s principal trademark, software or patent.

Material Contract Warranties

Commercial contract warranties may confirm that:

• Disclosed contracts are valid;
• No material breach exists;
• No termination notice has been received;
• No undisclosed change-of-control restriction applies;
• Material counterparties have not threatened termination;
• No unusually burdensome obligations exist.

The buyer may also require disclosure of the target’s largest customers and suppliers.

Customer concentration risk is primarily commercial rather than legal, but contract termination following closing can materially affect company value.

Litigation Warranties

The seller may warrant that all material litigation, arbitration, enforcement and administrative proceedings have been disclosed.

The clause may also cover:

• Threatened claims;
• Regulatory investigations;
• Tax disputes;
• Employment claims;
• Criminal investigations involving the company;
• Interim injunctions;
• Attachments;
• Settlement agreements.

Known litigation is normally disclosed and may be excluded from general warranty protection.

If a specific case presents material financial exposure, the buyer may instead require a specific indemnity.

Regulatory Warranties

Regulated companies require sector-specific warranties.

These may relate to:

• Licences;
• Permits;
• Regulatory filings;
• Inspections;
• Administrative fines;
• Ownership restrictions;
• Minimum capital requirements;
• Customer protection rules;
• Anti-money-laundering obligations.

The warranties should distinguish between historical compliance and the continuing validity of licences after closing.

Where a change of control requires regulatory approval, receipt of that approval should generally be a condition precedent rather than merely a warranty.

Data Protection Warranties

Data protection has become increasingly important in Turkish M&A.

The seller may warrant that the target complies with applicable personal data protection requirements, including:

• Privacy notices;
• Processing conditions;
• Data security;
• Data processors;
• International transfers;
• Data subject requests;
• Retention periods;
• Cybersecurity incidents.

The warranty schedule may also require disclosure of any complaints or investigations before the Turkish Personal Data Protection Authority.

For digital businesses, historical unlawful processing of customer data may have both regulatory and reputational consequences.

Environmental Warranties

Environmental warranties are especially important for industrial, energy, manufacturing, mining and real estate businesses.

The seller may provide statements concerning:

• Environmental permits;
• Waste disposal;
• Hazardous materials;
• Soil contamination;
• Water contamination;
• Emissions;
• Environmental fines;
• Remediation obligations.

Known contamination should not generally be handled only through a broad warranty.

If the issue has already been identified, the buyer may require remediation before closing or a specific indemnity backed by escrow.

What Is a Disclosure Letter?

A disclosure letter qualifies the seller’s warranties.

The basic principle is that the seller should not be liable for a warranty breach concerning a matter that was properly disclosed to the buyer before signing.

For example, a warranty may state:

The target is not involved in any litigation.

The disclosure letter may then identify three pending court cases.

Those cases are therefore disclosed exceptions to the warranty.

The quality of disclosure is one of the most important negotiation issues in an M&A transaction.

General Disclosure and Specific Disclosure

Disclosure may be general or specific.

General disclosure

General disclosure may include information available from:

• Trade registry records;
• Public registers;
• The data room;
• Published financial statements;
• Government databases.

Sellers often seek broad language stating that everything uploaded to the data room is deemed disclosed.

Buyers usually resist this approach.

Thousands of documents may have been uploaded, and a material risk may be hidden in one document without explanation.

Specific disclosure

Specific disclosure identifies the particular issue against the relevant warranty.

For example:

In relation to Warranty 12.3, the target is defendant in Istanbul 4th Commercial Court File No. 2026/… concerning a claim of TRY ….

Specific disclosure provides substantially greater certainty.

A well-structured disclosure letter should identify the nature of the issue, relevant document and potential exposure.

Fair Disclosure

Parties frequently use the concept of fair disclosure.

The agreement may provide that a matter is considered disclosed only if it has been disclosed with sufficient detail to enable a reasonable buyer to understand its nature and scope.

This avoids situations where the seller argues that a material liability was technically included somewhere in the data room even though its significance was not apparent.

The agreement should define the disclosure standard rather than leaving the issue entirely to later interpretation.

Buyer’s Knowledge

Sellers frequently argue that the buyer should not be able to claim for a warranty breach if the buyer knew about the issue before signing.

Buyers may resist this position.

The agreement should determine whether buyer knowledge prevents claims and how knowledge is defined.

Possible standards include:

• Actual knowledge of named individuals;
• Actual knowledge after reasonable enquiry;
• Constructive knowledge;
• Knowledge contained in due diligence reports.

A narrowly defined knowledge concept is preferable to vague wording such as “everything the buyer ought to have known.”

The agreement should also specify whether the buyer’s due diligence limits its rights.

Due Diligence and Warranty Claims

A recurring question is whether information discovered during due diligence prevents the buyer from later claiming breach of warranty.

The answer should be addressed contractually.

The parties may agree that:

• Due diligence does not limit warranty rights unless specifically disclosed;
• Data room documents qualify warranties;
• Only the disclosure letter qualifies warranties;
• Actual buyer knowledge prevents claims.

A buyer should avoid conducting extensive due diligence only to discover that the agreement treats every document reviewed as a complete waiver of warranty protection.

Specific Indemnities

A warranty addresses whether a contractual statement is correct.

A specific indemnity generally addresses an identified risk.

For example, due diligence may reveal:

• An ongoing tax inspection;
• An employee classification issue;
• Pending litigation;
• Environmental contamination;
• Unlicensed software;
• A customs dispute;
• Historical social security exposure.

The buyer already knows the issue exists.

The seller therefore cannot simply warrant that it does not exist.

Instead, the agreement may provide that the seller will reimburse the buyer or target for losses arising from that identified issue.

Specific indemnities are frequently negotiated without the same financial thresholds that apply to ordinary warranty claims.

Tax Indemnity

A tax indemnity often forms a separate schedule to the share purchase agreement.

Its objective is typically to allocate pre-closing tax liabilities to the seller and post-closing liabilities to the buyer.

The agreement should regulate:

• Which taxes are covered;
• Relevant tax periods;
• Tax audits;
• Tax litigation;
• Seller participation in defence;
• Settlement authority;
• Tax refunds;
• Tax benefits;
• Interest and penalties;
• Time limitations.

Careful drafting is required where a tax liability relates partly to a period before closing and partly to a period after closing.

Warranty Claims and Loss

The agreement should define what constitutes recoverable loss.

Possible categories include:

• Direct financial loss;
• Reduction in share value;
• Liability incurred by the target;
• Professional costs;
• Regulatory penalties;
• Interest;
• Litigation expenses.

The seller may seek exclusions for:

• Indirect damages;
• Consequential losses;
• Loss of opportunity;
• Loss of profit;
• Punitive damages.

The distinction between direct and indirect loss can create uncertainty.

A clearer approach is often to identify expressly which categories are recoverable or excluded.

Liability Caps

The seller will normally seek a maximum financial limit on warranty claims.

For example:

• General warranties: 10–30% of purchase price;
• Fundamental warranties: up to 100% of purchase price;
• Tax claims: separately negotiated;
• Fraud: potentially uncapped or outside contractual limitations.

These percentages are commercial examples rather than mandatory rules.

The appropriate cap depends on transaction size, due diligence quality, bargaining power and identified risks.

A seller should ensure that different caps do not accidentally overlap in a way that creates aggregate liability exceeding the intended maximum.

De Minimis Threshold

A de minimis provision prevents very small claims from being brought.

For example:

No individual warranty claim may be brought unless the amount exceeds EUR 10,000.

The purpose is to prevent disproportionate administrative effort over immaterial matters.

The threshold should be proportionate to the transaction value.

A threshold suitable for a EUR 100 million acquisition may be inappropriate for a EUR 2 million acquisition.

Basket

A basket requires aggregate claims to reach a specified amount before the seller becomes liable.

Two principal structures are used.

Deductible basket

The seller is liable only for the amount exceeding the basket.

If the basket is EUR 100,000 and valid claims total EUR 150,000, the seller pays EUR 50,000.

Tipping basket

Once the threshold is reached, the seller becomes liable for the entire amount.

If claims total EUR 150,000 and the basket is EUR 100,000, the seller may be liable for the full EUR 150,000.

The agreement should expressly identify which structure applies.

Time Limits

Warranty claims usually have contractual limitation periods.

Different periods may apply to different warranties.

For example:

• General business warranties: 12–24 months;
• Tax warranties: linked to tax assessment periods;
• Fundamental warranties: longer;
• Environmental matters: individually negotiated.

Again, these are common transactional approaches rather than statutory requirements.

The contractual claim procedure should be coordinated with mandatory statutory limitation rules under Turkish law.

Parties should be particularly careful where contractual wording appears to shorten mandatory rights in a way that may not be legally enforceable.

Claim Notification

The agreement should establish how the buyer must notify a claim.

A notice may need to include:

• Nature of the breach;
• Relevant warranty;
• Estimated loss;
• Supporting facts;
• Third-party proceedings;
• Expected timetable.

Sellers may request a deadline for notifying claims after the buyer becomes aware of them.

Buyer-friendly agreements may provide that failure to include a precise loss amount does not invalidate the notice where the amount cannot yet reasonably be determined.

The clause should avoid excessive technicality that creates disputes about whether an otherwise legitimate claim was properly notified.

Third-Party Claims

Many warranty and indemnity claims originate from third parties.

Examples include:

• Tax authority assessments;
• Employee lawsuits;
• Customer claims;
• Regulatory proceedings;
• Supplier disputes.

The share purchase agreement should determine who controls the defence.

The seller may seek the right to participate where it will ultimately bear the financial exposure.

The buyer should retain sufficient control to protect the target’s commercial relationships and reputation.

Settlement should generally require consultation, and the seller should not be permitted to force a settlement containing admissions or operational commitments harmful to the target.

Mitigation

The seller may require the buyer to take reasonable steps to minimise losses resulting from a warranty breach.

For example, the buyer should not allow an avoidable penalty to increase indefinitely and then claim the entire amount from the seller.

However, mitigation obligations should not require the buyer to:

• Commence commercially unreasonable litigation;
• Damage important customer relationships;
• Take actions against its legitimate business interests.

The obligation should be drafted around reasonable commercial conduct.

Double Recovery

The buyer should not recover the same loss twice.

For example, a loss may already have been:

• Reflected in the purchase price;
• Reimbursed by insurance;
• Recovered from a third party;
• Accounted for through completion accounts.

The agreement should contain an appropriate prohibition on double recovery.

However, the seller should not use the clause to avoid liability simply because the target may have a theoretical claim against another person.

Escrow Arrangements

An escrow arrangement may provide security for warranty and indemnity claims.

Part of the purchase price is placed with an agreed escrow agent and released after a specified period.

Escrow arrangements are especially useful where:

• The seller will distribute sale proceeds immediately;
• The seller is a foreign entity;
• Identified liabilities remain unresolved;
• Multiple individual sellers are involved;
• Enforcement risk is significant.

The escrow agreement should regulate:

• Amount;
• Currency;
• Release dates;
• Claim notices;
• Disputed claims;
• Interest;
• Bank fees;
• Governing law.

Escrow provides practical protection because obtaining a favourable judgment has limited value where the seller no longer has recoverable assets.

Purchase Price Retention

Instead of third-party escrow, the buyer may retain part of the purchase price.

For example, 10% of the price may be payable 18 months after closing, subject to warranty claims.

Retention may be simpler than escrow but sellers often resist it because the buyer continues to control the funds.

The agreement should prevent the buyer from withholding unrelated amounts merely because a minor dispute has arisen.

Bank Guarantees

A seller may provide a bank guarantee securing certain post-closing liabilities.

Bank guarantees may be particularly useful for:

• Tax indemnities;
• Construction-related liabilities;
• Regulatory matters;
• Specific pending litigation.

The guarantee should specify whether payment is on first demand and what documents are required.

The wording of the guarantee itself is as important as the indemnity provision it secures.

Warranty and Indemnity Insurance

Warranty and indemnity insurance, commonly known as W&I insurance, has become increasingly relevant in larger M&A transactions.

A policy may cover losses arising from breaches of seller warranties and certain tax risks.

Insurance can be useful where:

• A private equity seller requires a clean exit;
• Multiple sellers want limited continuing exposure;
• The buyer requires greater protection than the seller will provide;
• The transaction is competitive.

The insurer will normally conduct its own underwriting process and review due diligence reports.

Known risks are usually excluded and should be handled separately through specific indemnities or other security.

The policy wording should be coordinated with the SPA so that coverage gaps are minimised.

Fraud and Intentional Misconduct

Liability limitations generally require special attention where fraud, wilful misconduct or intentional concealment is involved.

Under Turkish law, contractual arrangements seeking to exclude liability for intentional or grossly wrongful conduct may be restricted or invalid depending on the circumstances.

The seller should therefore not assume that a contractual cap will protect deliberate concealment of material liabilities.

The agreement should expressly regulate the treatment of fraud and intentional misrepresentation.

Sandbagging Provisions

A sandbagging clause determines whether the buyer may bring a warranty claim even if it knew before closing that the warranty was incorrect.

A pro-sandbagging clause allows the claim.

An anti-sandbagging clause prevents it.

Turkish M&A agreements do not have to use this terminology, but the underlying issue should be addressed expressly.

Otherwise, disputes may arise over whether due diligence knowledge prevents recovery.

The appropriate position depends on bargaining power and how disclosure is structured.

Bring-Down of Warranties

Where signing and closing occur on different dates, the buyer may require warranties to be repeated at closing.

This is known as a warranty bring-down.

The agreement should determine whether warranties must be:

• True at signing;
• True at closing;
• True at both dates;
• Treated as repeated every day between signing and closing.

The seller should disclose material developments occurring after signing.

Where an important warranty becomes inaccurate, the buyer may receive:

• Termination rights;
• A waiver option;
• A price adjustment;
• An indemnity.

This mechanism is especially important where regulatory approval creates a long gap between signing and closing.

Material Adverse Change

A buyer may seek protection against a major deterioration in the target’s business between signing and closing.

A material adverse change or material adverse effect clause may permit the buyer not to complete the transaction where specified serious events occur.

These clauses require precise drafting.

The seller will seek exclusions for:

• General economic conditions;
• Industry-wide changes;
• Currency movements;
• Changes in law;
• Political developments;
• Events affecting competitors equally.

The buyer may seek exceptions where the target is disproportionately affected.

A broadly drafted MAC clause can create significant closing uncertainty.

Disclosure Between Signing and Closing

The seller may be required to notify the buyer if new circumstances arise before closing.

The key issue is whether supplemental disclosure:

• Automatically qualifies the warranties;
• Requires buyer consent;
• Gives the buyer termination rights;
• Creates an indemnity claim.

A seller should not be permitted to eliminate liability by disclosing a major breach immediately before closing unless the buyer knowingly accepts the risk.

The agreement should clearly regulate supplemental disclosures.

Seller Groups and Several Liability

Where several shareholders sell their shares, the agreement must determine how liability is allocated.

Possible models include:

• Joint and several liability;
• Several liability according to sale proceeds;
• Several liability according to ownership percentage;
• Different liability for founders and financial investors.

Financial investors often insist that their liability cannot exceed the amount of proceeds they individually receive.

Management shareholders may provide operational warranties that passive investors are unwilling to give.

The warranty structure should therefore reflect each seller’s actual involvement in the target.

Management Warranties

Where a financial investor sells a portfolio company, it may have limited operational knowledge.

Management may therefore provide certain business warranties.

However, management may receive only a relatively small portion of the sale proceeds.

Requiring management to assume unlimited corporate liability is rarely commercially appropriate.

Possible solutions include:

• Management knowledge qualifications;
• Separate lower liability caps;
• W&I insurance;
• Limited operational warranties.

Post-Closing Conduct

The buyer should not be able to deliberately create a warranty claim after closing.

The agreement may therefore regulate claims arising because the buyer voluntarily changes:

• Accounting policies;
• Tax elections;
• Business practices;
• Employee structures;
• Corporate arrangements.

For example, the seller may resist responsibility for additional tax caused solely by the buyer making a retrospective tax election after closing.

However, the clause should not prevent legitimate business decisions or compliance with changes in law.

Relationship Between Purchase Price and Warranties

The purchase price mechanism and warranty regime should be drafted together.

If a liability has already reduced net debt or working capital and therefore lowered the purchase price, the buyer should not generally recover it again through a warranty claim.

Conversely, a seller should not argue that a liability was reflected in the purchase price unless the agreement or completion accounts actually demonstrate that fact.

The interaction should be expressly addressed.

Locked-Box Transactions

In a locked-box transaction, the purchase price is determined by reference to historical accounts at an agreed locked-box date.

The seller usually warrants that no value has leaked from the target to the seller or related persons after that date, except for specifically permitted leakage.

Leakage may include:

• Dividends;
• Shareholder payments;
• Management fees;
• Related-party loans;
• Transaction bonuses paid for the seller’s benefit;
• Transfers of assets at undervalue.

The buyer may receive a pound-for-pound or euro-for-euro reimbursement right for unauthorised leakage.

Leakage claims often operate independently of ordinary warranty caps and baskets.

Completion Accounts Transactions

Where completion accounts are used, the purchase price is adjusted after closing based on actual financial figures.

Typical adjustments concern:

• Cash;
• Debt;
• Working capital;
• Transaction expenses.

Disputes concerning completion accounts are often referred to an independent accounting expert rather than litigation or arbitration.

The agreement should distinguish between accounting adjustment disputes and warranty claims.

Specific Risks in Turkish Transactions

Certain issues require particular attention in Turkish acquisitions.

These include:

• Limited company public debt exposure;
• Informal shareholder withdrawals;
• Incomplete corporate books;
• Cash payments outside accounting records;
• Historical employment and social security claims;
• Related-party transactions;
• Unregistered intellectual property;
• Informal property occupancy;
• Historical tax restructuring;
• Missing regulatory licences;
• Personal data compliance.

Where these matters are identified during due diligence, a broad general warranty may provide insufficient protection.

Pre-closing correction or a specific indemnity may be preferable.

Drafting Strategy for Buyers

A buyer should focus on the economic protection created by the warranty regime rather than simply requesting the longest possible warranty schedule.

The most effective approach normally involves:

1. Detailed due diligence;
2. Targeted warranties;
3. Specific indemnities for identified risks;
4. Appropriate claim periods;
5. Sufficient liability caps;
6. Practical security through escrow or retention;
7. Clear disclosure standards;
8. Effective tax protection.

The buyer should distinguish between risks that can be quantified before signing and risks that remain genuinely unknown.

Drafting Strategy for Sellers

A seller should seek a clear and final liability framework.

Important protections may include:

• Proper disclosure;
• Financial caps;
• De minimis thresholds;
• Baskets;
• Time limitations;
• Exclusion of double recovery;
• Buyer mitigation obligations;
• Limits on indirect damages;
• Procedures for third-party claims;
• Knowledge qualifications;
• Proportionate liability among multiple sellers.

The seller should also ensure that matters already identified and priced into the transaction are not left open as future warranty claims.

Practical Warranty and Indemnity Checklist

Before signing a Turkish M&A agreement, parties should generally:

1. Identify fundamental and business warranties.
2. Tailor warranties to the target’s sector.
3. Complete legal, financial and tax due diligence.
4. Prepare a detailed disclosure letter.
5. Define the required disclosure standard.
6. Determine how buyer knowledge affects claims.
7. Identify risks requiring specific indemnities.
8. Prepare a separate tax indemnity where appropriate.
9. Establish liability caps.
10. Agree de minimis and basket thresholds.
11. Determine claim periods.
12. Define recoverable loss.
13. Establish notification procedures.
14. Regulate third-party claims.
15. Prevent double recovery.
16. Determine mitigation obligations.
17. Consider escrow or purchase-price retention.
18. Consider W&I insurance for larger transactions.
19. Regulate warranties between signing and closing.
20. Coordinate the warranty regime with the purchase-price mechanism.

Conclusion

Representations, warranties and indemnities determine how risk is allocated between buyer and seller after an acquisition closes.

They should not be treated as standard boilerplate provisions.

The appropriate warranty package depends on the transaction structure, target company, due diligence findings and bargaining position of the parties.

Unknown business risks may be allocated through warranties, while identified risks are often better addressed through specific indemnities. Financial caps, baskets and time limitations give the seller certainty, while escrow, retention and insurance may provide the buyer with practical enforcement security.

In Turkish M&A transactions, particular attention should be given to the interaction between contractual remedies and the mandatory provisions of Turkish law. International transaction concepts should therefore be adapted rather than simply copied from foreign-law templates.

A carefully negotiated warranty and indemnity regime can significantly reduce post-closing disputes and ensure that the agreed purchase price accurately reflects the legal and financial risks transferred with the business.