A company may spend years building its customer portfolio, supplier relationships, pricing structure, technical know-how and commercial reputation.

Then one of its shareholders establishes another company.

The new company operates in exactly the same sector.

The same customers begin receiving offers from the new business. Employees are approached. Suppliers are contacted. The shareholder appears to know precisely which clients are profitable, what prices the existing company charges and when important contracts are due for renewal.

The remaining shareholders naturally ask:

“Can a shareholder simply establish a competing company and take our customers?”

Under Turkish law, the answer depends heavily on one fact that is frequently overlooked:

What is that person’s legal position within the original company?

A person may simultaneously be:

• merely a shareholder;
• a shareholder and manager of a limited liability company;
• a shareholder and board member of a joint-stock company;
• an employee;
• a party to a shareholders’ agreement containing a non-compete clause.

Each status creates a different legal analysis.

The rules are also fundamentally different for limited liability companies (limited şirket) and joint-stock companies (anonim şirket).

Most importantly, establishing a company with a similar business purpose does not automatically constitute a breach in every case. The claimant must identify the applicable prohibition and prove actual competitive conduct or another legally prohibited act.

1. The First Question: Is the Company a Limited Şirket or an Anonim Şirket?

This distinction should be made before any cease-and-desist letter or lawsuit is filed.

For limited liability companies, Articles 613 and 626 of the Turkish Commercial Code (“TCC”) contain specific rules concerning loyalty and competition.

For joint-stock companies, Article 396 TCC regulates the statutory non-compete obligation of board members.

An ordinary shareholder in a joint-stock company is in a very different position.

Therefore, the statement:

“A shareholder cannot compete with his own company”

is too broad to be legally accurate.

The correct question is:

Which shareholder, in which type of company, holding which management position, and subject to which contractual obligations?

PART I — LIMITED LIABILITY COMPANIES

2. A Limited Company Shareholder Has a Statutory Duty of Loyalty

Article 613 TCC is the starting point.

A limited liability company shareholder must protect the company’s confidential information. This confidentiality obligation cannot be removed by the articles of association or a general assembly resolution.

The provision also states that shareholders may not engage in conduct capable of harming the company’s interests and, in particular, may not carry out transactions that provide them with a special benefit while damaging the company’s purpose.

However, Article 613 makes an important distinction regarding competition itself:

The articles of association may expressly require shareholders to refrain from transactions and conduct competing with the company.

This distinction is extremely important in practice.

3. A Mere Limited Company Shareholder Is Not Automatically Subject to a Complete Non-Compete Ban

Assume a shareholder owns 30% of a Turkish limited company but is not a manager.

The company’s articles contain no non-compete provision.

Can that shareholder establish another company operating in the same general industry?

It cannot automatically be said that every such activity is prohibited merely because the person remains a shareholder.

Turkish case law has emphasised that, for a limited company shareholder who is not a manager, the existence of a comprehensive non-compete obligation generally requires an express provision in the articles of association. The general loyalty obligation in Article 613 should not automatically be converted into an unlimited prohibition on competing.

But this does not mean that the shareholder is free to harm the original company.

Article 613’s loyalty obligations remain relevant.

For example, a shareholder may face a significantly different situation if he:

• uses the original company’s confidential price lists;
• diverts an existing company opportunity to himself;
• takes confidential customer information;
• manipulates the company so that a contract is rejected and then takes the contract through his own business;
• obtains a personal benefit while deliberately damaging the original company.

Accordingly, two separate questions must be asked:

Is there an express non-compete obligation?

and

Even if there is not, has the shareholder breached the statutory duty of loyalty?

4. The Articles of Association Can Impose a Non-Compete Obligation on Limited Company Shareholders

Article 613 expressly permits a limited company’s articles of association to provide that shareholders must refrain from transactions and conduct competing with the company.

This is therefore one of the first documents counsel should obtain.

A non-compete provision may state, for example, that while a person remains a shareholder he may not:

• establish a business competing with the company;
• participate in competing businesses;
• carry out the company’s business activities personally;
• provide services to a competitor;
• solicit customers;
• divert corporate opportunities.

The exact wording matters enormously.

A clause prohibiting only the establishment of a “competing company” is different from a provision prohibiting direct or indirect involvement in competing commercial activities.

The scope of the clause must therefore be interpreted carefully.

5. What If the Shareholder Is Also the Manager?

This is a much more serious situation.

Article 626/2 TCC provides a statutory non-compete rule for managers and persons responsible for management of a limited company.

Unless:

• the articles of association provide otherwise; or
• all other shareholders give written permission,

a manager may not engage in an activity that competes with the company.

The articles may also provide for a general assembly resolution instead of individual shareholder approval.

The legal position is therefore almost the reverse of that applicable to an ordinary non-managing shareholder.

Non-managing shareholder

A broad non-compete obligation generally requires a contractual basis in the articles.

Manager

The statutory starting point is that competition is prohibited, unless the appropriate permission or exception exists.

This distinction can completely change the outcome of litigation.

6. Example: A 50% Shareholder and Manager Establishes a Competing Business

Assume two individuals each own 50% of a medical equipment company.

Both are shareholders, but Shareholder A is also the registered manager.

A secretly establishes another company.

The new company:

• sells the same medical equipment;
• contacts the original company’s distributors;
• employs former personnel of the original company;
• submits competing offers to existing customers.

Unless valid permission exists, this creates a strong Article 626 problem.

A manager owes not only a non-compete obligation but also duties of care and loyalty and must protect the company’s interests in accordance with good faith.

If the competing activity causes financial damage, management-liability provisions may also become relevant.

7. Is Merely Establishing a Company Enough?

Not always.

This is a particularly important practical point.

A newly incorporated company may have an activity clause identical to the existing company’s business.

But what if it has:

• no customers;
• no turnover;
• no invoices;
• no purchases;
• no sales;
• no genuine commercial operations?

Turkish court decisions have distinguished the mere legal incorporation of a company from actual competitive activity.

In one case involving a limited company, the court concluded that merely founding and becoming manager of another company was not sufficient where the new company had conducted no genuine commercial activity, made no purchases or sales and effectively remained inactive.

Therefore, a plaintiff should avoid building the entire case around the new company’s trade-registry activity code.

The stronger question is:

What did the new company actually do?

8. The Evidence of Actual Competition

A strong case should establish overlap between the two businesses.

Useful evidence may include:

• invoices issued by the competing company;
• customer lists;
• quotations;
• purchase orders;
• tender records;
• websites;
• online advertisements;
• social media accounts;
• trade fair participation;
• distributor agreements;
• supplier correspondence;
• e-mails;
• WhatsApp messages;
• commercial books;
• bank movements;
• electronic invoices;
• employee transfers.

The goal is to show that the alleged competitor is not merely incorporated under a similar activity code but is genuinely competing in the same commercial market.

9. Customer Diversion Is Often the Strongest Evidence

Consider the following situation.

The original company has 100 regular customers.

The shareholder-manager establishes a new company.

Within six months, 25 of those customers stop buying from the original business.

Twenty-two of them begin buying from the new company.

The new company’s quotations are systematically slightly below the original company’s historical prices.

This is far more significant than merely proving that the companies operate in the same sector.

Counsel should reconstruct:

customer → last transaction with original company → first transaction with competitor → person making contact → quoted price → subsequent turnover.

That chronology can reveal the commercial diversion.

10. Using Company Secrets Creates a Separate and Serious Problem

A shareholder may know information that an ordinary competitor could never obtain.

For example:

• confidential customer lists;
• customer purchasing volumes;
• discounts;
• profit margins;
• supplier prices;
• technical formulas;
• manufacturing processes;
• tender strategies;
• future projects;
• internal budgets.

Article 613 expressly imposes a duty on limited company shareholders to protect company secrets, and this duty cannot simply be removed by general assembly resolution.

Therefore, even where the shareholder argues that no contractual non-compete clause exists, misuse of confidential company information may still create substantial liability.

This is why a litigation strategy should not focus only on the phrase “non-compete.”

The case may simultaneously involve:

breach of loyalty + confidentiality violation + unfair competition + management liability.

11. Can the Other Shareholders Give Permission to Compete?

Yes.

Article 613/4 permits conduct otherwise conflicting with the loyalty or non-compete obligation where the remaining shareholders provide the required written approval. The articles may instead provide for a general assembly approval mechanism.

Article 626 contains a similar permission structure for managers.

This creates an important due-diligence point.

Before alleging breach, check:

• the articles of association;
• previous shareholder resolutions;
• written shareholder consents;
• shareholder agreements;
• management appointment documents.

A competitor may have been expressly permitted years earlier.

PART II — JOINT-STOCK COMPANIES

12. Ordinary A.Ş. Shareholders Are Different

The rules applicable to a Turkish joint-stock company are substantially different.

An ordinary shareholder in an A.Ş. is not automatically subject to the statutory non-compete obligation applicable to a board member.

This reflects the capital-company structure of an A.Ş.

Article 480 TCC embodies the single-obligation principle, under which shareholders generally cannot be subjected through the articles of association to obligations beyond payment of the share price or statutory exceptions.

Accordingly, the simple statement:

“He owns shares in our A.Ş., therefore he cannot establish a competitor”

is generally insufficient.

The analysis changes dramatically if the shareholder is also a board member.

13. Board Members Are Subject to Article 396 TCC

Article 396 establishes a specific statutory non-compete rule for members of the board of directors of a joint-stock company.

Without permission from the general assembly, a board member may not:

• conduct, for himself or another person, a commercial transaction falling within the company’s business activities; or
• enter another company engaged in the same type of commercial business as a partner with unlimited liability.

The first part of this provision is particularly important.

If the board member personally carries out competing commercial transactions through a business that he controls, merely hiding behind another legal entity will not necessarily resolve the problem.

The actual nature of his conduct should be investigated.

14. Merely Holding Shares in a Competing Limited-Liability Company Is Not Automatically the Same as Article 396 Competition

Article 396 should be read carefully.

The statutory wording expressly refers, in its second limb, to joining another competing enterprise as a partner with unlimited liability.

Therefore, merely holding a passive minority investment in another limited liability company or joint-stock company should not automatically be equated with the situation expressly described in that part of Article 396.

However, the result changes where the board member:

• manages the rival company;
• carries out transactions through it;
• diverts corporate opportunities;
• uses confidential information;
• actively competes against the original company.

In those circumstances, Article 396 must be considered together with the broader board-member duty of loyalty.

15. Board Members Also Owe a Duty of Loyalty Under Article 369

Article 396 is not the only relevant provision.

Board members must perform their duties with due care and protect the company’s interests in good faith under Article 369 TCC.

Therefore, conduct may create a liability issue even if it does not fit perfectly within the narrow wording of Article 396.

For example, a board member who learns through board meetings that the company intends to purchase a valuable distribution business and secretly acquires that opportunity for his own competing company may face serious loyalty and management-liability issues.

Turkish corporate law does not permit a board member to use his fiduciary position merely as an information source for another business.

16. What Can the A.Ş. Do Against a Board Member Who Violates Article 396?

Article 396 gives the company powerful alternatives.

Where a board member violates the prohibition, the company may choose to:

1. claim damages;
2. treat the transaction performed by the board member as having been made on behalf of the company; or
3. where the transaction was made for a third party, claim that the resulting benefits belong to the company.

The choice among these remedies belongs to the board members other than the member who committed the violation.

These remedies are considerably stronger than a simple claim for a symbolic amount of damages.

In an appropriate case, the company may seek to capture the very economic benefit obtained through the prohibited transaction.

17. Article 396 Has Very Short Limitation Periods

Speed is crucial.

The statutory remedies under Article 396 become time-barred:

• three months after the other board members learn of the competing transaction or the member’s participation in the other company; and
• in any event one year after the relevant act occurred.

Management-liability provisions are separately preserved.

These periods are extremely short in commercial litigation.

A company should therefore not spend a year sending informal warnings while the competitor continues operating.

Once the violation is discovered, the limitation analysis should be performed immediately.

18. Can an A.Ş. Shareholder Sign a Separate Non-Compete Agreement?

Yes, this is a different matter.

Although the corporate law rules do not automatically impose a general non-compete obligation on every A.Ş. shareholder, shareholders may undertake contractual obligations in a separate:

• shareholders’ agreement;
• share purchase agreement;
• investment agreement;
• founders’ agreement.

Such provisions operate contractually between the relevant parties rather than merely through shareholder status.

Their validity and enforceability should be evaluated under the general principles of the Turkish Code of Obligations and, where relevant, competition law.

The drafting should carefully define:

• prohibited business activities;
• territory;
• duration;
• direct and indirect competition;
• involvement through relatives or controlled companies;
• customer solicitation;
• employee solicitation;
• confidential information;
• consequences of breach.

Overbroad drafting creates enforceability risks.

19. A Non-Compete Clause Should Not Simply Say “The Shareholder May Never Compete”

A commercially effective clause should be precise.

For example, rather than stating:

“The shareholder shall not engage in any competing business.”

the agreement should identify:

Business scope

What products or services are competitive?

Territory

Turkey? Europe? Specific cities?

Duration

While the person remains a shareholder?

For a defined period after exit?

Capacity

Does the prohibition cover acting:

• personally;
• through another company;
• as director;
• manager;
• consultant;
• employee;
• investor;
• agent?

Customer solicitation

Can the former shareholder approach customers?

Employee solicitation

Can the person recruit key employees?

Confidential information

What information remains protected?

The more precisely the legitimate commercial interest is defined, the easier the clause is to analyse and enforce.

PART III — UNFAIR COMPETITION

20. Even Without a Corporate Non-Compete Obligation, Conduct May Constitute Unfair Competition

This is another critical distinction.

Suppose an ordinary shareholder is legally entitled to establish another business.

That does not give the shareholder permission to engage in unfair commercial conduct.

Articles 54 and following TCC create a separate unfair-competition regime designed to ensure honest and undistorted competition.

Article 54 provides that deceptive conduct and other commercial practices contrary to good faith affecting relationships among competitors, suppliers or customers are unlawful.

Therefore:

legal competition and
unfair competition

must be distinguished.

A shareholder may be entitled to become a competitor.

He is not thereby entitled to compete dishonestly.

21. Examples of Potential Unfair Competition

Depending on the facts, problems may arise where the rival business:

• falsely claims to be the continuation of the original company;
• uses confusingly similar branding;
• disparages the original company with false statements;
• misleads customers;
• misuses confidential business information;
• improperly induces contractual breaches;
• represents the original company’s projects as its own;
• systematically exploits protected commercial material.

Article 55 TCC contains examples of conduct contrary to honest competition, while Article 56 provides the civil remedies.

22. What Remedies Exist for Unfair Competition?

A person whose customers, credit, professional reputation, commercial activities or other economic interests have been damaged or threatened may, depending on the circumstances, request:

• determination that the conduct is unfair;
• prohibition of the unfair competition;
• removal of the consequences;
• correction of misleading statements;
• damages where fault exists;
• moral damages where the statutory requirements exist.

For damages, the court may also consider the economic benefit the defendant could have obtained through the unfair competition.

This can be especially valuable where proving the claimant company’s exact lost profit is difficult but the competing company’s financial gain can be demonstrated.

23. Can an Individual Shareholder Personally Sue for Loss Caused to the Company?

This issue requires caution.

If the competitor takes customers from the company, the immediate loss will usually be suffered by the company itself.

An individual shareholder may economically suffer because the value of his shares falls, but that is not necessarily direct personal damage.

Turkish case law has emphasised that claims based on competitive conduct damaging the company generally belong to the company rather than automatically allowing another shareholder to demand the company’s loss personally.

Accordingly, the plaintiff and the requested payment must be selected correctly.

A serious claim can fail if filed by the wrong person.

24. Can the Competing Shareholder Be Removed From a Limited Company?

Potentially, but not automatically.

Competition may become relevant to the removal of a limited company shareholder where:

• the articles provide a contractual removal ground; or
• the conduct is sufficiently serious to constitute just cause and the statutory corporate procedure is satisfied.

The existence of another company alone does not mean removal follows automatically.

The seriousness of the conduct matters.

For example:

Scenario A

The shareholder incorporates a company but it conducts no trade and is quickly liquidated.

Scenario B

The shareholder secretly diverts the company’s five largest customers, uses confidential price information and transfers employees to the rival business.

Scenario B presents a fundamentally stronger case for serious corporate remedies.

Turkish case law has both rejected allegations based merely on inactive competing entities and recognised that genuine competitive conduct can become relevant when assessing just cause.

25. What If the Competing Person Is a Limited Company Manager?

The company should also consider removal of management powers.

Where the manager is actively operating a competing business, the conduct may demonstrate a serious conflict between the manager’s statutory duty to protect the company and his personal economic interests.

The litigation strategy may therefore include, depending on the circumstances:

• claims arising from the non-compete breach;
• management liability;
• removal or restriction of management authority;
• claims for company loss;
• unfair competition proceedings;
• potential shareholder-removal issues.

The remedies should not be collapsed into one generic “competition lawsuit.”

26. The Financial Damage Must Be Proved Properly

A frequent weakness in these cases is the statement:

“He competed with us, therefore he must pay damages.”

The claimant should demonstrate the financial consequences.

Possible methodologies include:

Lost customers

Compare turnover before and after diversion.

Lost contracts

Identify contracts that moved to the competing company.

Lost profit

Determine the profit the original company would probably have generated.

Competitor gains

Analyse revenues generated from diverted customers where legally relevant.

Price undercutting

Compare confidential historic prices with rival offers.

Employee migration

Establish costs resulting from loss of key personnel.

Expert accounting analysis is frequently necessary.

27. Commercial Books of Both Companies May Become Critical

In many competition disputes, the strongest evidence will not come from witness testimony.

It will come from accounting records.

A forensic comparison may establish:

The closer the commercial transition, the stronger the evidential picture may become.

Relevant records include:

• commercial books;
• e-invoices;
• bank records;
• sales ledgers;
• customer accounts;
• supplier accounts;
• quotations.

28. Digital Evidence Is Often Decisive

The competing activity may be organised through:

• WhatsApp;
• private e-mail accounts;
• LinkedIn;
• customer CRM exports;
• cloud storage;
• spreadsheets;
• mobile phones.

Messages such as:

“Do not renew with the old company; we are moving everything to our new business next month”

may completely change the evidential position.

Electronic evidence should therefore be preserved lawfully and quickly.

Where evidence may disappear, procedural mechanisms for preservation of evidence and interim protection should be considered.

29. Injunctive Relief May Be More Important Than Damages

If customers are being diverted every week, waiting two years for a damages judgment may be commercially useless.

The real objective may be to stop the conduct.

Unfair competition rules expressly permit an action seeking prohibition of continuing unfair competition.

Depending on the claim and evidential position, interim measures under procedural law may also be evaluated.

The application should identify:

• the prohibited conduct;
• the continuing threat;
• the customers or information affected;
• why later damages would be inadequate.

A vague request to “prevent the defendant from conducting business” is much more problematic than a narrowly targeted request tied to specific unlawful conduct.

30. What Happens After the Shareholder Leaves the Company?

The statutory corporate non-compete obligation should be distinguished from a post-exit contractual non-compete.

Once a person ceases to be:

• a limited company manager; or
• an A.Ş. board member,

the statutory management-based prohibition does not automatically create a perpetual post-office non-compete obligation.

If the parties want protection after exit, a separate contractual mechanism is generally needed.

Such provisions are common in:

• share sale transactions;
• founders’ agreements;
• investment agreements;
• shareholder exits.

However, restrictions on commercial freedom should have legitimate and proportionate boundaries.

A clause attempting to prevent a former shareholder from conducting any business anywhere indefinitely creates significantly greater enforceability concerns than a narrowly tailored restriction protecting a defined business and customer base for a reasonable period.

31. A Practical Example

Assume three individuals establish a limited liability software company.

Each owns one-third.

Shareholder A is also the manager.

The articles contain a clause prohibiting shareholders from conducting businesses competing with the company.

After a dispute, A secretly establishes NewTech Ltd.

Evidence later shows that:

• NewTech sells the same software services;
• A remains manager of the original company;
• ten customers receive NewTech quotations;
• six existing customers migrate to NewTech;
• prices offered by NewTech correspond closely to confidential margins of the original company;
• three employees resign and immediately join NewTech;
• A downloads the customer database shortly before the migration.

This is not merely a case of “a shareholder starting another company.”

Potential legal issues include:

1. Article 613 contractual shareholder non-compete;
2. Article 613 confidentiality and loyalty duties;
3. Article 626 manager non-compete;
4. management liability;
5. unfair competition under Articles 54–56;
6. possible management removal;
7. possible shareholder-removal consequences;
8. claims for financial loss;
9. urgent measures to prevent continued misuse of information.

This is why shareholder competition disputes must be pleaded on several legally distinct levels.

32. Compare That With a Very Different Case

Assume instead:

• A owns only 10%;
• A is not a manager;
• the articles contain no non-compete clause;
• A incorporates another company in the same broad industry;
• the new company never trades;
• no customers are approached;
• no confidential information is used;
• the original company suffers no loss.

A claim based solely on:

“You incorporated a company whose trade registry activity is similar to ours”

may be significantly weaker.

Turkish court practice confirms that mere incorporation without genuine activity does not necessarily prove prohibited competition.

33. Practical Litigation Strategy

When a shareholder establishes a rival company, counsel should immediately perform the following analysis.

First: identify the person’s status

Is the person:

• a limited company shareholder?
• a limited company manager?
• an A.Ş. shareholder?
• an A.Ş. board member?
• an employee?
• several of these simultaneously?

Second: obtain the governing agreements

Review:

• articles of association;
• shareholders’ agreement;
• investment agreement;
• share purchase agreement;
• management agreements.

Third: identify the competing entity

Obtain:

• trade registry history;
• shareholders;
• managers;
• business purpose;
• establishment date;
• addresses.

Fourth: prove actual activity

Do not rely solely on incorporation.

Identify:

• invoices;
• sales;
• customers;
• contracts;
• website activity;
• quotations.

Fifth: trace customer migration

Determine exactly when customers moved.

Sixth: investigate confidential information

Determine whether company data was copied or used.

Seventh: quantify loss

Use accounting evidence.

Eighth: choose the correct plaintiff

Company loss should normally be pursued through the legally appropriate company claim.

Ninth: consider urgent protection

Stopping ongoing diversion may matter more than future damages.

Tenth: check limitation periods immediately

This is particularly critical for an A.Ş. board-member claim under Article 396 because the statutory periods are only three months from knowledge and, in any event, one year from the conduct.

34. Final Takeaway

A shareholder establishing a rival company does not produce the same legal result in every Turkish company.

For a non-managing limited company shareholder, a comprehensive non-compete obligation generally depends on whether the articles of association contain an appropriate restriction. However, even without such a clause, the shareholder remains bound by Article 613 duties concerning company secrets and conduct prejudicial to the company.

For a limited company manager, Article 626 establishes a much stronger statutory rule: competition is prohibited unless the articles provide otherwise or the required shareholder permission exists.

For an ordinary shareholder in an A.Ş., share ownership alone does not generally create the same statutory non-compete obligation.

For an A.Ş. board member, Article 396 imposes a specific statutory prohibition and gives the company powerful remedies, subject to very short limitation periods.

And regardless of shareholder status, dishonest competitive conduct may independently trigger the unfair competition provisions of Articles 54–56 TCC.

The decisive question is therefore not simply:

“Did my partner establish another company?”

The better investigation asks:

Was he legally prohibited from competing?

Did the new business actually compete?

Were customers, employees or corporate opportunities diverted?

Was confidential company information used?

How much money did the original company lose?

And perhaps most importantly:

Was the shareholder merely becoming a competitor — or was he using the knowledge, customers and opportunities obtained inside the first company to build the second one?

That distinction is often where an ordinary shareholder dispute becomes an enforceable corporate claim.