Company Liability for Managers and Employees in Turkey: Civil Code Art. 50, Commercial Code Art. 371(5), Code of Obligations Art. 66, Criminal Code Art. 60, Misdemeanours Law Art. 43/A and Capital Markets Law Art. 114

When investors lose money through the conduct of managers or employees of an investment firm, portfolio management company or listed issuer, the company itself is often the defendant best able to pay. Turkish law attributes such conduct to the company in several ways. A legal person’s organs bind it by all their acts, not only legal transactions (Civil Code Art. 50). A joint stock company is liable for torts committed by persons authorised to represent or manage it in the course of their duties (Commercial Code Art. 371(5)). An employer, including a business, is liable for damage caused by its employees at work unless it proves due care or a suitable organisation (Code of Obligations Art. 66). Where several persons are liable for the same loss, they are jointly and severally liable (Art. 61). Criminal penalties cannot be imposed on legal persons, but security measures can (Criminal Code Art. 20(2)). These include revocation of the company’s licence and confiscation for offences committed for its benefit (Art. 60). The Criminal Code provides for them for fraud and abuse of trust (Art. 169) and laundering (Art. 282(5)), and the Capital Markets Law for insider dealing and market manipulation (Art. 114). A legal person that benefits from fraud or laundering by its organs or staff is also fined at least twice the benefit (Misdemeanours Law Art. 43/A). This guide explains these rules for foreign institutions in the 2026 cases. It reflects the legislation in force as at 26 October 2026.

Why company liability matters in the 2026 cases

Capital markets losses are usually caused by individuals: a portfolio manager who trades a fund’s assets for someone else’s benefit, a dealer who executes manipulative orders, a director who approves a misleading disclosure. Individuals, however, may have limited assets, may be abroad or may have their property seized in criminal proceedings. The investment firm, portfolio management company or issuer through which they acted is usually a regulated company with capital, insurance and a continuing business. For a foreign institution seeking compensation, the first legal question is therefore often whether the company answers for what its people did.

Turkish law answers this through several separate rules. Civil law attributes the acts of organs, representatives and employees to the company. Criminal law does not punish companies but allows security measures, confiscation and administrative fines against them. Capital markets law adds its own measures. Each rule has its own conditions and its own defences, and claims often combine several of them.

The legal framework

Acts of organs and representatives

A legal person acquires capacity to act once it has the organs required by law and its articles (Civil Code Art. 49). Its will is expressed through those organs, which bind it by legal transactions and by all their other acts. The organs are also personally liable for their own fault (Art. 50). In a joint stock company, the board of directors and those to whom it delegates representation and management are the relevant persons. The rule reaches torts as well as contracts: if an organ deceives investors, the deception is the company’s.

The Commercial Code states the consequence for joint stock companies expressly. The company is liable for torts committed by persons authorised to represent or manage it while performing their duties, and it has recourse against them (Commercial Code Art. 371(5)). Transactions by authorised representatives that fall outside the company’s objects bind it unless the third party knew, or should have known, that they were outside the objects (Art. 371(2)). Limits on representation authority do not bind third parties in good faith, except registered and announced limits to head office or branch business or to joint signature (Art. 371(3)).

For investors, this means that a misleading statement made by the managing director on the company’s behalf, a decision of the board to divert assets, or unauthorised use of client assets by an authorised signatory are, in law, acts of the company. The individuals remain liable alongside it: the directors’ personal liability under the Commercial Code and the Capital Markets Law is discussed in our guide on directors’ and auditors’ liability.

Proving who acted for the company

Because the attribution rules depend on the capacity in which a person acted, investors need evidence of who was an organ, who was authorised to represent or manage the company, and who was an employee. The Commercial Code provides much of it. Unless the articles provide otherwise or the board has a single member, representation belongs to the board of directors, exercised by two signatures. The board may delegate representation to one or more managing directors, or to third parties as managers, but at least one board member must hold representation authority (Commercial Code Art. 370). Where the articles allow it, the board may delegate management, in whole or in part, to one or more board members or to third parties under an internal directive. The directive sets out the duties and positions needed and, in particular, who reports to whom (Art. 367(1)). Absent delegation, management belongs to all board members (Art. 367(2)).

The internal directive is not only an internal document. On request, the board must inform shareholders, and creditors who convincingly show an interest worth protecting, in writing about it (Art. 367(1)). An investor with a claim against the company may therefore ask to be told how management was delegated, which helps identify the persons whose acts are attributed to the company under Art. 371(5). The board must also file a notarised copy of its decision naming the persons authorised to represent the company, and the manner of representation, with the trade registry for registration and announcement (Art. 373(1)). Once registered, defects in their election or appointment can be raised against third parties only if the third parties knew of them (Art. 373(2)). Signature circulars, trade registry records and Trade Registry Gazette announcements are therefore the first evidence of capacity.

Acts of employees and the business organisation

Many acts that cause loss are committed by employees who are not organs: dealers, portfolio managers, back-office staff. The Code of Obligations makes the employer liable for damage caused by an employee to others in performing the work given to the employee. The employer escapes liability only by proving that it took the care required to prevent the damage when selecting, instructing and supervising the employee (Art. 66(1)–(2)). For businesses, the rule is stricter. An employer running a business must compensate damage caused by the business’s activities unless it proves that the business’s working organisation was suitable to prevent the damage (Art. 66(3)). The employer has recourse against the employee only to the extent that the employee is personally liable (Art. 66(4)).

For investment firms and portfolio management companies, the organisation defence must be read against the detailed organisational duties in capital markets regulation. These include internal control, risk management, segregation of client assets, record keeping and conflict-of-interest rules, which are set out in our guides on investment services and on fund rules. An organisation that failed to apply those rules will find it difficult to prove that it was suitable to prevent the damage.

Liability within a client relationship

Where the investor has a contract with the company, for example a brokerage, custody or portfolio management agreement, the contractual rules apply as well. A debtor is liable for damage caused by persons it uses to perform its obligations, such as employees, while they carry out the work (Code of Obligations Art. 116(1)). Liability for auxiliaries may normally be excluded in advance. Where the service may be carried on only with a permit from the law or the competent authorities, however, an agreement excluding liability for auxiliaries is absolutely void (Art. 116(2)–(3)). For such licensed services, an advance agreement excluding liability even for slight fault is also void (Art. 115(3)). Investment services require the Capital Markets Board’s authorisation, so these restrictions are relevant to the agreements foreign institutions sign with Turkish firms. Their application is discussed in our guide on claims against brokers, custodians and portfolio managers.

Joint and several liability and recourse

Where several persons together cause a loss, or are liable for the same loss on different grounds, the rules on joint and several liability apply (Code of Obligations Art. 61). The investor may claim the full amount from any of them. Among themselves, the compensation is divided by reference to all the circumstances, in particular the gravity of each person’s fault and the degree of danger each created. A person who pays more than his share has recourse against the others and is subrogated to the investor’s rights (Art. 62).

In capital markets cases, the same loss may be attributable to the company under Civil Code Art. 50 or Commercial Code Art. 371(5), and to the employer under Code of Obligations Art. 66. It may also be attributable to the individual director or employee under general tort law and the Capital Markets Law. Where reports or disclosure documents are involved, auditors, valuers and other signatories may be liable under Capital Markets Law Arts. 32 and 63. Bringing them into one claim avoids the risk that each blames another who is not before the court.

Typical company defendants

The general attribution rules sit alongside specific liability rules for the companies most often involved in capital markets losses. The table below links the two. The specific rules are explained in the guides referred to.

Criminal law: no penalty, but security measures

Criminal responsibility is personal, and no one is held responsible for another’s act (Criminal Code Art. 20(1)). Criminal penalties cannot be imposed on legal persons, but sanctions of the nature of security measures provided by law for an offence are reserved (Art. 20(2)). The prosecution in the 2026 cases is therefore directed at individuals, while the companies through which they acted may face security measures, confiscation and administrative fines.

The Criminal Code sets out two security measures for private legal persons (Art. 60). The first is revocation of the licence. Where a legal person operating on a permit granted by a public authority is involved in an intentional offence, committed with the participation of its organs or representatives, by abusing the authority the permit confers and for the legal person’s benefit, the court revokes the permit on conviction (Art. 60(1)). The second is confiscation. The confiscation provisions apply to private legal persons for offences committed for their benefit (Art. 60(2)). The judge may decline to order these measures where they would have consequences more severe than the offence warrants (Art. 60(3)). They apply only in cases specified by law (Art. 60(4)).

The cases relevant here are specified in three provisions:

• ▸ Theft, abuse of trust and fraud. Security measures apply to legal persons that obtained an unjust benefit through these offences (Criminal Code Art. 169). Because the Capital Markets Law defines its qualified forms of abuse of trust, such as misusing client assets or diverting a public company’s profits, as qualified abuse of trust under Criminal Code Art. 155(2) (Capital Markets Law Art. 110(1)), Art. 169 can also be engaged by them.
• ▸ Laundering. Security measures apply to legal persons in respect of laundering proceeds of crime (Criminal Code Art. 282(5)).
• ▸ Insider dealing and market manipulation. Where the offences in Capital Markets Law Arts. 106 and 107 are committed for the benefit of a legal person, security measures specific to legal persons apply (Art. 114).

For licensed capital markets institutions, licence revocation under Criminal Code Art. 60(1) overlaps with the Capital Markets Board’s own power to restrict, suspend or revoke their authorisations (Capital Markets Law Art. 96(1)). The Board may also cancel the licences of managers and employees found responsible, limit or remove their signing authority from the date of a criminal complaint until the trial ends, and remove board members whose responsibility is established by court decision (Art. 96(2)).

Administrative fines on legal persons

The Misdemeanours Law adds an administrative fine. It applies where certain offences are committed for the benefit of a private legal person by one of its organs or representatives, or by a person who is not an organ or representative but has a role within its activities. The listed offences include fraud and qualified fraud (Criminal Code Arts. 157 and 158), laundering (Art. 282), bribery, bid rigging and embezzlement under the Banking Law. Unless a heavier administrative fine applies, the legal person is fined within a range set in the Law, and the fine may not be less than twice the benefit involved (Misdemeanours Law Art. 43/A(1)). The fine is imposed by the court trying the offence (Art. 43/A(2)). The third paragraph of Art. 43/A was annulled by the Constitutional Court on 18 January 2024 (E. 2021/28, K. 2024/11). The base amounts in the Law are revalued each year, so we do not quote them.

The Capital Markets Law contains a parallel rule for breaches of capital markets regulation. Where the person who breaches regulations, standards or Board decisions is an organ or representative of a private legal person, or a person with a role within its activities, the legal person is fined as well, unless the breach harmed the legal person itself (Art. 103(2)). Fines on legal persons may reach the higher of 1% of gross sales or 20% of pre-tax profit in their last audited annual financial statements before the breach, taking account of the seriousness of the breach and the number of victims (Art. 103(1)). The administrative fine regime, including market-disrupting acts, is explained in our guide on Article 104.

The company in criminal proceedings and trusteeship

In investigations and prosecutions of offences committed within a legal person’s activities, the legal person’s organ or representative is admitted to the proceedings either as a participating party or alongside the defence. In that capacity it has the rights the Criminal Procedure Code gives a participating party or an accused (Criminal Procedure Code Art. 249(1)–(2)). This does not apply where the accused is himself the organ or representative (Art. 249(3)). For investors, this means the company will usually be represented in the criminal case, and its position there, defending its managers or distancing itself from them, can matter for later civil claims.

A court may appoint a trustee (kayyım) to run a company’s affairs during an investigation or prosecution. The conditions are strong grounds to suspect that an offence is being committed within the company’s activities, and that the appointment is necessary to establish the material truth (Art. 133(1)). The decision must state whether the board’s decisions require the trustee’s approval, or whether the board’s powers, with or without the powers to administer shares or securities, pass entirely to the trustee. It is announced in the Trade Registry Gazette (Art. 133(1)). The trustee’s fee is paid from the company’s budget, but is refunded from the Treasury with statutory interest if the case ends in non-prosecution or acquittal (Art. 133(2)). Those concerned may challenge the trustee’s acts before the competent court under the Civil Code and the Commercial Code (Art. 133(3)). Compensation claims for the trustee’s acts are brought against the State, which has recourse against a trustee who abused his duties (Art. 133(5)).

Trusteeship is available only for the offences listed in Art. 133(4). The list includes laundering (Criminal Code Art. 282) and embezzlement, but not fraud, abuse of trust or the Capital Markets Law offences. In capital markets cases, therefore, a trustee can be appointed under Art. 133 only where a listed offence, typically laundering, is also under investigation. Seizure of company shares and assets under Art. 128, which also allows a trustee to be appointed to manage seized assets, is a separate measure explained in our guide on freezing assets.

Measures against the company and investors’ recovery

Measures against a company can help or hinder investors’ recovery. Confiscation applies to the benefits of the offence only where they cannot be returned to the victim (Criminal Code Art. 55(1)), so investors should identify themselves as victims early and ask for restitution in the criminal file. Administrative fines under Misdemeanours Law Art. 43/A and Capital Markets Law Art. 103 are paid to the State and reduce the assets available to compensate investors. Licence revocation may lead to the company’s gradual liquidation or insolvency, in which client assets are protected but other claims rank with other creditors, as explained in our insolvency guide.

The practical lesson is to act in parallel. In the criminal file, investors should seek restitution and support provisional measures that preserve assets for victims. In the civil courts, they should claim against the company and the individuals jointly and seek interim measures where needed. In regulatory processes, they should follow the Board’s findings, which often provide the clearest account of what the company’s organisation failed to prevent.

Points for foreign institutional investors

1. 1. Identify the capacity of each actor. Organ, authorised representative or employee: each leads to a different attribution rule (Civil Code Art. 50; Commercial Code Art. 371(5); Code of Obligations Art. 66).
2. 2. Sue the company and the individuals together. Joint and several liability allows the full loss to be claimed from each (Code of Obligations Art. 61).
3. 3. Prepare for the organisation defence. Gather evidence on internal control, risk management and supervision, which the company will rely on under Art. 66.
4. 4. Review your contracts. Exclusion clauses for staff and slight fault are void for licensed services (Arts. 115(3) and 116(3)).
5. 5. Follow the criminal file. Watch for security measures under Criminal Code Arts. 60, 169 and 282(5) and Capital Markets Law Art. 114, and ask for restitution before confiscation (Art. 55(1)).
6. 6. Track administrative fines. Fines under Misdemeanours Law Art. 43/A and Capital Markets Law Art. 103(2) reduce the company’s assets and signal the regulator’s findings.
7. 7. Check for trusteeship. A trustee under Criminal Procedure Code Art. 133 changes who runs the company and who answers for its acts during the appointment.
8. 8. Watch the company’s regulatory status. Board measures under Capital Markets Law Art. 96 can lead to gradual liquidation; client assets are protected, other claims are not.
9. 9. Use the company’s role in the criminal case. Its organ or representative may take part under Criminal Procedure Code Art. 249; its stance may be useful evidence later.
10. 10. Respect limitation periods. Claims against companies and individuals run on their own deadlines, explained in our limitation guide.

Overview of the rules

Frequently asked questions

Is a Turkish company liable for its directors’ wrongful acts?

Yes. Organs bind the legal person by all their acts (Civil Code Art. 50), and a joint stock company is liable for torts of persons authorised to represent or manage it in performing their duties (Commercial Code Art. 371(5)).

Is a company liable for its employees’ acts?

Yes, unless it proves due care in selection, instruction and supervision; a business must prove that its organisation was suitable to prevent the damage (Code of Obligations Art. 66).

Can an investor sue the company and the individuals together?

Yes. Persons liable for the same loss are jointly and severally liable (Code of Obligations Art. 61).

Can a licensed broker exclude liability for its staff in the client agreement?

No. For services that require a permit, such exclusions are absolutely void (Code of Obligations Art. 116(3)), as are exclusions of liability for slight fault (Art. 115(3)).

Can a Turkish company be criminally convicted?

No. Criminal penalties cannot be imposed on legal persons, but security measures provided by law can (Criminal Code Art. 20(2)).

What security measures can be imposed on a company?

Revocation of a licence obtained from a public authority and confiscation, for offences committed for its benefit where the law provides (Criminal Code Art. 60).

Do these measures apply to market manipulation?

Yes. Where insider dealing or manipulation is committed for a legal person’s benefit, security measures apply (Capital Markets Law Art. 114).

Can a company be fined for fraud committed by its managers?

Yes. Where fraud or laundering is committed for its benefit by its organs, representatives or persons with a role in its activities, it is fined at least twice the benefit (Misdemeanours Law Art. 43/A).

Who imposes the Article 43/A fine?

The court trying the offence (Misdemeanours Law Art. 43/A(2)).

Can the Capital Markets Board fine the company for its employees’ breaches?

Yes, unless the breach harmed the company itself (Capital Markets Law Art. 103(2)).

Can a court appoint a trustee to run a company under investigation?

Yes, for the offences listed in Criminal Procedure Code Art. 133(4), which include laundering but not fraud or the Capital Markets Law offences.

Does confiscation from a company take priority over investors?

No. Confiscation of benefits applies only where they cannot be returned to the victim (Criminal Code Art. 55(1)).

How can an investor prove who was authorised to act for the company?

Representatives and the manner of representation are registered and announced in the trade registry (Commercial Code Art. 373(1)), and after registration defects in their appointment can be raised against third parties only if they knew of them (Art. 373(2)).

Can a creditor learn how a company delegated its management?

Yes. On request, the board must inform shareholders and creditors who show an interest worth protecting, in writing, about the internal directive delegating management (Commercial Code Art. 367(1)).

Is a custodian liable to fund unit holders?

Yes, for losses caused by failing to meet its custody obligations (Capital Markets Law Art. 56(2)).

Does the civil claim depend on a criminal conviction?

No. The civil attribution rules apply independently of the criminal outcome.

Related guides

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• Market-Disrupting Acts and Administrative Fines: Article 104
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• Insolvency of Turkish Issuers and Brokers
• Joining a Criminal Case in Turkey as a Foreign Investor
• Limitation Periods for Investor Claims in Turkey