Under the Turkish Commercial Code, shareholders of a limited liability company are generally not personally liable for the company’s debts.[1] However, the law provides an exception for public receivables. Article 35 of Law No. 6183 allows the authorities to take enforcement action against shareholders’ personal assets for public receivables owed by a limited liability company.[2]
When Can the Authorities Pursue a Shareholder?
A shareholder is not directly liable for every amount owed by the company. First, the debt must be a public receivable covered by Law No. 6183.
Taxes, duties, fees and tax penalties owed to the State and local authorities, including municipalities, are classified as public receivables. Interest, late payment charges and related amounts are also included.[3] Unpaid social security premiums and other receivables of the Social Security Institution (SGK) are collected under Law No. 6183 as well.[4]
However, claims of the State and local authorities arising from contracts, torts or unjust enrichment are outside the scope of this Law.
Before pursuing a shareholder, the authorities must first attempt to collect the public receivable from the company, which is the principal debtor. This is because a shareholder’s liability under Article 35 is secondary.
The authorities do not always have to sell every company asset before taking action against a shareholder. If objective information shows that collection from the company will not be possible, the proceedings may be directed against the shareholder at an earlier stage. However, a payment order issued without a proper investigation of the company’s assets or without clear legal and factual grounds showing that collection is impossible would be inconsistent with the secondary nature of the shareholder’s liability.[5]
A shareholder’s liability does not disappear merely because the shareholder did not manage the company, did not know about its tax returns or was not personally at fault in the creation of the debt. Liability under Article 35 is generally considered strict liability based on the person’s status as a shareholder.
However, the absence of a fault requirement does not remove the authorities’ obligation to establish the other legal conditions. They must still determine whether the receivable falls within Law No. 6183, whether it can be collected from the company, who was a shareholder during the relevant period and what percentage of the company that person owned.
How Much Is the Shareholder Liable For?
A shareholder is liable for a public receivable covered by Law No. 6183 in proportion to their share in the company’s capital. However, the liability is not limited to the amount of capital contributed by the shareholder.[6]
For example, assume that a shareholder owns 25% of the company and the public receivable that cannot be collected from the company is TRY 800,000. The shareholder may be held liable for TRY 200,000.
The result does not change even if the shareholder contributed only TRY 50,000 to the company’s capital. The authorities may take enforcement action against the shareholder’s personal assets, such as bank accounts, vehicles and real estate, for the TRY 200,000 liability.
Liability After a Share Transfer
Transferring shares does not end the former shareholder’s liability for public receivables relating to the period before the transfer. The former shareholder and the new shareholder are jointly and severally liable for public receivables relating to that period (Law No. 6183, Art. 35/2). This means that both shareholders are liable for the full amount attributable to the transferred shares, and the authorities can take enforcement action against either of them.
The same rule applies if different people held the shares when the public receivable arose and when it became due. In that case, both may be held jointly and severally liable (Law No. 6183, Art. 35/3).
The share transfer rules were challenged before the Constitutional Court, but the Court rejected the challenge. The Court noted that a buyer knows that they may become liable for public receivables arising before the transfer. The buyer can review the company’s financial position, negotiate the purchase price and take other precautions before acquiring the shares.
For the former shareholder, the Court stated that liabilities arising before the transfer can be identified. It also noted that the former shareholder is free to choose the person to whom the shares will be transferred.[7]
This decision has been criticised in legal scholarship.[8] For example, a public receivable may arise after the transfer because the company failed to submit its books and records, even though the tax period includes a period before the transfer. Holding the former shareholder liable in such a case may be unfair.
The Council of State has also ruled in favour of a former shareholder in such a case. It held that former shareholders cannot be held liable solely because they held shares during the relevant tax period if the failure to submit the books and records occurred after they had transferred their shares and ended their relationship with the company.[9]
Can the New Shareholder Claim Repayment from the Former Shareholder?
If the new shareholder has to pay public receivables relating to the period before the transfer, can they recover the payment from the former shareholder? The answer depends on the share transfer agreement. In one case, the court found that the new shareholder had no right to claim repayment because the shares had been transferred together with all rights and liabilities.
If the agreement states that only the former shareholder will be responsible for liabilities relating to the period before the transfer, this provision may be valid between the parties. However, it does not bind the public authority.[10]
Turkish higher court decisions have consistently emphasised that both the former and the new shareholder are expected to exercise the care of a prudent businessperson. Before transferring or acquiring shares, they should investigate unpaid taxes, social security premiums and other public receivables.[11]
Must the Company Manager Be Pursued Before the Shareholder?
Not only shareholders but also the manager of a limited liability company may be personally liable for tax and other public receivables owed by the company. (The manager’s liability will be examined separately.) The relevant question here is whether the authorities must pursue the manager before pursuing a shareholder.
Some legal scholars argue that the authorities should first pursue the company’s legal representative, meaning the manager. Under this view, a shareholder should be pursued only if the public receivable cannot be collected from the manager.[12]
However, in its binding decision, the Council of State held that there is no order of priority between the manager and the shareholder after a public receivable cannot be collected from the company.[13]
A person may be both a shareholder and a manager. In that case, the person may be liable for the entire debt as a manager and in proportion to their share as a shareholder. In practice, the authorities generally prefer to rely on the person’s position as the company’s legal representative because this may result in broader liability.
Conclusion
The fact that limited liability company shareholders may be held personally liable for public receivables owed by the company shows why shareholders should monitor the company’s activities and financial position carefully.
Shareholders have the right to request information and inspect the company’s records and accounts. They may also vote at the general assembly on matters such as amendments to the articles of association[14] and decisions concerning the company’s management.[15] These rights allow shareholders to monitor the company and should be used carefully.
A shareholder should also remember that personal liability for unpaid public receivables may continue after a share transfer. Both a person acquiring shares and a person transferring them should investigate the company’s position and exercise the care expected of a prudent businessperson.
[1] Turkish Commercial Code No. 6102, Art. 573/2
[2] Law No. 6183 on the Procedure for the Collection of Public Receivables, Art. 35/1
[3] Law No. 6183, Art. 1/1
[4] Social Insurance and General Health Insurance Law No. 5510, Art. 88/16
[5] Pulaşlı, Hasan, Şirketler Hukuku Şerhi, Vol. III, 3rd ed., Ankara: Adalet Yayınevi, 2018, p. 2825 (cited in Kaya, İlknur, “Limited Şirket Ortağının Kamu Borçlarından Sorumluluğu ve Danıştayın 2013/1 E. ve 2018/1 K. Sayılı İBK Üzerine Kısa Bir Değerlendirme”, AndHD, Vol. 6, No. 1, January 2020, p. 143).
[6] General Assembly of Civil Chambers of the Court of Cassation (Yargıtay), November 2, 2022, E. 2021/448, K. 2022/1417.
[7] Constitutional Court, December 13, 2017, E. 2016/14, K. 2017/170.
[8] Kaya, pp. 142-143.
[9] Plenary Session of the Tax Law Chambers of the Council of State, February 26, 2025, E. 2023/291, K. 2025/105.
[10] Istanbul Regional Court of Appeal, 12th Civil Chamber, May 2, 2023, E. 2020/1293, K. 2023/639. See also the Court of Cassation, 11th Civil Chamber, June 11, 2013, E. 2011/9722, K. 2013/12168.
[11] General Assembly of Civil Chambers of the Court of Cassation, November 2, 2022, E. 2021/448, K. 2022/1417.
[12] Pınar, Burak, “Danıştay İçtihatları Birleştirme Kurulu Kararı Sonrası Limited Şirketlerdeki Kanunî Temsilci ve Ortaklar Arasındaki Sorumluluk İlişkisinde Ortaya Çıkan Sıra ve Rücû Sorunu”, Dokuz Eylül Üniversitesi Hukuk Fakültesi Dergisi, Vol. 23, No. 1, May 2021, pp. 306-307.
[13] Turkish Council of State, Board of the Unification of Case Laws, December 11, 2018, E. 2013/1, K. 2018/1.
[14] This power is not granted to a shareholder individually. A shareholder may influence the outcome by voting at the general assembly.
[15] Turkish Commercial Code, Art. 614/1 and Art. 616.