Borrowing Prohibition for Company Shareholders Under the Turkish Commercial Code: Details and Application

The Turkish Commercial Code (TCC) imposes restrictions on shareholders borrowing from their companies to safeguard the financial structure of companies and secure the claims of third parties. These restrictions, particularly targeting capital companies (joint-stock and limited liability companies), aim to protect the financial health of companies and prevent shareholders from using corporate resources for personal benefit.

Here are the provisions and application details regarding the borrowing prohibition under the TCC:

1. Which Companies Are Subject to the Borrowing Prohibition?

Article 358 of the Turkish Commercial Code limits the borrowing of shareholders from joint-stock companies. The provisions include:

  • Joint-Stock Companies: According to Article 358 of the TCC, shareholders of joint-stock companies cannot borrow from the company.
  • Limited Liability Companies: In limited liability companies, general provisions of the TCC prohibit shareholders from borrowing without fulfilling their capital contribution obligations.

This prohibition aims to prevent the use of company financial resources for purposes other than business activities.

2. Exceptions to the Borrowing Prohibition

Article 358 of the TCC does not completely ban shareholder borrowing but introduces certain conditions under which exceptions may apply:

  • Completion of Capital Commitments: If the shareholder has fully fulfilled their capital commitment, the borrowing prohibition does not apply.
  • Adequacy of Free Reserves: If the company’s free reserves and distributable profits are sufficient to cover the borrowed amount, the shareholder may borrow from the company.

Even when these conditions are met, the borrowing amount may still be limited based on the company’s financial situation.

3. Additional Provisions for Board Members

Under Articles 395 and 396 of the TCC, board members of joint-stock companies cannot borrow from the company unless approved by the general assembly. The borrowing of board members is subject to the following restrictions:

  • Prohibition of direct or indirect transactions with the company.
  • Restrictions on using corporate resources for personal interests.

These provisions are intended to prevent board members from abusing their influence over the company.

4. Consequences of Violating the Borrowing Prohibition

The TCC imposes severe penalties for violating the borrowing prohibition:

  • Legal Sanctions: If the company incurs damage, the shareholder or board member responsible is obliged to compensate the loss.
  • Financial Liability: Any borrowing that violates the law must be repaid to the company and recorded as a corporate receivable.
  • Criminal Sanctions: Violations of the relevant provisions of the TCC may result in criminal liability for company managers or officials.

Article 395/2 of the TCC states:
“Otherwise, creditors of the company may pursue these individuals directly for the amount borrowed from the company as if it were a corporate debt.”


Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.