Contents
• Why Due Diligence in Turkey Demands Extra Attention
• Corporate and Ownership Structure
• Financial and Tax Review
• Labor and Employment Obligations
• Commercial Contracts and Ongoing Obligations
• Litigation and Enforcement Exposure
• Regulatory and Sector-Specific Compliance
• Real Estate and Asset Ownership
• Structuring the Acquisition: Share Deal vs. Asset Deal
• Working with Local Counsel
• FAQs
Acquiring a Turkish company can open access to a fast-moving market at the crossroads of Europe, the Middle East, and Central Asia. It can also expose you to liabilities you never agreed to take on - if the pre-acquisition process isn't handled carefully.
Turkish M&A due diligence follows a broadly familiar structure, but several areas carry country-specific risks that foreign buyers consistently underestimate. This guide covers what you need to examine before signing any share purchase or asset acquisition agreement in Turkey.
Why Due Diligence in Turkey Demands Extra Attention
Turkey operates under a civil law system derived largely from the Swiss Civil Code and German Commercial Code, with its own statutory overlay. The Turkish Commercial Code (Türk Ticaret Kanunu, or TTK) governs companies; the Code of Obligations governs contracts. The framework is coherent, but it produces outcomes that can diverge sharply from common law expectations.
A few examples worth noting: shareholder liability can pierce the corporate veil under Turkish law, particularly where capital is underfunded or the legal entity is used to evade obligations. Employment relationships carry statutory protections that survive a share acquisition unchanged. Tax liabilities follow the legal entity, not just the disclosed financials. None of these are edge cases - they come up routinely in Turkish M&A.
Corporate and Ownership Structure
Start with the company's constitutional documents. The articles of association (ana sözleme) filed with the Trade Registry define the company's purpose, capital structure, share transfer restrictions, and governance rules.
Confirm that what you receive in the data room actually matches what is registered.
Check the Trade Registry (Ticaret Sicili) records directly. Turkey's Central Registry Record System (MERSS) allows verification of registered address, authorized signatories, capital amounts, and historical amendments. Any discrepancy between data room documents and the registry record is a red flag.
Ownership chains should be traced to the ultimate beneficial owner. Turkish limited liability companies (limited sirket) and joint-stock companies (anonim sirket) have different share transfer mechanisms, and nominee arrangements - while not illegal - add complexity to enforcement if disputes arise post-closing.
Also verify whether any pledges, usufruct rights, or attachments have been placed on shares. These are registered separately and can survive a transfer if not cleared at closing.
Financial and Tax Review
Request at least three years of financial statements, preferably audited. Turkish companies are not uniformly required to have statutory audits unless they meet certain size thresholds, so the quality of financial records varies considerably between targets.
Tax due diligence covers corporate income tax, VAT, withholding taxes, and stamp duty. The Turkish Revenue Administration (Gelir idaresi Bakanligi) holds assessment rights for up to five years in standard cases - longer where fraud or non-declaration is involved. Any open assessment periods represent contingent liabilities that pass to the acquirer in a share deal.
Check for tax installment agreements, deferred obligations, and whether the company has participated in any tax amnesty programs, which can signal past underpayment. Transfer pricing documentation is required for related-party transactions and should be reviewed for adequacy.
Labor and Employment Obligations
This is one of the most consistently underestimated areas in Turkish acquisitions. Turkish labor law is employee-protective. Severance pay (kidem tazminati) accrues at 30 days' gross salary per year of service and is payable upon termination in most circumstances. In a share acquisition, all existing employment contracts, accrued severance, and notice obligations transfer automatically.
Review the full headcount, employment contracts, any collective bargaining agreements, and pending labor disputes. Confirm that the company is registered with the Social Security Institution (SGK) for all employees and that SGK contributions are current. Unregistered or partially registered employees create both financial and criminal exposure.
Also check whether any workers have been classified as independent contractors when their actual working conditions suggest an employment relationship. Turkish courts reclassify these arrangements regularly, and the liability follows the acquiring entity.
Commercial Contracts and Ongoing Obligations
Identify all material contracts: customer agreements, supplier contracts, distribution arrangements, lease agreements, and financing facilities. For each, check whether there are change-of-control provisions that would allow the counterparty to terminate or renegotiate upon a share transfer.
Turkish lease law gives commercial tenants relatively strong protections, but landlords may also hold specific rights in certain transfer scenarios. If the target's business depends on a particular location, confirm the lease terms and renewal rights carefully.
Examine exclusivity arrangements, non-compete clauses, and intellectual property licenses. IP ownership in Turkey is registered through the Turkish Patent and Trademark Office (Türk Patent ve Marka Kurumu), and a gap between the company's claimed IP and what is actually registered in its name is a common finding.
Litigation and Enforcement Exposure
Request full disclosure of pending and threatened litigation. Turkish court proceedings are public record in principle, and the UYAP (National Judiciary Informatics System) can be queried by a Turkish attorney to surface active cases against the target only if there is a qualified power of attorney from one of the parties.
Pay particular attention to enforcement proceedings (icra takibi). A company with multiple open enforcement files may be facing liquidity pressure that doesn't appear on the balance sheet. Enforcement creditors in Turkey hold priority rights that can complicate post-acquisition operations.
Also check for arbitration proceedings, both domestic and international. Turkey is a signatory to the New York Convention, and foreign arbitral awards can be enforced against Turkish entities through Turkish courts - so international exposure matters here too.
Regulatory and Sector-Specific Compliance
Depending on the target's sector, additional regulatory review is required. Companies in banking, insurance, energy, telecommunications, healthcare, and media are subject to sector-specific licensing and ownership restrictions. Foreign ownership thresholds apply in some regulated sectors, and a change of control may require prior regulatory approval.
For any company handling personal data, KVKK (Kiisel Verilerin Korunmas Kanunu, Turkey's data protection law) compliance is now a standard due diligence item. Verify that the company has registered its data processing activities with the Personal Data Protection Authority where required, and that its privacy notices, data processing agreements, and cross-border transfer mechanisms are in order.
Environmental permits, construction licenses, and zoning compliance are relevant for companies with physical assets or manufacturing operations.
Real Estate and Asset Ownership
If the target owns real property, verify title through the Land Registry (Tapu Sicili) and check for mortgages, easements, and any pending expropriation proceedings. Foreign-owned entities can generally hold real estate in Turkey, but restrictions apply in certain border zones and military areas that require specific clearance.
For movable assets, check whether any are subject to financial leases or retention-of-title arrangements that would affect the acquirer's ownership position after closing.
Structuring the Acquisition: Share Deal vs. Asset Deal
In Turkey, most acquisitions of ongoing businesses are structured as share deals because asset transfers can trigger VAT and stamp duty that share transfers do not. The trade-off is that a share deal means inheriting all historical liabilities of the entity - which makes the depth of due diligence directly proportional to your financial exposure.
An asset deal gives you more control over what you take on, but it requires individual transfer of contracts, licenses, and registrations, and counterparty consent is often needed. For businesses where the value sits in contracts, relationships, or licenses, that can become operationally complex.
The right structure depends on the target's liability profile, the sector, and your post-acquisition integration plan. It's a decision that should be made with qualified Turkish legal counsel before the letter of intent is signed - not after.
Working with Local Counsel
Foreign buyers often engage their home-country advisors to lead the process and bring in Turkish counsel for local execution. That model works, but it requires your Turkish counsel to be genuinely integrated from the start
- not reviewing translated summaries at the end.
A Turkish attorney can query the Trade Registry, SGK, UYAP, and land registry directly. They can identify issues in the articles of association that a non-Turkish reader would miss, and flag whether a disclosed liability is routine or structurally significant under Turkish law.
Miran Legal advises foreign buyers on Turkish M&A transactions, covering corporate, employment, tax, regulatory, and enforcement due diligence across its domestic office in Istanbul. The firm has been operating since 2017 and works across more than 22 legal branches, including corporate and commercial law, labor law, banking and finance, and debt enforcement.
FAQs
What is the standard timeframe for due diligence on a Turkish company acquisition?
For a mid-market transaction, a thorough process typically takes four to eight weeks, depending on the complexity of the target, the quality of the data room, and the number of open issues requiring follow-up. Regulatory approvals, where required, can extend the timeline significantly.
Does Turkish law require regulatory approval for foreign acquisitions?
Not in most sectors. Turkey generally welcomes foreign direct investment under the Foreign Direct Investment Law (No. 4875). However, acquisitions in regulated sectors - banking, insurance, energy, media - require prior approval from the relevant sector regulator. Competition law filings with the Turkish Competition Authority (Rekabet Kurumu) are required when the transaction meets applicable turnover thresholds.
What liabilities transfer automatically in a Turkish share acquisition?
All liabilities of the legal entity transfer to the acquirer. This includes tax liabilities for open assessment periods, accrued employee severance, pending litigation, SGK contribution arrears, and any enforcement proceedings. There is no automatic carve-out for pre-closing liabilities unless specifically negotiated in the purchase agreement with appropriate indemnities.
How is employee severance handled in a Turkish acquisition?
Accrued severance pay (kdem tazminat) stays with the entity in a share deal and becomes the acquirer's obligation. In an asset deal or business transfer, employees may have the right to terminate their contracts and claim accrued severance if the transfer materially changes their working conditions. This is a significant cost item that should be quantified during due diligence.
Can a foreign company own 100 percent of a Turkish company?
Yes, in most sectors. Turkey permits 100 percent foreign ownership of limited liability companies and joint-stock companies without a local partner requirement across the majority of industries. Restrictions apply in certain regulated sectors and specific geographic zones. The structure and registration process for a fully foreign-owned entity is well-established under Turkish law.
What happens if undisclosed liabilities surface after closing?
The acquirer's recourse depends on the representations and warranties in the share purchase agreement and any indemnity provisions negotiated at closing. Turkish contract law provides remedies for material misrepresentation, but practical enforceability depends heavily on how the agreement was drafted and whether the seller has recoverable assets. This is precisely why thorough pre-closing due diligence and well-drafted warranty language both matter.
Is it possible to conduct due diligence on a Turkish company remotely?
Partially. Many documents can be reviewed remotely through a data room, and certain registry searches can be conducted electronically. However, direct queries through UYAP, SGK verification, and land registry searches require a Turkish attorney with local access credentials. Relying solely on documents provided by the seller - without independent registry verification - carries meaningful risk.
Acquiring a Turkish company is a manageable process when approached with the right preparation. The risks aren't unique to Turkey, but they are specific to it. Knowing which registries to check, which liabilities survive a share transfer, and where Turkish law diverges from your home jurisdiction's defaults is the difference between a clean acquisition and an expensive surprise. Start the legal review early, bring qualified Turkish counsel in from the outset, and treat due diligence as the foundation of the deal - not a formality before signing.