Who Is Liable for a Limited Liability Company’s Debts? Liability of Shareholders and Managers

What Is the Basic Rule on the Debts of a Limited Liability Company?

A limited liability company has legal personality and assets separate from those of its shareholders. Under Article 602 of the Turkish Commercial Code (TTK), the company is liable for its debts and obligations solely with its own assets. Accordingly, for debts arising from commercial contracts, purchases of goods or services, leases or bank loans, the creditor’s primary counterparty is the company as a legal entity.

Article 573 of the Turkish Commercial Code also provides that shareholders are not liable for the company’s debts. Their principal obligations are to pay the capital contribution they have subscribed and, where stipulated in the articles of association, to fulfil additional payment and ancillary performance obligations. In its judgment numbered 2020/4819 E., 2020/5438 K., the 11th Civil Chamber of the Court of Cassation (Yargıtay) held that there was no legal basis for pursuing a company representative personally for a debt arising from a commercial sale made with the company. Nevertheless, this basic rule has significant exceptions in relation to public debts, personal security and culpable conduct by managers.

When Is a Shareholder Liable for Private Law Debts?

A shareholder’s unpaid capital contribution is, as a rule, an obligation owed to the company. A company creditor cannot claim this amount directly from the shareholder’s personal assets merely because that person is a shareholder. Payment of the capital contribution may be sought by the company, its liquidators or, where the applicable conditions are met, the bankruptcy administration. Any additional payment and ancillary performance obligations validly stipulated in the articles of association must also be examined separately.

If a shareholder has provided a personal surety for a company debt, given an aval (aval beyanı), assumed the debt or signed the contract as a joint and several debtor, the shareholder may be held liable on the basis of that independent undertaking rather than merely by virtue of being a shareholder. A shareholder may also incur personal liability by directly causing loss through their own tortious act. In highly exceptional cases where the company’s legal personality is used contrary to the principle of good faith, piercing the corporate veil may be considered. However, mere non-payment of a debt is insufficient; the commingling of assets, abuse of rights and specific evidence must be assessed together.

Is a Shareholder of a Limited Liability Company Liable for Tax and Other Public Debts?

Article 35 of Law No. 6183 provides for a regime distinct from that applicable to private law debts. Where a public receivable cannot be collected, in whole or in part, from the limited liability company or is found to be uncollectible from it, a shareholder may be pursued directly in proportion to their capital share. The relevant measure is not the monetary amount of the capital that the shareholder undertook to contribute to the company, but the percentage of their capital share in the company. Accordingly, full payment of the capital contribution does not, in itself, eliminate the shareholder’s liability for public receivables.

Before proceeding against a shareholder, it is necessary to examine the nature of the public receivable, the period to which the debt relates, the person’s status as a shareholder and percentage shareholding, and the enforcement steps demonstrating that the receivable could not or cannot be collected from the company. A payment order should not be regarded as sufficient merely because it is based on the recipient’s status as a shareholder. Matters such as whether the debt has become final, limitation periods, service and the period for which liability arises must also be reviewed in the specific case. As liability for public receivables arises by operation of law, it cannot be excluded against the public authority by a provision in the articles of association. As a rule, arrangements between shareholders concerning allocation or recourse cannot be asserted against the public authority.

Does a Share Transfer End Liability for Earlier Debts?

For private law debts, a share transfer does not make a former shareholder liable merely because of their previous status as a shareholder. By contrast, Article 35 of Law No. 6183 makes the transferor and transferee jointly and severally liable, in proportion to the relevant capital share, for public receivables relating to the period before the transfer. If different persons held the shares on the dates when the public receivable arose and became payable, the statutory joint and several liability may also apply to those persons. A share transfer alone therefore does not result in absolute immunity from liability for public debts relating to earlier periods.

The event and date from which the debt arose nevertheless remain important. In its judgment numbered 2024/181 E., 2025/752 K., the Tax Litigation Chambers Board of the Council of State (Danıştay) held that a former shareholder could not be held liable for a tax loss penalty imposed because the conditions for voluntary disclosure were breached after the transfer of their shares, merely on the ground that they had been a shareholder during the relevant tax period. The judgment demonstrates that both the period of shareholding and the timing and nature of the act giving rise to the public receivable must be examined. Written share transfer documents, the general assembly resolution, the share ledger, and the registration and publication of the transfer in the trade registry may be decisive in this assessment.

Is a Limited Liability Company Manager Personally Liable for Company Debts?

A company manager does not become personally liable for a company debt merely by signing a contract on behalf of the company or handling payment transactions. Where a manager acts within their authority and on behalf of the company, the resulting rights and obligations vest in the company. A different outcome may arise, however, if the manager provides a surety or an aval in their own name, if the rules on unauthorised representation apply, or if the manager personally commits a tort.

Article 626 of the Turkish Commercial Code requires managers to perform their duties with due care and to safeguard the company’s interests in accordance with the principle of good faith. Through the reference made in Article 644 of the Code, managers who culpably breach duties arising from the law or the articles of association may be liable for loss caused to the company, its shareholders and, where the applicable conditions are met, its creditors. Indirect loss suffered by the company must be distinguished from direct loss suffered by a shareholder or creditor. This distinction determines who may bring the claim and to whom compensation is payable.

In its judgment numbered 2023/3002 E., 2024/5704 K., the 11th Civil Chamber of the Court of Cassation upheld a decision finding that the manager had breached the duty of care and that just cause existed for removal, based on a combined assessment of the failure to hold general assembly meetings, the failure to honour a shareholder’s right to information, the decline in the company’s assets and capital, and prolonged losses. Not every commercial failure entails a manager’s personal liability. A breach of duty, fault, loss and an adequate causal link must be established by specific evidence.

How May a Manager Be Held Liable for Tax and Public Debts?

In most cases, a limited liability company’s manager is its statutory representative. Under repeated Article 35 of Law No. 6183, recourse may be had to the statutory representative’s personal assets for public receivables that cannot be collected, in whole or in part, from the company’s assets or are found to be uncollectible from them. For taxes and tax-related receivables, the specific liability regime under Article 10 of the Tax Procedure Law (VUK) must also be taken into account. The applicable provision is determined by the type of receivable and the relevant period.

When assessing a manager’s liability, it is necessary to establish the dates between which the person had authority to represent the company, the period in which the debt arose and became payable, whether tax obligations were fulfilled, and whether the condition that the receivable be uncollectible from the company has been met. The termination of a person’s registration as manager may not, in itself, eliminate liability for earlier periods. Conversely, merely holding the position of manager on a particular date is not sufficient to establish automatic liability for every debt. If the same person is both a shareholder and a manager, the grounds for liability arising from their status as shareholder and statutory representative must be examined separately.

Which Documents Are Important When Assessing Liability?

It must first be determined whether the debt is a private law debt or a public receivable. The articles of association, trade registry records, share transfer documents, share ledger, resolutions appointing and removing managers, signing authorities, contracts, surety or aval declarations, tax assessment documents and payment orders must then be assessed together. Any discrepancy between the trade registry records and the company’s internal records requires separate examination when determining the start and end dates of liability.

The outcome cannot be determined solely by reference to a person’s title as shareholder or manager. The source of the debt, the relevant date, the requirement of attempted collection from the company, the person’s capacity, their percentage shareholding, their personal undertakings and any culpable conduct are each governed by distinct legal criteria. Particularly where payment orders are served after a share transfer or departure from management, it must be examined separately for each receivable whether the periods to which the debts relate coincide with the capacity giving rise to liability.

Frequently Asked Questions