Due Diligence
"What does legal due diligence involve in Turkish M&A transactions?"
Quick Answer
Due diligence typically covers corporate governance and authority, material contracts, litigation and enforcement, employment and benefits, IP and IT, real estate and permits, regulatory and compliance (including data protection), competition law risk, and (with tax/finance teams) tax and financial exposure.
Key Aspects Under Turkish Law
Legal due diligence in Türkiye is a risk-assessment process carried out for M&A and major commercial transactions. It is not “governed” by a single statute; instead, the review is shaped by the target’s legal profile under multiple regimes (e.g., Turkish Commercial Code for corporate matters, Turkish Code of Obligations for contracts, Labour Law for employment, IP legislation, real estate rules, competition law, and sectoral regulations).
Key Points to Remember
- Turkish Commercial Code No. 6102 provides the primary legal framework
- Trade Registry filings may be required to perfect or implement the transaction (e.g., changes to directors, share transfers, capital increases) and should be checked as part of corporate due diligence.
- Foreign investors can generally acquire shares/assets in Türkiye, but sector-specific approvals, licensing rules, and foreign ownership restrictions may apply and should be assessed during due diligence.
- A reliable due diligence outcome depends on complete documentation (trade registry records, signature circulars, share ledgers, key contracts, litigation files) and verifying that corporate approvals and authorizations are valid and properly documented.
- Change-of-control clauses in material contracts (e.g. distribution, financing, licensing, joint venture agreements) must be identified, as they may trigger termination, consent requirements, or renegotiation upon closing.
- Due diligence should identify hidden liabilities such as guarantees, sureties, pledges, letters of comfort, off-balance-sheet commitments, and pending enforcement or attachment proceedings.
- Trade Registry, enforcement office (icra), pledge, mortgage, and lien records must be reviewed to detect encumbrances over shares, assets, bank accounts, or real estate.
- Data protection compliance (KVKK), cross-border data transfers, and past administrative fines or investigations should be reviewed, especially where customer or employee data is processed.
- Competition law risks, including exclusivity arrangements, resale price maintenance, dominance concerns, and potential merger control notification requirements, should be assessed during due diligence.
Practical Considerations for Businesses
When dealing with due diligence in Turkey, businesses should consider engaging qualified legal counsel familiar with both Turkish law and international business practices. This ensures compliance with local requirements while meeting global standards.
Documentation requirements, timeline considerations, and regulatory approvals vary depending on the specific circumstances of each case. Early planning and proper structuring can help avoid common pitfalls.
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