In Türkiye’s modern liberal economy, the principle of free competition forms the cornerstone of commercial life. Article 48 of the Turkish Constitution guarantees every individual the freedom to work and to conclude contracts in the field of their choice.
However, this freedom is not absolute. To prevent the abuse of competition, the legislator has introduced several restrictions under the Turkish Commercial Code (TCC). One of the most significant among them is the non-compete obligation (rekabet yasağı), which applies differently to board members and shareholders of joint stock companies (anonim şirket).
This article explains how the non-compete principle operates in Turkish corporate law, the scope of restrictions imposed on company managers, and how shareholders may also be bound through contractual arrangements.
I. Non-Compete Obligation for Board Members
In joint stock companies, those who hold management authority are prohibited from engaging in commercial activities that fall within the company’s field of business, or from participating in competing enterprises.
This restriction is based on the duty of care and loyalty imposed on board members under Article 369 of the Turkish Commercial Code (TCC). The article clearly states that board members and persons in charge of management must perform their duties diligently and protect the company’s interests in accordance with the principle of good faith.
The rule aims to prevent directors from using confidential company information or business opportunities for their personal benefit or for the advantage of another company.
Even when management powers are delegated to executive directors (murahhas müdürler), these individuals remain subject to the same duty of care and loyalty — meaning the non-compete obligation applies equally to them.
Legal Basis under Article 396 TCC
According to TCC Article 396(1),
“A member of the board of directors may not, without the permission of the general assembly, engage in any commercial transaction within the company’s field of operation on his or her own behalf or on behalf of others, nor may he or she be a partner with unlimited liability in another company engaged in the same type of business.”
If a board member violates this provision, the company may:
Claim compensation for damages,
Deem the transaction as made on behalf of the company, or
Assert that any benefit derived from the transaction belongs to the company.
Is the Restriction Absolute?
The non-compete rule for board members is not mandatory (emredici) in nature. It may be lifted by a general assembly resolution granting explicit permission.
For a legal norm to be mandatory, the parties must not have the freedom to decide otherwise, yet Article 396 explicitly allows the shareholders to authorize the member to engage in such activities.
Scope of the Restriction
Article 396 prohibits two main types of behavior:
Carrying out commercial transactions within the company’s field of activity
The restriction applies not to every possible subject listed in the articles of association, but only to the areas in which the company is actually engaged in practice.Becoming an unlimited partner in a competing company
This covers joining ordinary partnerships, collective companies, or limited partnerships (komandit şirket)as a partner with unlimited liability.
However, being a limited partner or shareholderin a limited or joint stock companydoes not fall within the prohibition.
Consequences of Breach
If a director breaches the non-compete clause, the company may:
File a claim for damages,
Adopt the transactionas if it were performed by the company itself, or
Request the transfer of the benefitobtained by the director.
These options may be exercised by the remaining board members who did not violate the rule.
According to TCC Article 396(3), such claims must be brought:
Within 3 monthsfrom the date the violation was discovered, and
In any event, within 1 yearfrom the date of the act.
Failure to act within these time limits results in the expiration of the company’s rights.
II. Non-Compete Obligation for Shareholders
The Turkish Commercial Code does not impose a statutory non-compete obligation on shareholders of joint stock companies.
The relevant provisions (particularly those under Articles 369 and 396) apply exclusively to board members and individuals who actively participate in management.
However, this absence of a statutory rule does not mean that shareholders are entirely free to act against the company’s interests. Turkish law recognizes that while shareholders are not bound by a “duty of loyalty,” they must still act in accordance with the principle of good faith (Türk Medeni Kanunu Article 2) and refrain from causing harm to the company.
Doctrine and Practice
Legal scholars differ on whether shareholders may indirectly fall within the scope of a non-compete duty:
One view holds that shareholders are not subject to any non-compete restriction, unless they hold managerial duties.
Another view suggests that shareholders should also avoid competing activities, particularly when their conduct harms the company or violates good faith.
To avoid ambiguity, companies often include non-compete provisions in shareholders’ agreements. Such clauses create a clear contractual obligation even though no statutory duty exists.
Shareholders’ Agreements as a Solution
Under TCC Article 329/2, a shareholder’s liability toward the company is limited to the capital commitment. However, through a shareholders’ agreement, the parties may:
Impose additional obligations, including a non-compete clause,
Define the scope, duration, and geographical limitsof such prohibition, or
Expressly state that no non-compete obligation existsamong shareholders.
When drafting these agreements, it is essential that the restriction remains reasonable and proportionate.
Courts will invalidate overly broad clauses that excessively limit an individual’s economic freedom. For instance, in its decision dated 11 June 2015 (11th Civil Chamber, E. 2014/11565, K. 2015/8187), the Court of Cassation (Yargıtay) ruled that a 15-year non-compete clause was invalid as it excessively restricted the right to work.
Reasonable periods typically accepted in practice include:
During the shareholder’s participation in the company, and
- to 5 years after withdrawal from the company.
III. Conclusion
In joint stock companies:
Board membersare subject to a statutory non-compete obligationunder Article 396 TCC, which may be lifted only by general assembly authorization.
The restriction also applies to delegated managers and executive directorsdue to their duty of loyalty and care.
In contrast:
Shareholdersare not legally boundby a non-compete rule unless it is contractually imposedthrough a shareholders’ agreement.
Their behavior is instead evaluated under the general principle of good faithand the prohibition of unfair competitionif it causes harm to the company.
Therefore, companies seeking to avoid future disputes should clearly regulate non-compete obligations within their articles of association or shareholders’ agreements, ensuring that such provisions remain lawful, proportionate, and enforceable under Turkish law.
Bayraktar Attorneys Can Assist You
At Bayraktar Attorneys, we advise both domestic and international clients on all aspects of Turkish company law, including corporate governance, director liability, shareholder rights, and non-compete restrictions.
Our firm assists in drafting articles of association, shareholders’ agreements, and board resolutions that comply with the Turkish Commercial Code while protecting our clients’ commercial interests.
If your company faces a potential conflict of interest, breach of loyalty, or shareholder dispute, our multilingual legal team provides strategic representation and preventive legal solutions tailored to your corporate structure.
📞 Contact us: [email protected] | www.bayraktarattys.com
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