Muharrem Küçük Mustafa Yigit Örnek When international banks and financial institutions finance a project or provide acquisition financing, they need to acknowledge certain restrictions under the Turkish Commercial Code No 6102 (TCC) in respect of security granted to secure such financing. For any project or acquisition financing, the borrower itself is able to provide a corporate guarantee to the lenders. But there is a concern if a subsidiary company is required to provide a corporate guarantee in respect of the obligations of its parent company. According to article 202 of the TCC, a parent company cannot cause any loss to its subsidiary. Although abuse of control by the parent company does not render the relevant transaction void, the parent company is obliged to compensate the losses of the subsidiary within the same financial year or provide a method for compensation within the same financial year. If the parent company fails to compensate, the other shareholders or creditors of the subsidiary are entitled to commence proceedings against the parent company and the directors of the parent company for compensation of losses. Article 202 also applies if either the parent or the subsidiary is incorporated in Turkey.
April 23, 2013
