Mr. A and Mr. B establish a limited company named “ABC Textile Ltd. Co.” Both are 50% partners. According to the articles of association, the authority to represent and manage the company is given to Partner Mr. B as the “manager” for 10 years.

Although things go well for the first few years, Mr. A notices a serious drop in the company’s profitability over the last year. When he demands a detailed financial report and account summary from Mr. B (the manager), Mr. B constantly stalls him with the excuse of “being too busy.”

Suspecting the situation, Mr. A conducts his own research and discovers that Mr. B:

  1. Paid his wife’s personal credit card debts and family holiday expenses from the company bank account,

  2. Received invoices at exorbitant prices from a company owned by Mr. B’s relative for services purchased from the market,

  3. Rented a luxury official car that provided no benefit to the company. When Mr. A wants to call a general assembly meeting to correct this situation, Mr. B refuses this request as well.

Legal Evaluation This case is a typical example of a situation known as “deadlock,” often experienced in 50-50 partnership companies, where the manager partner abuses their authority.

1. Violation of Manager’s Duty of Care and Loyalty (TCC Art. 626) According to the Turkish Commercial Code (TCC), managers (whether partners or outsiders) must perform their duties with “the care of a prudent manager” and protect the interests of the company with “loyalty.”

  • Mr. B has clearly violated these obligations and caused damage to the company by using company money for personal expenses (disguised profit distribution) and purchasing overpriced services from relatives.

2. Prevention of Partner’s Right to Information and Inspection (TCC Art. 614) Every partner has the right to obtain information about the financial status of the company and to inspect the books. Manager Mr. B’s stalling of this request is a separate unlawfulness.

3. Mr. A’s Deadlock: Locked with 50% Vote Even if Mr. A convenes the general assembly, he cannot make a decision alone to remove Mr. B from the management because he holds only 50% of the votes (since Mr. B also holds 50%).

Legal Result and Solution Methods The TCC grants significant rights to the “minority” (or deadlocked) partner for such “deadlock” and “mismanagement” situations. Steps Mr. A should take through his lawyer:

  • 1. Request for Appointment of Special Auditor (TCC Art. 637): The first thing Mr. A should do is apply to the Commercial Court of First Instance with evidence of suspicious transactions and request the appointment of a “special auditor” to investigate “specific issues” (suspicious expenses, relative company invoices, etc.). This is critical for turning suspicions into an official report.

  • 2. Lawsuit for Removal of Manager for Just Cause (TCC Art. 630): With the special auditor’s report or existing evidence, Mr. A must apply to the Commercial Court again to request the “removal of Mr. B from management for just cause.” If just causes (causing loss to the company, violation of duty of loyalty) are clearly proven, the court can remove Mr. B from management without the need for a general assembly decision.

  • 3. Liability Lawsuit (TCC Art. 636): Additionally, Mr. A can file a “manager’s liability” lawsuit to compensate for the damage given to the company, demanding the collection of personal expenses from Mr. B and their return to the company.

  • 4. Last Resort: Termination of Company for Just Cause (TCC Art. 636/3): If the continuation of the partnership has become impossible, a lawsuit for the “termination of the company for just cause” can also be filed as a last resort.

Conclusion and Advice Trust between partners in limited companies is the foundation of commercial activity. However, when this trust is abused, especially in 50-50 deadlocks, fast and strategic legal moves are essential. As soon as you notice the actions of a bad-faith partner, applying to legal remedies such as a special auditor and removal of the manager to prove the situation and request intervention from the court is the only way to save both the company and your personal investment.