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COMMERCIAL LAW
79
Liability Arising out of Management
This first category of abuse of control, set forth in art. 202/ 1 of NCC,
covers the transactions and actions performed under the authority of the
board of directors which may result with a financial loss on the subsidiary
company’s account that are considered as violation of the duty of care by
the board of directors.
According to this, dominant company cannot exercise its dominance
power in a way which may give rise to a financial loss in the subsidiary’s
ledger. The loss concept herein covers causing a potential risks to
the company’s financial assets or future profitability as well as value
depreciation on them. Therefore, not only the actual losses sustained but
also potential risks that may arise thereof falls within the definition of
loss. Some sample transactions and decisions which can especially lead to
this consequence are listed in art. 202/1 of NCC, inducing or dictating the
subsidiary company to execute and perform those transactions, without
compensating the loss occurred within the preceding fiscal year or entitling
a right of claim equal to such loss to the subsidiary company by stating its
time and method, is accepted to be unlawful practice. Some of the samples
given in the articles are directing the company to conduct legal transactions
for transfer or assignment of business, assets, funds, personnel, receivables
and debts; to reduce or to transfer its profit; to restrict its property right;
to undertake obligations such as suretyship, guarantee; to take decisions
which will negatively effect on its productivity or its activities.
In the event that the financial loss occurred is not compensated within
the fiscal year or a right of claim equal to such loss is not entitled to the
subsidiary company by stating its time and method, the shareholders of
the subsidiary company or the creditors may claim the indemnification of
the loss of the subsidiary company from the dominant company. If this
lawsuit is filed by the shareholders, the judge may, either by demand or
by reason, decide the shares of such shareholders to be purchased by the
dominant company or may order another expedient remedy that may be
reasonable and compatible with the particular circumstances rather than
indemnification. The right granted to the shareholders of the subsidiary
company to claim the purchase of the shares before the court is an
important exit right under the group of companies’ provisions.