Newsletter-21

40 NEWSLETTER 2016 companies and their shareholders’ personal assets, where the company is the sole beneficiary of the credits it is owed as it is solely liable for the debts. Thus, the company has been shielded from its sharehold- ers’ personal liabilities and vice versa. In this respect, under Turkish Law, limitation of shareholders’ liabilities is subject to certain excep- tions as (i) the obligations vis-à-vis the government and (ii) a legal doctrine accepted by the Turkish case law, “lifting the corporate veil” as a judicially imposed exception to the separation principle where a shareholder is responsible for the company’s action. As explained above, while the shareholders’ limited liability re- sulting from the separation principle under Turkish law, the Turkish Courts of Appeals advanced the doctrine of veil lifting due to the oc- currence of companies that have been set up for fraudulent purposes, and/or to avoid existing obligations. By this exception, the courts shall disregard the separation principle 2 of the corporation, and hold the shareholders responsible for their actions of the corporation as if it were the actions of the shareholders. Under Turkish law, the share- holders (natural or legal entity shareholders) may be held liable by veil lifting (i) in case of fraud committed against the law or (ii) breach of a contractual obligation by hiding behind the corporation or (iii) breach of good faith as per Articles 2 and 3/II of the Turkish Civil Code. The Grounds to Lift the Corporate Veil The necessity to lift the corporate veil may occur in situations re- lated to (i) deficiency of shareholders’ equity; (ii) serious misconduct, such as abuse of the corporate form and (iii) intermingling the assets of the shareholder and entities. Deficiency of Shareholders’ Equity Deficiency of shareholders’ equity might result in holding the shareholders liable for the obligations of the legal entity by lifting the 2 “ Single debt principle ” is set forth under Article 480/1 of the Turkish Com- mercial Code. Save for exceptions stipulated under the TCC, no obligation shall be conferred upon the shareholders by the articles of association, other than the premium exceeding the share price or nominal value of the share.