Newsletter-21

41 COMMERCIAL LAW corporate veil. The deficiency must be determined objectively by tak- ing the purposes and activity size of the legal entity into account. According to the Turkish Commercial Code (“TCC”), a certain amount of shareholders’ equity is required to be determined and al- located to the company so that the creditors can be protected. In such respect, the shareholders are liable to fund the subscribed amount of capital to the company. However, such right must be exercised ac- cording to the good faith principle, and the amount so allocated must be determined in accordance with the good faith principle 3 consider- ing the activities of the company and underlying risks likely to arise therefrom. The capital amount must be sufficient to cover the possible risks likely to occur, not only in the company itself, but also through the conduct of its activities. Then, in the event a company with insuffi- cient equity enters into legal transactions without rectifying its equity deficiency, it may be required to lift the corporate veil and hold the shareholders liable for the obligations of the legal entity. Lifting the Veil in the Companies with a Controlling Shareholder The fact that one or more shareholders having the authority to represent and manage the company in capital companies (holding the majority of the share capital or voting rights) is referred to as the controlling shareholding. The control over a company can also oc- cur by holding the majority of shares by another company or person. The Turkish courts attempt to pierce the corporate veil and make the controlling shareholder(s) liable for the debts of the company in the case of controlling shareholder(s) abuse of its controlling rights to the detriment of the creditors for the sake of their own interests. As an ex- ample, the courts may pierce the veil of a parent company if the parent company used its subsidiary for the purpose of fraudulent transactions. 3 Yanlı Veliye , Piercing the Corporate Veil for Joint Stock Companies, May, 2009, p 111.