One of the most sensitive issues between the partners of a company is whether the partner can do the same job on his own account.Non-compete clauses in shareholder agreements are introduced precisely to manage this risk: the partner undertakes not to do business that will compete with the company in the company’s field of activity. However, in practice, a significant portion of these records do not provide the expected protection when needed — because they were written in the wrong place, to the wrong extent.
In this article, we explain the subject step by step: in which type of company the prohibition exists automatically, in which one it must be written in the contract, what happens after leaving the partnership, what the company can demand in case of non-compliance, and what mistakes are most frequently made when writing the contract.
What is the non-competition clause in the partnership agreement?
A non-compete is an obligation that prohibits or limits a person from operating in the same field as a particular business. In company law, this liability may arise from two different sources:
- Prohibition arising from the law: In some types of companies, the law imposes a direct non-competition on the partner or manager. Even if there is no provision in the contract, there is a prohibition.
- Contractual prohibition: In cases where the law does not automatically impose a prohibition, the parties decide on this by writing it in the company agreement or a separate agreement.
This distinction is decisive in practice. The prohibition arising from the law applies as long as the partnership status continues and can usually be overcome with the approval of the other partners. The prohibition arising from the contract is valid only within the scope of what is written and within the limits set by law.
Which rule applies to which company type?
Ordinary partnership
Turkish Code of Obligations No. 6098 art. Article 626 regulates that ordinary partnership partners cannot do things that hinder the purpose of the partnership or harm the partnership for the benefit of themselves or third parties. In other words, the prohibition in an ordinary partnership exists even if it is not written in the contract. If the partners wish, they can clarify the scope of this in the contract.
General partnership
Turkish Commercial Code no. 6102 art. According to Article 230, a partner of a general company cannot carry out any business similar to the commercial activities carried out by the company on his own account or on someone else’s behalf, without the permission of the other partners; He cannot join a company dealing with the same type of business as a partner with unlimited liability. Here too, the prohibition arises from the law and is quite broad.
Limited company
In a limited company, the table is divided into two. The prohibition for managers arises from the law: Turkish Commercial Code art. In accordance with Article 626, directors cannot engage in an activity that constitutes competition with the company unless otherwise provided for in the company agreement or unless all other partners give written permission.
For ordinary partners, the law does not impose a direct prohibition on competition. Turkish Commercial Code art. 613 says that partners are obliged to protect company secrets and must avoid behavior that would harm the interests of the company; also with company agreement indicates that it is foreseeable that partners must avoid competing transactions and conduct. In other words, if you want to impose a non-competition ban on the partner in a limited company, you must write this in the company agreement. According to the same article, if all the remaining partners give written approval, the partner may engage in activities that are contrary to the prohibition.
Joint stock company
In a joint stock company, the legal prohibition is directed at the members of the board of directors, not the shareholders. Turkish Commercial Code art. According to Article 396, a member of the board of directors cannot carry out a commercial transaction within the scope of the company’s business on his own account or on someone else’s behalf, without the permission of the general assembly. Ordinary shareholders are not legally prohibited from competing; This obligation can only be imposed by a separate agreement, such as a shareholders’ agreement.
Does the non-competition clause continue after leaving the partnership?
This is the most critical question in practice and
This is where most non-competition in partnership agreement edits break down.
The established approach of the 11th Civil Chamber of the Supreme Court of Appeals is clear on this issue: the non-competition clause included in the company agreement, the partnership is common is binding. The law provides for the partnership with the company agreement.after leaving the partnership does not contain a regulation allowing the imposition of non-competition obligations. In a case examined by the department, the articles of association of an insurance brokerage company contained the provision that “partners and departing partners cannot operate in the same field for 15 years from the date of their separation”. When the person who left the partnership started working in another company in the same sector a short time later, a penal clause was requested; The Supreme Court ruled that the prohibition placed in the articles of association in this way is not binding on the person leaving the partnership.
As long as
The solution is also shown in the same decision: a settlement between the company and its partner.with a separate and independent non-competition agreement, non-competition obligations may also be foreseen for the period after separation. As a matter of fact, cases based on independent non-competition agreements signed during the share transfer are examined on the merits by the courts.
Practical result: If you want post-separation protection, it is not enough to write this in the articles of association. At the time of share transfer or exit from the partnership, a separate non-competition agreement must be signed between the parties.
How to prepare a valid non-competition agreement?
It should not be forgotten that the ban established by a separate agreement cannot be unlimited. Article of the Turkish Code of Obligations regarding service contracts. 444 and m. 445 provisions are used as the basic criterion in the audit of non-competition records. According to these provisions, it is prohibited; It cannot contain inappropriate restrictions in terms of place, time and type of work, cannot unfairly endanger the economic future of the person, and its duration cannot exceed two years, except for special cases. In case of excessive registration, the judge may limit the ban by narrowing its scope instead of lifting it.
A solid text should clearly include these four elements:
- Subject: Which activity is prohibited? Phrases such as “any business activity” increase the risk of invalidity; Describe the business the company actually does.
- Location: Geographical boundary. Limit it to the province, region or customer circle in which the company actually operates.
- Duration: As a rule, two years at most. Long periods of time alone put the text at risk.
- Sanction: Penalty amount and whether damages can be claimed separately.
What can the company demand in case of non-competition violation?
In case of violation of the prohibition arising from the law, the company has more than one option. For example, in a joint stock company, Turkish Commercial Code art. Article 396 gives the company three alternative rights in case the board member violates the ban: to seek compensation, to consider the transaction made in lieu of compensation as having been done on behalf of the company, or to sue that the benefits arising from contracts made on behalf of third parties belong to the company. These rights expire three months from the date the other members learn about the situation, and in any case, one year from the date it occurs. These periods are short; It is necessary to take action as soon as it is learned.
In case of violation of the contractual prohibition, the demands are based on the contract: collection of the agreed penal clause, compensation for excess damage and prevention of competition may be requested. If a penal clause is stipulated, this amount may be requested without the creditor having to prove the damage separately; However, proof of damage is required for damage exceeding the penal requirement.
Common mistakes
- Writing the post-separation ban only in the articles of association. This is the most common and expensive mistake; It cannot be claimed against the departing partner.
- Unlimited duration and geography. Records such as “lifetime”, “across Türkiye, in all sectors” may be narrowed down in court or may be deemed completely invalid.
- Skipping the topic during share transfer. If the non-competition clause is not separately regulated when signing the transfer agreement, there will be no bargaining power afterwards.
- Not establishing the approval mechanism. In a limited company, it is forgotten that the ban can be overcome with the written approval of the other partners, and how the approval will be obtained is not regulated in the contract.
- Not determining the penal clause realistically. Exorbitant penal terms can be reduced by the judge; A balance must be established between deterrence and proportionality.
When preparing the company contract or discussing the share transfer, structuring this issue correctly from the beginning is much cheaper than filing a lawsuit later.
In our work in the field ofCommercial and corporate law, the preparation of such contracts and their follow-up in case of dispute are carried out; For penal terms and compensation size
You can also take a look at our pagelaw of obligations and contracts.
Frequently Asked Questions
Can a common competitor do business if there is no provision in the company agreement?
Depends on company type. In ordinary partnerships and general companies, the prohibition arises from the law. In a limited company, the director is prohibited by law, but an ordinary partner requires a provision in the company agreement. In a joint stock company, the ban is directed at the board member; A separate agreement is required for the shareholder.
How many years can the non-compete clause last after leaving the partnership?
In the obligation imposed by a separate non-competition agreement, Turkish Code of Obligations art. The criterion in 445 is taken as basis: two years, except in special cases. Longer periods may be shortened by the court.
Can a penal clause be requested from a partner who violates the non-competition clause?
Yes, if a penalty clause is agreed in a valid contract. However, if the ban itself is invalid, a penal clause cannot be requested; Therefore, it is decisive that the text remains within reasonable limits in terms of subject, place and duration.
Is the ban deemed to be violated if the partner works as an employee in a rival company?
Depends on the contract text. If it is only stated that “cannot be a partner”, working as an employee may be excluded from the scope. Therefore, when defining the prohibition, titles such as partnership, management, employee and consultancy should be considered separately.
Will the ban be lifted if other partners give permission?
If all the remaining partners in a limited company give written approval, the partner may engage in activities that violate the obligation of loyalty or the prohibition of competition. The company agreement may also stipulate a general assembly decision instead of this approval.
What is the period for filing a lawsuit for violation of non-competition?
The periods of prohibition arising from the law are short; For example, in a joint stock company, three months, in any case one year, from the time other members learn about it. For claims arising from the contract, general statute of limitations rules apply. In order to avoid loss of time, it is important to have a legal evaluation as soon as the violation is learned.
This article has been prepared to provide general information about Turkish law; It does not constitute legal advice. Each contract and dispute must be evaluated on its own terms. We recommend that you consult a lawyer for your specific situation.
