When Can a Business License Be Revoked in Turkey?

Table of Contents

• Introduction: The Existential Risks to a Business in Türkiye
• The Legal Framework for Corporate Sanctions
• When Can a Business License Be Revoked?
  • The Core Condition: Abuse of Public Authority
  • Practical Examples
• Asset Confiscation vs. Asset Freezes: A Critical Distinction
  • Asset Confiscation (Post-Conviction Penalty)
  • Asset Freezes and Trustee Appointment (Pre-Conviction Risk)
• Prevention as the Only Effective Defense

For any board of directors or executive team, few risks are as existential as those that threaten the company’s core assets or its very license to operate. In Türkiye, while the legal system reserves traditional criminal penalties like imprisonment for individuals, it wields a set of powerful "security measures" against corporations that can be just as, if not more, devastating. Among the most severe are the revocation of a business license and the confiscation of corporate assets.

These are not arbitrary punishments. They are triggered under specific conditions rooted in The Turkish Penal Code (TPC), typically when a company is found to have benefited from a crime committed by its employees or leadership. Understanding these conditions is not just a legal exercise; it is a critical component of corporate risk management. This article details the legal framework and specific circumstances under which a company in Türkiye can face these business-ending sanctions.

The Legal Framework for Corporate Sanctions

To grasp how a company can be penalized, one must first understand the foundational principle of Turkish criminal law: criminal liability is strictly personal (şahsilik ilkesi). This means only individuals can be found to have criminal intent and sentenced to prison.

However, this does not leave the corporation immune. Article 60 of the TPC provides the legal basis for imposing "security measures" on a legal entity. This can happen only when two fundamental conditions are met:

1. A crime is committed by the company’s "organs" (e.g., its board of directors) or its "representatives" (e.g., executives, managers, or even subordinate employees).
2. The crime was committed for the benefit of the company.

Crucially, liability is not limited to cases where management directly orders or participates in the crime. A company can be held responsible if the offense was made possible by a failure of its internal policies, a lack of supervision, or a culture where leadership "turned a blind eye" to misconduct. Therefore, the strength and demonstrable enforcement of a company's internal compliance program become a central factor in its defense.

When Can a Business License Be Revoked?

For any company operating in a regulated industry, the revocation of its license or permit is arguably the ultimate corporate sanction. It effectively ends the company's ability to conduct its primary business activities.

The Core Condition: Abuse of Public Authority

The central condition for license revocation, as stipulated by TPC Article 60, is the abuse of a license or permit granted by a public authority to commit a crime. This means the company must have used the special rights and privileges granted to it by the state as a tool or cover to engage in illegal activity for its own benefit.

Practical Examples:

The risk is highest in sectors that require specific government authorization to operate. The research highlights several key areas:

• Energy Sector: An energy company holding a production license from the Energy Market Regulatory Authority (EPDK) could face revocation if it uses its operations to commit environmental crimes or engage in massive fraud. Any crime committed by abusing the authority granted by the license is a direct trigger.
• Financial Sector: A bank or financial institution could have its banking license revoked if it is found to have systematically engaged in money laundering or used its licensed status to defraud customers.
• Construction: A construction firm could see its permits revoked if it is found to have committed fraud by abusing zoning regulations or using substandard materials in violation of its permits, leading to public harm.

The process involves a court order that directs the issuing public body to cancel the license. The impact is immediate and profound, effectively shutting down the company’s operations in that regulated field.

Asset Confiscation vs. Asset Freezes: A Critical Distinction

A company’s financial assets can be targeted at two different stages of the criminal process, a distinction that is critical for understanding the full scope of the risk.

Asset Confiscation (Post-Conviction Penalty)

Asset confiscation (müsadere) is a "security measure" imposed by a court after a conviction. Its purpose is to ensure that a company does not retain the financial benefits of its illegal actions.

The Core Condition: The court can order the confiscation of any property or material interests (financial gains) that are connected to the commission of the crime. This is about disgorging ill-gotten gains and removing the profit motive from corporate crime.

Examples of what can be confiscated include:

• The profits were generated from a government contract that was secured through bribery.
• Funds and property acquired through fraudulent activities.
• Assets linked to money laundering schemes.

Asset Freezes and Trustee Appointment (Pre-Conviction Risk)

Perhaps more alarming for businesses is that their assets can be neutralized long before a final verdict is reached. During the investigation phase (soruşturma), prosecutors can request that a court order a "protection measure" against a company.

The Core Condition: These measures do not require a conviction. They can be implemented based on a strong suspicion that a crime has been committed within the company’s activities, particularly for offenses like fraud, bribery, or money laundering.

The two primary measures are:

• Asset Freeze: A court can order corporate bank accounts and other assets to be frozen for the duration of the investigation and trial, effectively paralyzing the company's financial operations.
• Appointment of a Trustee: In more drastic cases, the court can appoint a trustee to take over the entire management of the company. This means the board and executives lose control, and the company is run by a state-appointed official until the legal process concludes. This is a common and powerful tool used in financial crime cases in Türkiye.

This pre-conviction risk means that from the moment an investigation begins, a company's control over its own assets and management is in serious jeopardy.

Prevention as the Only Effective Defense

The conditions for license revocation and asset confiscation are all tied to the commission of a crime for corporate benefit, often enabled by a failure of governance. This means that the only effective strategy to mitigate these existential risks is a proactive and deeply embedded compliance culture. A company must be able to demonstrate to prosecutors and courts that it has a robust framework designed to prevent, detect, and respond to misconduct. Key elements of such a defensible program include clear, tailored policies on anti-corruption and ethics, effective and regular employee training, secure internal reporting channels, and board-level commitment to compliance.

To navigate these high-stakes legal challenges and protect your corporate assets, having the right information is crucial. Visit Lawzana to explore expert insights and detailed legal guides. Join a global network of legal professionals to help you gain more clients and build a more resilient compliance framework for your firm. Register with Lawzana today.