Disputes Between Company Partners and Preventive Law: Stopping Conflict Before It Starts

As the number of foreign investors setting up companies in Turkey continues to grow in 2026, one of the most sensitive points in any business partnership remains unchanged: disputes between partners. Everyone tends to agree at the incorporation stage, yet a few years down the road serious disagreements can surface over profit distribution, management authority, or how a partner exits the company. In this article, we look at the concrete legal measures that can be taken before a dispute arises, and what a preventive law approach can offer company partners.

Why Are Disputes Between Partners So Common?

At the incorporation stage, partners tend to focus on the business idea and the excitement of growth, so questions like who will hold how much authority, how profits will be shared, and what happens if one partner wants to leave are often never spelled out clearly. Take a typical example: two partners set up a company on a 50-50 basis, one contributing capital and the other contributing operational effort. The first year goes well, but in the second year one partner starts putting in more time and argues that “an equal profit share is no longer fair.” This is precisely where disputes escalate if there is no written framework in place from the outset.

The Turkish Commercial Code sets out the basic rights and obligations between partners in limited liability companies (LLCs) and joint stock companies, but the Code’s general provisions are not enough to address the specific dynamics of any given company. This is why it is critical that the partnership agreement (the articles of association for an LLC, or a separate shareholders’ agreement signed alongside the articles of association for a joint stock company) be drafted in a detailed and forward-looking manner.

The Foundation of Preventive Law: The Partnership Agreement and Management Agreement

Preventive law means anticipating potential points of conflict when the partnership is formed and writing them into the agreement as clear rules, rather than seeking a solution after a dispute has already broken out. Consider three partners setting up a new company in Istanbul: one provides the financing, and the other two run the operations. If the agreement does not clearly specify which decisions require unanimous consent and which require a majority vote, even a simple investment decision can end up deadlocking the company later on.

A well-drafted partnership agreement typically addresses: the allocation of management authority, the basis for sharing profits and losses, the conditions for exit and share transfer, non-compete obligations, and the dispute resolution method. The more concretely these clauses are drafted, the lower the likelihood of a future dispute arising from differing interpretations.

Common Types of Disputes

Disputes between partners tend to cluster around a handful of recurring themes. Knowing these in advance shows which clauses deserve the most attention when drafting the agreement.

• Profit-sharing disputes: The perception of a fair split between a partner who contributes labor and one who contributes only capital can shift over time.
• Management authority conflicts: If it is unclear who has the final say on day-to-day operational decisions, the company can grind to a halt.
• Exit and share transfer issues: When a partner wants to leave, the process drags on if there is no clarity on how their share will be valued and to whom it may be transferred.
• Breaches of non-compete and loyalty obligations: A partner starting another venture in the same sector can trigger a crisis of trust.

Ask yourself this: “If my partner wanted to leave the company tomorrow, to whom could they transfer their share, and at what price?” If you don’t have a clear answer, your agreement has a significant gap.

Concrete Measures to Take Before a Dispute Arises

So which clauses actually reduce this risk in practice? In our experience, the risk of deadlock is particularly high in 50-50 partnership structures, so the following mechanisms should be considered as a priority.

For instance, two founding partners of a software company included a clause at incorporation stating that “management disputes not resolved within three months will be referred to an independent mediator.” Two years later, when a real dispute did arise, they reached a resolution within a few weeks without ever entering litigation, because the roadmap was already written into the agreement.

Legal Avenues to Follow Once a Dispute Arises

Despite every precaution, a dispute can sometimes be unavoidable. In that case, the available paths depend on the mechanism set out in the agreement.

• Mediation: For commercial disputes, Turkish law makes mediation a mandatory procedural step before filing suit for many types of monetary claims; the parties seek a resolution with the help of an independent mediator.
• Arbitration: If the agreement contains an arbitration clause, the dispute is resolved before an arbitral tribunal rather than in court, usually faster and in confidence.
• Litigation: If the above avenues fail, a lawsuit can be filed before the general courts under corporate law; this includes, for example, actions for dissolution for just cause or for the expulsion of a partner.

In one case involving a family company based in Ankara, the partners had not included any dispute resolution clause in their agreement and were forced straight into litigation, a process that stretched on for years. This example shows just how costly a single overlooked clause at the drafting stage can turn out to be.

Special Considerations for Foreign Partners

In companies set up in Istanbul jointly by foreign investors and Turkish partners, mismatched expectations can surface earlier due to cultural and language differences. Take an English-speaking investor partnering with a Turkish entrepreneur: if the agreement is drafted only in Turkish, the foreign partner may end up signing without fully understanding certain clauses.

Additional points to watch for in this type of partnership include:

• Drafting the agreement in two languages (Turkish and English) and specifying which language version prevails.
• Clearly stating the governing law and the competent court or arbitration center.
• If the foreign partner resides outside Turkey, clarifying the address for service of process and power of attorney arrangements.

These details may seem minor, but at the moment a dispute arises they can turn into a separate battle over which country’s law applies and which court has jurisdiction.

Can the partnership agreement be amended after incorporation?

Yes, the agreement can be updated later with the consent of all partners. However, renegotiating it becomes far more difficult once trust between the parties has already been strained, which is why it is advisable to draft it as comprehensively as possible at the incorporation stage.

What can be done in a company without a deadlock clause?

If the agreement does not contain such a clause, the parties can seek a resolution through mediation or add such a clause later by mutual agreement. In some cases, applying to the courts under the general provisions of the Turkish Commercial Code is also an option.

In summary: most disputes between partners can be prevented with a sufficiently detailed agreement at the incorporation stage. Clarifying provisions such as management authority, profit sharing, exit conditions, and the dispute resolution method from the outset is the most valuable investment you can make, both in terms of time and the partnership relationship itself.