Pursuant to Article 18/2 of the Turkish Commercial Code No. 6102, every merchant is obliged to act as a prudent businessman in all activities related to their trade. However, this obligation imposed on the merchant is not merely a duty of care limited to commercial life. Due to violations of this duty of care, a merchant may face not only civil liability but also criminal liability. In this article, the elements of the offense of negligent bankruptcy, the conditions required for its formation, and its penal aspects will be examined.
Legal Definition of the Offense
The offense of negligent bankruptcy is regulated under Article 162 of the Turkish Penal Code within the section titled “Crimes Against Property.” The relevant provision is as follows:
TCK Article 162 – (1) A person who causes bankruptcy due to failure to exercise the care and diligence required by the status of a merchant shall be punished with imprisonment from two months to one year, provided that a bankruptcy decision has been issued.
When the statutory text is considered, it is seen that every merchant is obliged to act as a prudent businessman in all activities related to their trade, and that in the event of a breach of this responsibility, not only civil liability but also criminal liability may arise.
The formation of criminal liability is subject to the existence of certain conditions. These conditions are:
1- There must be a final (enforceable) bankruptcy decision: The first requirement for the prosecution of the offender for the crime of negligent bankruptcy is the existence of a final bankruptcy decision. This point is also explicitly stated in the statutory text. A final bankruptcy decision is an objective condition of punishability for this type of offense.
“…A bankruptcy decision constitutes an objective condition of punishability, and in order for the defendant to be convicted of negligent bankruptcy, there must necessarily be a final bankruptcy decision, and a certified copy containing the finalization annotation enabling judicial review must be included in the case file. In terms of the offense of negligent bankruptcy, the date of the offense is the date on which the bankruptcy decision becomes final. Upon examination of the file, it was understood that the Bankruptcy Decision was issued by the Ankara 11th Commercial Court of First Instance on 24.12.2013 under case number 2012/302 and decision number 2013/375, and that at the time the indictment was issued on 28.09.2015, the bankruptcy decision had not yet become final. Therefore, it was necessary to investigate whether the decision of the Ankara 11th Commercial Court of First Instance dated 24.12.2013 (2012/302 E., 2013/375 K.) had become final, and to include the bankruptcy decision and the finalization annotation in the file in a manner allowing judicial review; accordingly, the defendant’s ground of appeal was found justified…” (Court of Cassation, 2nd Criminal Chamber, 2022/11050 E., 2023/1499 K., 27.03.2023)
2- There must be a failure to exercise the care and diligence required by the status of a merchant: The determining factor in this type of offense is the merchant’s neglect of the level of care required in conducting business activities. In the offense of negligent bankruptcy, the law does not specify a particular form of conduct constituting the crime; instead, it is regulated as a free-form offense. Therefore, any act involving a failure to exercise the care and diligence required of a merchant may lead to the formation of this offense. Examples of such conduct include a merchant’s failure to take necessary precautions despite being able to foresee the ordinary risks of commercial life, thereby placing the business in financial difficulty.
In addition, Article 310 of the Enforcement and Bankruptcy Law stipulates that a bankrupt person who falls under any of the conditions listed in the article shall be deemed negligent and punished under the provisions of the Turkish Penal Code. The relevant provision is as follows:
Article 310 of the Enforcement and Bankruptcy Law (İİK) –
“A bankrupt person shall be deemed negligent (guilty of fault in bankruptcy) and shall be punished under the Turkish Penal Code if any of the following circumstances exist:
1 – If he cannot provide reasonable grounds for his losses;
2 – If his household expenses are excessive;
3 – If he has spent substantial amounts on gambling, pure games of chance, or stock exchange transactions;
4 – If, despite knowing that his debts exceed his assets and receivables, he has purchased goods on credit or borrowed significant amounts of money from persons unaware of his financial situation;
5 – (Amended: 29/6/1956-6763/42) If he has not kept, or has not properly kept, the books listed in subparagraphs 1 to 3 of the first paragraph of Article 66 of the Commercial Code as required by law;
6 – If he has signed promissory notes for amounts far exceeding his assets and receivables;
7 – (Amended: 18/2/1965-538/128) If he fails to appear without a valid excuse when summoned by the court, bankruptcy administration, or bankruptcy office during bankruptcy proceedings;
8 – If he has abandoned his business and absconded;
9 – If he has been declared bankrupt again without fulfilling the terms of a previous composition (concordat);
10 – If he has been declared bankrupt within one year without complying with the provision of the last paragraph of Article 178.
3- There must be an appropriate causal link between the fact of bankruptcy and the defendant’s actions: The mere breach of the duty of care and diligence by the offender is not sufficient on its own for the formation of the crime. The offender’s conduct must have occurred in a manner that leads to the bankruptcy of the company, and there must be a causal link between them. This point was explicitly emphasized in the decision of the 8th Criminal Chamber of the Court of Cassation dated 06.12.2017.
“…In the concrete case in which it is alleged that the defendant, who is the authorized representative of the company …. Gıda Tur. İnş. San. Tic. Ltd. Şti., committed the offense of negligent bankruptcy under Article 310/7 of the Enforcement and Bankruptcy Law No. 2004 by failing to submit the company’s books and documents despite a formal notice containing a warning issued by the bankruptcy administration following a request for their submission after the company was declared bankrupt, and thereby failed to exercise the care and diligence required of a merchant; it is stated that Article 162 of the Turkish Penal Code provides that a person who causes bankruptcy due to failure to exercise the care and diligence required by the status of a merchant shall be punished in the event that a bankruptcy decision has been issued. Although Articles 66 and subsequent provisions of the Turkish Commercial Code require merchants to keep certain books, under Article 162 of the Turkish Penal Code No. 5237, the failure to submit or properly keep the relevant books and documents becomes significant only if it causes the debtor’s bankruptcy. The mere failure to submit requested commercial books, records, and documents is not sufficient on its own to constitute the offense of negligent bankruptcy. The defendant’s conduct in not properly keeping commercial books, records, or documents must have been carried out in a way that establishes a causal link leading to the company’s bankruptcy. In light of the fact that no expert examination was conducted regarding the defendant’s actions, in order to establish the truth beyond doubt, it was necessary first to obtain the books and documents of the company, of which the defendant was the authorized representative and which was declared bankrupt, and to have them examined by a panel of three experts consisting of specialists in commercial law, enforcement and bankruptcy law, and accounting, in order to determine whether the acts and transactions listed in Article 162 of the Turkish Penal Code were present, whether these acts—being elements of negligent offenses—caused the bankruptcy of the company, in other words, whether there was a proper causal link between the bankruptcy and the defendant’s failure to exercise the care and diligence required of a merchant, without leaving any room for doubt. Accordingly, convicting the defendant of negligent bankruptcy solely on the ground that he failed to submit the books and documents despite a request, without such an examination, is contrary to law…”
2- A bankruptcy decision is an objective condition of punishability; in order for the defendant to be convicted of negligent bankruptcy, there must necessarily be a final and enforceable bankruptcy decision, and a certified copy containing the finalization clause must be included in the case file in a manner allowing judicial review. The issuance of a judgment without including the bankruptcy decision rendered by the Istanbul 49th Commercial Court of First Instance dated 17.10.2011 (Case No. 2011/147, Decision No. 2011/81) in a manner allowing review, based on incomplete examination, is contrary to law. Since the defendant’s grounds of appeal were therefore found justified, the judgment was REVERSED for these reasons pursuant to Article 321 of the former Criminal Procedure Code No. 1412, which is applicable under Article 8/1 of Law No. 5320…” (Court of Cassation, 8th Criminal Chamber, 2017/4911 E., 2017/13890 K., 06.12.2017)
ELEMENTS OF THE OFFENSE
When evaluated together with its objective and subjective elements, the offense of negligent bankruptcy has the following basic components:
1- Offender: The offense of negligent bankruptcy is a special offense. Therefore, only a debtor subject to bankruptcy (a merchant) can be the perpetrator of this crime.
2- Victim: In terms of this offense, the victims are persons who are unable to collect their receivables due to negligent bankruptcy or who face the risk of being unable to collect them.
3- Act (Conduct) Element: In the offense of negligent bankruptcy, the law does not specify a particular form of conduct constituting the crime; instead, it is regulated as a free-form offense. Therefore, under Article 162 of the Turkish Penal Code, the act element consists of any conduct involving the failure to exercise the care and diligence required of a merchant.
4- Legal Interest Protected by the Offense: The offense of negligent bankruptcy is regulated under the section titled “Crimes Against Property” in the Turkish Penal Code, and the legal value protected by this offense is trust in commercial life.
5- Mens Rea (Mental Element): As the name suggests, this offense can only be committed negligently; it cannot be committed intentionally.
COMPLAINT PERIOD, STATUTE OF LIMITATIONS AND COMPETENT COURT
The offense regulated under Article 162 of the Turkish Penal Code is not subject to complaint, and the investigation proceedings are carried out ex officio by the public prosecutor. Although there is no complaint period for the investigation of the offense, the statute of limitations for prosecution is eight years. The competent court is the Criminal Court of First Instance.
EFFECTIVE REMORSE
Effective remorse is an institution of substantive criminal law that provides for a reduction of the penalty imposed on the offender if the offender shows remorse for the act committed and compensates for the damage caused by the offense. Pursuant to Articles 168/1-2 of the Turkish Penal Code, it is possible for the offender to benefit from the provisions of effective remorse in relation to the offense of negligent bankruptcy if the conditions set out in the article are fulfilled.
Article 168 of the Turkish Penal Code:
(1) In the offenses of theft, damage to property, abuse of trust, fraud, fraudulent bankruptcy, negligent bankruptcy (…)[72], if, after the completion of the offense but before the initiation of prosecution, the offender, instigator, or aider personally shows remorse and fully compensates the victim’s damage by returning the property as it is or by indemnification, up to two-thirds of the sentence to be imposed shall be reduced.
(2) If effective remorse is shown after the prosecution has begun but before the judgment is rendered, up to one-half of the sentence to be imposed shall be reduced.
FINE, SUSPENSION OF SENTENCE, AND DEFERMENT OF THE PRONOUNCEMENT OF THE JUDGMENT (SUSPENDED ANNOUNCEMENT OF JUDGMENT) DECISION
Pursuant to Article 162 of the Turkish Penal Code, a person who causes bankruptcy due to failure to exercise the care and diligence required by the status of a merchant shall be punished with imprisonment from two months to one year. Considering the minimum and maximum limits of the penalty, it is possible for the imprisonment sentence to be converted into a judicial fine, and for a decision of deferment of the pronouncement of the judgment (suspended announcement of judgment – HAGB) as well as a decision to suspend the sentence to be issued.
SUPREME COURT DECISIONS ON THE SUBJECT
“…The judgment acquitting the defendant of the offense of negligent bankruptcy was appealed by the counsel of the participating party, and the file was examined and the matter was considered as follows: In the incident where it is alleged that the defendant caused the bankruptcy of the company by failing to take necessary precautionary measures, failing to fulfill his responsibilities in a timely manner, failing to take preventive measures, and failing to keep certain statutory books, it is noted that in limited liability companies, the perpetrator of a negligent bankruptcy offense committed within the scope of the company can only be the managers authorized to represent the company. Since the companies subject to bankruptcy were limited liability companies and the authorized person was the defendant’s spouse, who had died on 23/01/2008, and since the defendant was not the authorized manager of the bankrupt companies in which he was a partner, and there was no evidence or concrete fact establishing a causal link between the defendant’s actions and the bankruptcy of the companies, no illegality was found in the acquittal decision rendered by the court, and the view of reversal based on insufficient examination was not shared. Considering the conducted trial, the evidence collected and indicated in the judgment, the conviction and discretion formed by the court in accordance with the results of the proceedings, and the scope of the file examined, the appeals alleging that the crime was proven, that the requests should be accepted, and that the defendant’s defenses were not justified were rejected, and the judgment was UPHELD…” (Court of Cassation, 15th Criminal Chamber, 2016/1302 E., 2016/4735 K., 11.05.2016)
“…In the decision of the 8th Criminal Chamber of the Court of Cassation dated 20.12.2017, numbered 2017/6350 E. and 2017/14626 K., it was held that “…the mere fact that the closing certifications of the relevant commercial books, records, and documents of the debtor have not been carried out is not sufficient on its own to constitute the offense of negligent bankruptcy; the defendant’s conduct of failing to keep commercial books, records, or documents in accordance with the law must have been carried out in a manner that establishes a causal link leading to the bankruptcy of the company, and it is also understood that no expert examination was conducted by the court regarding the defendant’s actions…”, and on these grounds the decision was reversed. In the expert report obtained during the prosecution phase, it was stated in the conclusion that due to the books not being kept in accordance with the law, the elements of the offense of negligent bankruptcy under Article 310/5 of the Enforcement and Bankruptcy Law were fulfilled and that punishment under the Turkish Penal Code was required. However, the expert report did not contain any opinion as to whether the defendant’s conduct of not properly keeping commercial books, records, or documents established a causal link leading to the company’s bankruptcy, nor did the court provide any reasoning in this regard. Although the defendant … was unable to present the general ledger for the year 2008 during the prosecution stage, it was submitted together with the defense counsel’s appeal petition; therefore, it was necessary to determine, without any doubt, whether these acts constituting elements of negligent offenses caused the bankruptcy of the company of which the defendant was the authorized representative, in other words, whether there was an appropriate causal link in the offense of negligent bankruptcy between the fact of bankruptcy and the defendant’s failure to exercise the care and diligence required of a merchant, by means of an expert panel consisting of specialists in commercial law, enforcement and bankruptcy law, and accounting, without resorting to such an examination. Instead, the defendant was convicted of negligent bankruptcy solely on the grounds that the books and documents were not properly kept, which was held to be unlawful. This required reversal, and since the defendant’s counsel’s grounds of appeal were found to be justified, the judgment was REVERSED for the reasons stated…” (Court of Cassation, 2nd Criminal Chamber, 2022/1645 E., 2022/5181 K., 21.03.2022)
“…A bankruptcy decision is an objective condition of punishability, and in order for the defendant to be convicted of the offense of negligent bankruptcy, there must necessarily be a final and binding bankruptcy decision, and a certified copy containing the finalization endorsement enabling judicial review must be included in the case file. In the present case, regarding the bankruptcy decision issued by the Kadıköy 3rd Commercial Court of First Instance on 27/10/2011, case number 20011/547 and decision number 2011/677, concerning …. Aksesuar Sanayi ve Ticaret A.Ş., of which the defendant is the chairman of the board of directors, it was ruled in writing without including the bankruptcy decision in the case file in a manner allowing judicial review, which constitutes a procedural deficiency.
3- Moreover, even under acceptance, since the defendant has no criminal record, it was necessary to evaluate whether a decision of deferment of the pronouncement of the judgment (suspension of the announcement of the judgment – HAGB) could be granted under Article 231/6-b of the Code of Criminal Procedure No. 5271, taking into account his personal characteristics, as well as his behavior and demeanor during the hearing, and the resulting conviction that he would not reoffend.
The judgment is contrary to law, and since the defendant’s counsel’s grounds of appeal were found to be justified, the judgment is hereby REVERSED for these reasons pursuant to Article 321 of the former Code of Criminal Procedure No. 1412, which is applicable under Article 8/1 of Law No. 5320…” (Court of Cassation, 8th Criminal Chamber, 2017/7554 E., 2017/13881 K., 06.12.2017)
“…In accordance with Article 226 of the Enforcement and Bankruptcy Law, the bankruptcy administration, which acts as the legal representative of the bankruptcy estate and is obliged to safeguard its interests and carry out liquidation, has, pursuant to Article 260 of the Code of Criminal Procedure, the right and authority to join the proceedings and to appeal the judgment. In light of this, it was understood that the bankruptcy administration—being a party entitled to legal remedies, having reported the offense against the defendant, not being notified of the hearing date, and having a judgment rendered in its absence, and being a victim of the offense—was also not served with the reasoned judgment. Therefore, it was decided unanimously on 02/06/2020 to serve the reasoned judgment on the bankruptcy administration, and if an appeal is filed, to attach the appeal petition and prepare an additional notice, and then to return the file to ensure a review limited to the appeals, and to transmit it to the Chief Public Prosecutor’s Office of the Court of Cassation…” (Court of Cassation, 17th Criminal Chamber, 2020/4574 E., 2020/4498 K., 02.06.2020)
“…In the concrete case where it is alleged that the defendants … and …, as authorized persons of ….. İnşaat Hırdavat Taşımacılık Elektrik Ticaret Limited Şirketi, committed the offense of negligent bankruptcy by failing to submit the company’s books and documents to the bankruptcy office in due time after the company was declared bankrupt, and thereby failing to act as prudent merchants; upon examination of the case file and the UYAP system, it was determined that during the same period, cases were also filed against the defendants for causing the bankruptcy of the same company based on indictments dated 22.06.2011 (2011/5158 investigation file) and 19.09.2011 (2011/6768 investigation file) issued by the Üsküdar Chief Public Prosecutor’s Office, and that these cases were being heard before the Istanbul Anadolu 6th High Criminal Court under case numbers 2016/305 E. and 2016/354 K. on the charge of fraudulent bankruptcy, and that this case was also subject to appellate review under the Court’s file number 2017/5925 E.
In view of this, in order to prevent double punishment of the defendants, it was necessary to join the cases which are factually and legally connected and to evaluate the evidence together; however, instead of doing so, a judgment was rendered based on incomplete examination, which is contrary to law…” (Court of Cassation, 8th Criminal Chamber, 2017/6320 E., 2017/14623 K., 20.02.2017)
Lawyer. Gökhan AKGÜL & Lawyer Yasemin ERAK
