21 COMMERCIAL LAW Indemnification An investor invests by relying on the picture drawn by representations and warranties. Therefore, the breach of representations and warranties in share subscription agreement or the fact that they do not reflect the real situation of the company poses a great risk for the investor. In practice, there are sometimes situations where representations and warranties are violated or do not reflect the truth. In principle, representations and warranties used in mergers and acquisitions are a promise of special qualifications in the legal sense that are defined under art. 219 of Turkish Code of Obligations No. 6098 (“TCO”) as “qualities declared by the seller against the buyer”.5The fact that the company does not have the qualifications set forth under representations and warranties is legally defined as a defect, but it is controversial among scholars whether the provisions of the Turkish Code of Obligations on warranty against defects is applied to share subscription agreements. Therefore, the scope of indemnification to be requested by the investor in case of breach of representations and warranties should be designated in detail in the agreement. The indemnification provision may cover only the direct damages of the investor arising from the violation, as well as the indirect damages. In case of more than one founder, whether the founders will be jointly and severally liable for the indemnification obligation is determined in the agreement. Indemnification provisions may be subject to time and monetary limitations. A time limitation is a limitation on the period of time in which the investor must notify the founders after learning the situation giving rise to the indemnification claim. The investor must direct their claim for indemnification to the founders within this period, otherwise they cannot claim indemnification. The monetary limitation is determined by de minimis and basket provisions. A de minimis limitation means that the founders will not be liable to compensate the damages claims of an investor which fall below a certain monetary threshold. Only the claims exceeding the de minimis threshold are accumulated, and the investor cannot make a claim against the founders unless the 5 Esin, İsmail G.: Birleşme ve Devralmalar, On İki Levha Yayıncılık, 2021, p.189.
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