Authors: Sports Law Department, Prof. Dr. Ali Paslı, Assist. Prof. Dr. Nihat Güman, Atty. Mustafa Şahin

Introduction

With the growth of the sports industry, serious problems have arisen in the financial management of clubs and their corporate structures. In order to address these issues, the Law on Sports Clubs and Sports Federations No. 7405 (“Sports Law”) introduced the model of the “sports joint stock company” and established special provisions for the conduct of sporting activities within a commercial and corporate framework. One of the most striking aspects of these regulations is the introduction of financial rules and transaction prohibitions. These prohibitions were enacted to ensure the financial discipline of sports joint stock companies, safeguard the sustainability of clubs, and prevent managers from misusing company resources.

A. The Principle of Budgetary Balance

Article 18 of the Sports Law requires sports joint stock companies to prepare their annual budgets in balance. The principle of budgetary balance obliges clubs to limit their expenditures to the revenues that are foreseen. In other words, the company’s expenses must not exceed the revenue items projected in the budget. This rule aims to prevent budgetary planning based on borrowing independent of income and to avoid the accumulation of unsustainable debt burdens.

The requirement of budgetary balance also carries international importance. While UEFA’s financial fair play regulations mandate that clubs operate under a balanced budget framework, the provisions introduced by the Sports Law facilitate compliance with these criteria at the national level. Budgetary balance is not merely a technical accounting obligation but a fundamental principle guaranteeing the long-term financial independence of clubs and the healthy continuation of sporting competition. In cases of violation, the legal liability of directors comes into play, and administrative sanctions may be imposed by the Ministry of Youth and Sports.

B. Prohibition on Profit and Benefit Transfers

When sports joint stock companies generate profits, the fields in which these profits may be transferred are restricted. According to the law, profits may only be distributed to shareholders as dividends or through bonus share capital increases. Beyond these, it is strictly prohibited to grant direct or indirect benefits to board members, founders, or third parties.

The purpose of this regulation is to prevent sports joint stock companies from being turned into vehicles of personal gain by managers or controlling shareholders. In the past, it was often seen that club presidents or directors used club resources for their own benefit, transferring profits to entities under their control. Such practices undermined the financial stability of clubs, eroded supporter confidence, and deepened internal governance crises.

The prohibition on profit and benefit transfers is also significant from the perspective of corporate governance principles. Ensuring that company resources are directed solely to shareholders and sporting purposes secures the operation of transparency and accountability mechanisms and guarantees the fair use of financial resources.

C. Prohibition on Assignment

One of the most notable restrictions introduced by the Sports Law is the prohibition on sports joint stock companies assigning their receivables and revenues to third parties. The prohibition on assignment particularly prevents the transfer of vital income items such as broadcasting revenues, sponsorship fees, and match revenues to financial institutions.

In past practice, many clubs assigned their future revenues to banks or financial institutions in order to settle current debts. Although this method provided short-term liquidity, it resulted in the continuous blocking of club revenues in the long run, with existing debts consuming incoming resources before new income streams could even materialize. The prohibition on assignment aims to break this cycle, ensuring that revenues remain within the club structure and are directly allocated to sporting activities and infrastructure.

Thanks to this regulation, clubs will be compelled to abandon the habit of mortgaging their future revenues and will instead be required to turn towards more transparent and sustainable financing methods.

D. Prohibition on Borrowing and Lending

The Sports Law also prohibits sports joint stock companies from borrowing or lending at interest. This provision has two aspects. First, clubs are forbidden from borrowing with interest from natural or legal persons. Second, they are prohibited from lending their own resources at interest to third parties.

This regulation is intended in particular to prevent club presidents or directors from becoming “creditor managers” by lending to the club. In the past, it was common for directors to gain influence over clubs by financing them and subsequently holding the position of creditor, upsetting the balance of governance. The prohibition on lending, on the other hand, prevents clubs from directing their financial resources to non-sporting areas. Sports joint stock companies must allocate their available funds exclusively to sporting purposes and company activities.

This prohibition prevents both conflicts of interest and the waste of resources, compelling clubs to operate within a framework of financial discipline.

E. Prohibition on Transactions with the Company

The law further prohibits managers from entering into transactions with the sports joint stock company. Board members or executives may not conduct transactions with the company on their own behalf or on behalf of others. This prohibition resembles the non-compete obligation set out in the Turkish Commercial Code, but it is broader in scope.

The purpose of the prohibition on transactions is to prevent managers from indirectly using company resources for themselves. For example, contracts concluded between a sports joint stock company and another company owned by a board member, or the transfer of club resources to a third party controlled by a director, would constitute violations. Thus, conflicts of interest are avoided, and company resources are directed exclusively towards corporate and sporting purposes.

F. Procedural Aspects of Transaction Prohibitions

The implementation of transaction prohibitions in sports joint stock companies is also regulated by law. In this framework, the Ministry of Youth and Sports is authorized to inspect company books and records, review income-expenditure statements, and request independent audit reports when necessary. Furthermore, the Ministry may audit the financial position of all sports joint stock companies participating in specific leagues through independent audit firms authorized by the Public Oversight, Accounting and Auditing Standards Authority.

In the case of publicly held sports joint stock companies, the provisions of capital markets legislation take precedence. In such cases, violations of transaction prohibitions may lead not only to administrative sanctions but also to criminal liability under capital markets law. Accordingly, procedural regulations on these prohibitions enhance their effectiveness and compel clubs to operate within a framework of discipline.

G. General Evaluation

When considered as a whole, the transaction prohibitions imposed on sports joint stock companies are aimed at ensuring financial discipline and the efficient use of resources. The principle of budgetary balance compels the alignment of revenues and expenditures, while the prohibition on profit and benefit transfers prevents club resources from being diverted to personal interests.

The prohibition on assignment stops clubs from mortgaging future revenues, while the prohibition on borrowing and lending prevents directors from exerting financial pressure. The prohibition on transactions eliminates conflicts of interest, and procedural rules ensure that these prohibitions are subject to oversight.

These rules not only discipline the financial structure of clubs at the national level but also ensure alignment with international financial fair play criteria. In this way, Turkish clubs increase their competitiveness in European football while simultaneously enhancing supporter trust and corporate transparency.

Conclusion

Transaction prohibitions in sports joint stock companies are indispensable regulations for safeguarding the financial future of Turkish sports. Through these prohibitions, clubs will move away from borrowing habits detached from income, directors will be prevented from using club resources for personal gain, and financial discipline and transparency will be secured.

However, for these prohibitions not to remain merely on paper, an effective oversight mechanism is essential. The regular audits of the Ministry of Youth and Sports, the transparency demands of federations, and the enforcement powers of capital markets institutions will determine the practical effectiveness of transaction prohibitions. Ultimately, these prohibitions are not merely a set of financial rules but a strategic framework ensuring that Turkish sports progresses toward a sustainable future within an environment of fair competition.