Brief Information Regarding the Law on Pledge of Movables In Commercial Transactions
The Law on Pledge of Movables in Commercial Transactions (“Law”) numbered 6750 was published in the Turkish Official Gazette on September 28, 2016 and will enter into force on January 1, 2017. This Law, upon entry into force, will repeal the Commercial Enterprise Pledge Law dated July 21, 1971 and numbered 1447. Brief information regarding the Law is as follows:
– The Law aims to facilitate access of enterprises (particularly small and medium sized enterprises) to financing and to establish alternate securities for such enterprises.
– By this Law, a Movables Pledge Registry (“Pledge Registry”) will be established and pledges on movables will become valid, effective and enforceable against third parties when all pledge agreements executed between the respective parties are registered at the Pledge Registry.
– Agreement on pledge of movables may be executed by and between:
- Financial institutions, on the one hand, and merchants, tradesmen, farmers, producer organizations, self-employed real persons and legal entities, on the other, and/or
- Merchants and/or tradesmen.
The definition of merchant shall be as set forth under articles 12/I-II and 16 of the Turkish Commercial Code.
– Within the scope of this Law, execution of pledge agreements and transactions that are registered at the Pledge Registry are exempt from taxes, duties, charges and similar expenses.
– Movables to be pledged as per the Law are listed as numerus clausus in the following way:
|* Receivables |
* Trees that grows fruits for multiple years
* Rights subject to intellectual and industrial property
* Raw materials and animals
* All kinds of income and earnings
|* Movable equipment such as machines and appliances, tools, instruments, heavy machinery, all kinds of electronic devices including communication devices |
* Commercial title and/or enterprise name
|* All kinds of licenses and certificates, whose registration with another registry is not regulated and which are not deemed as administrative permission certificate |
* Consumable materials and stocks
* Agricultural products
|* Commercial enterprise and tradesman enterprise |
* Commercial plate or commercial route
* Commercial project and wagons * Rent incomes and right to rent
– Pledge may also be established on inexistent movables or the prospective movable assets as well as their proceeds that are not under the possession of pledgors as of the execution date of pledge agreement.
– In case the debtor pays its debt; the Law obliges the pledgee to revoke the pledge record on the respective movable at the Pledge Registry within three business days as of the date of such payment. In case of breach, the pledgee shall be obliged to pay an administrative fine equal to one-tenth of the secured pledge amount. If the pledgee does not apply for the revocation within the given time, the debtor, who paid the debt and evidenced such payment, may request the removal of the pledge from the Pledge Registry.
– The Law imposes certain responsibilities to pledgor or the assignee that acquires the pledged movable. Within this scope, in the event of;
a. use of the pledged movable in contradiction with the provisions of the Law,
b. failure to transfer of the title to the pledged movable if debt is not paid,
c. damaging or destruction of the pledged movable with the intention to cause damage to the pledgee,
d. non-registration of the transfer of pledged movable and transfer of receivables with the Pledge Registry,
e. acting in order to mislead the Pledge Registry,
upon the complaint of the pledgee who is not able to collect his/her receivables; punitive fine up to the half of the secured debt amount will apply.
– Even though the Law provides specific provisions for the pledge of movables, implementation of certain provisions thereof will be clarified through the issuance of the regulations in accordance with the Law.