Law on Pledges over Movable Property in Commercial Transactions No. 6750 is published in the Official Gazette No. 29871 and dated October 28, 2016 and entered into force as of January 1, 2017. Law on Pledges over Movable Property in Commercial Transactions No. 6750 abolished the Commercial Enterprise Pledges Law No. 1447 and dated July 21, 1971 and introduced many new innovations to movable pledges. However, Commercial Enterprise Pledges Law No. 1447 will remain applicable for commercial enterprise pledges that are already established before 1 January 2017.

There are some similar implementations between immovable pledges (mortgages) in the Turkish Civil Code and non-delivery movable pledges in commercial transactions. The main purpose of this law could be stated as to increase the use of non-delivery movable pledge rights as assurance and facilitating the access to sources of financing for the Small Medium Enterprise’s (“SME”)

Under the Commercial Enterprise Pledge Law, a commercial enterprise pledge agreement could only be executed between credit institutions or institutions engaged in credit sales and business enterprise owners.  However, the Law on Pledges over Movables No. 6750, enables a pledge agreement to be executed between: (i) credit institutions and traders, craftsmen, farmers, producer organizations and self-employed individuals and legal entities, as well as between; (ii) tradespeople and/or craftsmen. The parties who are allowed to pledge movables without delivery are:

a) Scope

The Law on Pledges over Movables allows the pledgee to establish a pledge without the need to transfer possession of the asset to the pledge holder over any or all of the following movables assets:

Right of pledge contains the components parts of the movable assets which are aforementioned. It is also possible to establish pledge rights on joined and mixed assets.

b) Required Form and Registration

According to Law No. 6750 the parties should have a contract for establishing the non-delivery movable pledges either in electronic or written form. If the contract is prepared on an electronic platform then the electronic signature shall be securely signed, if it is prepared in writing then the signatures shall be approved by a notary or the parties should sign the contract before the registry authority.

As also stipulated under the Commercial Enterprise Pledge Law, registration of the pledge agreement with the relevant trade registry is a validity requirement under the Law on Pledge over Movables. This registry is titled ‘Pledged Movable Registry’ (TARES). TARES establishes a right of pledge and effectiveness against third parties, determines priority rights amongst the pledgee and ensure public accessibility regarding information on pledges of movable assets.

According to this procedure, the degree system for immovable pledge (mortgages) will be subject to the non-delivery movable pledge as long as it is regulated in the contract. The preferential right will be determined according to the moment of establishment of the pledge however in case of stating degree then the degree system would be taken as basis. This aims to prevent disputes which may arise between creditors during the liquidation process.

c) Sanctions

Finally the Law No. 6750 has introduced additional securities to the pledge holder. In case of any of the following events, the pledger may be penalized in favor of the pledge over with a judicial fine in an amount not exceeding half (50%) of the amount of the secured obligations upon complaint by pledge (right) holder/owner: