Lending and taking security in Turkey: overview

A Q&A guide to lending and taking security in Turkey. The Q&A gives a high level overview of the lending market, forms of security over assets, special purpose vehicles in secured lending, quasi-security and guarantees. It covers creation and registration requirements for security interests; problem assets over which security is difficult to grant; risk areas for lenders; structuring the priority of debt; debt trading and transfer mechanisms; agent and trust concepts; enforcement of security interests and borrower insolvency; cross-border issues on loans; taxes; and proposals for reform.

To compare answers across multiple jurisdictions, visit the Lending and taking security in country Q&A tool.

This article is part of the global guide to finance. For a full list of contents visit www.practicallaw.com/finance-guide.

Arpat Şenocak, Nilay Çelebi, Ece Çakırel, and İklim Gülsün Kelekçi, Özdirekcan Dündar Şenocak Attorney Partnership (in association with Gide Loyrette Nouel in Turkey)

Overview of the lending market

1. What have been the main trends and important developments in the lending market in your jurisdiction in the last 12 months?

Turkish economic growth has been facing a relative slowdown over the past months, mainly caused by:

  • Continuing geopolitical turmoil affecting the region.

  • A series of political elections in Turkey.

  • The absence of certain key structural reforms still expected by the markets.

Combined with currency volatility and recently adopted austerity measures, these factors seem to have affected the appetite of foreign investors, especially in the financing sector. However, the low saving rate and a declining loan-to-deposit ratio have also increased the banking sector's dependency on foreign financing. In addition, a change in international financial institutions' investment strategies, with a recent stronger focus put on Turkey, has contributed to a significant increase in foreign inward investment, spread over a wide range of projects.

Leasing, factoring and financing companies have also gained important momentum in the Turkish economy. Several factors have enabled leasing companies' growth, including:

  • Major bridge, highway and subway construction projects.

  • A decrease in VAT from 18% to 1%.

  • An increase in the share of sale and leaseback transactions from 2012.

Factoring companies have faced difficulties arising from non-performing loans, decreasing profit and new minimum capital requirements. These have led 12 companies to lose their licences in 2015. However, the remaining 64 companies are still expected to grow in 2016, taking into consideration the size and potential of the market.

While leasing companies currently have the highest market share in the sector, financing companies are expected to take the lead, with their trading size reaching TRY94 billion in 2015. Recent changes to the Banking Regulation and Supervision Agency legislation affecting the calculation of financial companies' equity is also expected to support this growth.

Public-private partnership project financing has also seen continued development. The adoption of the public-private partnership law and regulations in the healthcare sector in particular, have formed a strong basis for the bankability and development of these projects on the Turkish market.


Forms of security over assets

Real estate

2. What is considered real estate in your jurisdiction? What are the most common forms of security granted over it? How are they created and perfected (that is, made valid and enforceable)?

Real estate

Real estate or immovable property is defined as a property that cannot be transported or physically moved without causing damage to the nature of that property. It includes:

  • Land.

  • Independent and continuous rights, which are registered on a separate sheet with the title deed registry.

  • Independent sections/apartments, which are registered with the Commonhold Registry.

Common forms of security

Under the Turkish Civil Code, a security over a real estate can only be established in the form of either a:

  • Mortgage (ipotek).

  • Mortgage bond (ipotekliborçsenedi).

  • Land charge note (iratsenedi).

Among these, the mortgage is the most common security established over immovable property.

Mortgages can be either:

  • Principal amount or maximum amount mortgages (according to the amount of security).

  • Voluntary or legal mortgages (according to the source/legal basis of the mortgage).

Certain forms of mortgages, such as mortgages over aircraft and sea vessels, are regulated under several specific regulations and require different perfections and formalities.


Establishment of a mortgage over an immovable property requires the:

  • Execution of a mortgage deed (resmisenet) before the relevant title deed registry office where the immovable property is located.

  • Registration of the mortgage at the title deed registry office, on the application of the mortgagee or the mortgagor.

  • Statement of the principal (and interest) amount in the mortgage deed. If the amount cannot be determined at the time of the mortgage, a maximum amount must be stated.

Tangible movable property

3. What is considered tangible movable property in your jurisdiction? What are the most common forms of security granted over it? How are they created and perfected?

Tangible movable property

Tangible movable property includes:

  • Property that can be physically moved without causing damage to its nature.

  • Natural resources that are subject to legal ownership and that are not deemed to be immovable property (such as electricity, gas and steam).

Common forms of security

The most common form of security interest to be granted over movables under Turkish law is the pledge, including:

  • Pledges of shares.

  • Bank account pledges.

  • Commercial enterprise pledges.

  • Pledges on rights and receivables.


Transfer of physical possession of movable property to the pledgee or a reliable third party is the only requirement for the perfection of the pledge, except in the following specific cases:

  • The Commercial Enterprise Pledge Law does not require a physical transfer but instead provides for specific procedural requirements, such as a written form for the agreement, and notarisation and registration of the commercial enterprise pledge with a trade registry. A commercial enterprise pledge does not cover the real property where the commercial enterprise is located but does include the relevant commercial enterprise's:

    • trade name;

    • machinery, equipment, tools and so on allocated to the operation (a list is made as an attachment to the agreement);

    • intellectual property rights.

  • Pledges of motor vehicles and trade marks and so on require a written agreement and registration of the pledge with the relevant authorities.

  • For the pledge of shares of a joint stock company, perfection requires:

    • a blank or pledge endorsement to be made on the back of registered share certificates;

    • delivery of these certificate to the pledgee or a reliable third party.

A written share pledge agreement must also be executed between the pledgor and the pledgee, and the pledge must be recorded in the share ledger of the company. A pledge of limited liability company shares requires the share pledge agreement to be made before a notary public (see Question 4).

  • A written agreement is required for the perfection of pledges over rights and receivables.

Any agreement stating that the pledged property (movable or immovable) would become the absolute property of the pledgee in the event of a default by the pledgor is null and void under general principles of Turkish Law (no lex commissoria).

Financial instruments

4. What are the most common types of financial instrument over which security is granted in your jurisdiction? What are the most common forms of security granted over those instruments? How are they created and perfected?

Financial instruments

Financial instruments are tradable assets (certificated or dematerialised) that can be transferred through money markets or capital markets. The most common types of financial instrument over which security is granted are shares, especially company shares and debt securities.

Common forms of security

In practice, the most common form of security which is granted over financial instruments is the pledge.


It is possible to establish a pledge on company shares in two main ways:

  • Bearer shares can be pledged by transferring the possession of the shares to the pledgee without requiring an endorsement.

  • Registered shares must be endorsed in blank or a pledge endorsement made and the share certificates must be delivered to the pledgee or a third party. A separate pledge agreement must be executed in writing between the pledgor and the pledgee and the pledge must be recorded in the share ledger of the company. A pledge must also be approved by the board of directors of the company if the articles of association of the company requires this.

To create a pledge on dematerialised shares of a listed company, the pledge must be notified to and recorded with the Central Securities Depository of Turkey (MerkeziKayıtKuruluşu) where the shares are registered.

To create a pledge on the shares of a limited liability company, the share pledge agreement must be executed before a notary public.

Any agreement stating that the pledged property would become the absolute property of the pledgee in the event of a default by the pledgor is null and void under general principles of Turkish Law (no lexcommissoria).

Claims and receivables

5. What are the most common types of claims and receivables over which security is granted in your jurisdiction? What are the most common forms of security granted over claims and receivables? How are they created and perfected?

Claims and receivables

In principle, receivables (either existing or to be accrued in the future) can be assigned, and all rights and debts related to the receivables transferred to the assignee.

Under Article 191 of the Turkish Code of Obligations, the assignor is deemed to guarantee the obligations of the debtor and the existence of the receivables. This guarantee covers:

  • The consideration paid and all accrued interest.

  • Costs arising from the assignment.

  • Costs arising from the legal procedures.

  • Other expenses, unless the assignor can prove that they were not due to its fault.

Common forms of security

The most common form of security granted over claims and receivables is the assignment of receivables.


To establish a valid assignment of receivables, an assignment agreement must:

  • Be executed in writing.

  • Include the terms and conditions for the assigned receivables.

  • Specifically determine the assigned receivables.

In principle, the assignment of receivables agreement is executed mutually between the assignor and the assignee. In transactions where the assignee is a bank, a notarised agreement is generally requested.

The debtor's consent is not required. However, in practice, the parties notify the debtor and obtain its acknowledgement in writing for evidentiary purposes. If the debtor has no knowledge of an assignment, it is released from its obligations if it makes a bona fide payment to the assignor.

Cash deposits

6. What are the most common forms of security over cash deposits? How are they created and perfected?

Common forms of security

The most common form of security over cash deposits is the pledge over bank accounts.


The Turkish Civil Code gives the following requirements for establishing a pledge over bank accounts:

  • The pledge agreement must be in writing.

  • The bank holding the account must be notified. This requirement is not for the perfection of the pledge but for the admissibility of the pledge by the banks.

There are no further requirements, such as notarisation or registration of the pledge with the authorities. The use of the pledged bank account may be limited or blocked by the account bank, depending on the agreement executed by the parties.

Intellectual property

7. What are the most common types of intellectual property over which security is granted in your jurisdiction? What are the most common forms of security granted over intellectual property? How are they created and perfected?

Intellectual property

The most common intellectual property rights over which security are granted are trademarks and copyrights.

Common forms of security

The most common form of security to be established over intellectual property rights is the pledge.


The valid establishment of a pledge on an intellectual property right requires a pledge agreement to be concluded in writing before a notary public. The registration of the pledge before the Turkish Patent Institution is not a validity requirement but it has a notice effect for third parties, and therefore the pledge on the intellectual property can be registered on the request of either party.

Intellectual property rights may also be pledged within the context of a commercial enterprise pledge (see Question 3).

Problem assets

8. Are there types of assets over which security cannot be granted or can only be granted with difficulty? Which assets are difficult or problematic when security is granted over them?

Future assets

Security can be granted over assets, provided that the assets are determinable. Therefore, future assets can be pledged only to the extent they are determinable.

Fungible assets

Because of their indistinguishable nature, fungible assets are not eligible as security instruments. However, if it is possible to segregate the relevant asset so that it becomes determinable, it can be used as a security.

Other assets

The grant of security over several other assets and rights can be problematic due to additional requirements. For instance:

  • Trade mark licence rights are not transferable as a matter of principle. As a consequence, these rights cannot be subject to a pledge, unless the agreement explicitly allows the parties to transfer the rights.

  • Pledges over shares or rights attached to licences of companies operating in certain regulated sectors (such as energy) may be subject to the approval of the relevant regulatory authority.

  • Assets subject to prohibitions under certain contractual relationships, such as assets transferred under a concession agreement to a company, cannot be pledged or granted as security without the consent of the administration granting the concession.


Release of security over assets

9. How are common forms of security released? Are any formalities required?

The release processes applicable to securities depends on the specific type/form of the security. The following formalities must be taken into consideration:

  • Bank account pledge. There is no specific formality requirement for the release of a bank account pledge, and the parties are free to agree on a release mechanism. In practice, at the request of the pledgor, the pledgee must deliver a release letter to the pledgor and the pledgor must notify the relevant bank that the pledgee has accepted the release of the relevant bank account.

  • Assignment of receivables. A release agreement must be concluded in writing between the assignee and the assignor. In practice, the debtor is notified of the release.

  • Mortgage. After obtaining a release letter from the mortgagee/pledgee, the release of mortgage must be requested in writing from the relevant title deed authority where the mortgage was recorded.

  • Share pledge. In joint stock companies, share certificates must be physically returned by the pledgee to the pledgor, and the pledge must be removed or cancelled from the share ledger. For limited company shares, which do not have to be materialised in the form of certificates, a written and notarised release agreement must be concluded between the pledgor and the pledgee.

  • Commercial enterprise pledge. The pledge must be released by the relevant trade registry officer:

    • on the pledgee's written consent, with its notarised signature;

    • on a ruling of the non-existence, or end, of the pledge in a court decision; or

    • by a petition of the commercial enterprise owner after completion of foreclosure.


Special purpose vehicles (SPVs) in secured lending

10. Is it common in your jurisdiction to take security over the shares of an SPV set up to hold certain of the borrower's assets, rather than to take direct security over those assets?

In practice, and in particular in project financing (such as projects under concessions, public-private projects, and so on), it is common to establish securities over the shares of an SPV established only for the purpose of the project. If the borrower is the shareholder of that SPV, a security can be established over its shares within the SPV.



11. What types of quasi-security structures are common in your jurisdiction? Is there a risk of such structures being recharacterised as a security interest?

Sale and leaseback

The sale and leaseback is one of the methods used in financial lease agreements. In practice, immovable property, machinery and construction equipment are the assets most frequently subject to this type of financial leasing method.


Factoring, as an instrument which enables companies to transform their receivables into cash, is a commonly used financing method. Factoring agreements must be executed in writing and the validity conditions are set out by Financial Leasing, Factoring and Financing Companies Law.

Hire purchase

Hire purchase transactions are not specifically regulated. However, simple sale contracts with instalment payment options and financial lease agreements can be arranged under the Financial Leasing, Factoring and Financing Companies Law.

In sale contracts with instalment payment options, although the buyer pays the price in several instalments, the property is delivered to the buyer without awaiting the completion of the instalment payments.

In financial leasing transactions, the financial leasing company owns the property (immovable or movable) and leases it to the lessee. In practice, the lessee, owning all usage rights over the property, has the right to purchase the property at the end of the lease term. Financial leasing is generally considered to favour lenders, since it enables the lenders to retain title over the property.

Retention of title

It is possible for the owner of a movable property to transfer it to a third party by retaining its ownership through an agreement with the transferee. This type of transaction is used as security when giving non-cash credits, such as sale agreements with deferred payments. It requires the notary public located at the transferee's place of residence to notarise the relevant documents, and registration with the relevant registry of the sale and the retention of title. Failure to satisfy these perfection requirements results in the retention of title being null and void.

Other quasi-securities

Netting and set-off mechanisms, as well as indemnities and comfort letters or bank letters of credit, are also allowed under Turkish law and can be used as quasi-security.



12. Are guarantees commonly used in your jurisdiction? How are they created?

Two types of security contracts can be concluded between a creditor and a third party providing security:

  • Surety contracts. These are concluded between the debtor, the creditor and the surety provider, and are dependent on the principal debt. In a surety relationship, the creditor first solicits the debtor and, if the creditor cannot be satisfied, it then solicits the surety provider for the collection of the receivables (which constitutes a prior requirement for the surety providers' debt to become due and payable). Surety contracts must specify:

    • the maximum surety amount that the surety provider is liable for;

    • the nature of the surety, as either a joint or several liability surety;

    • the date of execution of the contract, which must be hand-written by the surety provider.

  • Guarantee contracts. Unlike surety contracts, guarantee contracts are concluded only between the guarantor and the creditor, independently from the main relationship existing between the debtor and the creditor. The creditor can assert a claim towards the guarantor without needing to first claim its receivable from the debtor, provided that the claimed receivable has become payable under the main contract and the debtor is in default. Guarantee contracts are not subject to any form requirements. However, under Article 603 of the Code of Obligations, if the guarantor is a real person, then the surety requirements apply. Therefore, a written agreement must be made for an individual guarantor stating:

    • the maximum amount of the guarantee, in handwriting;

    • the nature of the guarantee (joint or several); and

    • the date of execution of the guarantee.In addition, written consent of the surety provider/individual guarantor's spouse must be obtained. However, that consent is not required if the security is provided:

    • by the shareholder or manager of a business or company registered with the Trade Registry; and

    • in relation to the business or company.


Risk areas for lenders

13. Do any laws affect the validity of a loan, security or guarantee (or the terms on which they are made or agreed)?

Financial assistance

Financial assistance is restricted under several provisions of the Turkish Commercial Code, which provides that a company cannot lend money, grant securities or pay advance to a third person for the acquisition of its own shares. Transactions concluded in breach of this rule are deemed null and void, regardless of whether they result in financial damage for the company.

Corporate benefit

The Commercial Code does not provide for specific rules regarding corporate benefits. However, members of the board of directors of a company have a contractual (mandate) liability to act with reasonable care and loyalty while carrying out their duty. In case of breach, board members can be held liable towards the company, its shareholders and its creditors for breach of contract.

Loans to directors and shareholders

Under the Commercial Code, board members who are not shareholders of a company and their relatives cannot obtain a loan from the company and their relatives cannot grant any security or guarantee, or take over any liability or obligation for board members.

As far as shareholders are concerned (including board members holding shares of the company), these transactions can be performed under arm's length conditions, if capital subscriptions of said shareholders have been paid and the company's current profit is sufficient to cover previous losses.


The Code of Obligations sets out certain limitations on interest rates. However, parties to a commercial transaction are not subject to these limitations and are therefore allowed to agree freely on an interest rate. The Commercial Code provides for two exceptions:

  • Compound interest can only be applied for money lending agreements and open accounts.

  • All provisions for the protection of the consumers are reserved.

14. Can a lender be liable under environmental laws for the actions of a borrower, security provider or guarantor?

Persons whose actions contravene environmental laws and regulations are liable for those actions. The grant of a loan or enforcement of a security or guarantee alone would not trigger or incur any liability. However, in practice, most loan documentation contains environmental compliance-related provisions.


Structuring the priority of debts

15. What methods of subordination are there?

Contractual subordination

Contractual subordination can be created between the parties by providing contractual undertakings such as non-collection of the receivables or establishing rankings for debts and securities, unless the public order provisions provide otherwise. For instance, on the debtor's bankruptcy, the mandatory ranking set out under the Execution and Bankruptcy Law applies (see Question 24). In addition, if the loan is secured by a mortgage over an immovable property, that mortgage right must be claimed primarily.

Structural subordination

As long as the public order provisions arising from the Execution and Bankruptcy Law, among others, are complied with, structural subordination whereby senior debts are prioritised as against subordinated debts can be implemented in Turkish financial transactions.

Inter-creditor arrangements

In general, inter-creditor agreements are concluded in syndicated loans and are commonly seen in leveraged finance transactions in Turkey.

The parties to inter-creditor agreements are generally the creditors (primary, intra-group lenders and subordinated lenders) and agents/trustees.

Key terms in the inter-creditor agreements usually focus on:

  • Restrictions (such as on taking further securities, and amendment and payment restrictions).

  • Equalisation in case of experiencing uneven recourse against debtors.

  • Debt purchase transactions.

  • Information sharing and co-operation among creditors.


Debt trading and transfer mechanisms

16. Is debt traded in your jurisdiction and what transfer mechanisms are used? How do buyers ensure that they obtain the benefit of the security and guarantees associated with the transferred debt?

Debt can be traded under Turkish law through the following main mechanisms:

  • Assignment of the receivable. The subject of the agreement must be determinable and assignable. The agreement must be concluded in writing.

  • Assumption of the debt. For validity, the creditor must consent to the change. All granted securities related to the debt remain valid if the grantors give their written consent to the assumption of the debt. Under a similar provision, participation in the debt is also possible if the participant is severally liable together with the debtor.


Agent and trust concepts

17. Is the agent concept (such as a facility agent under a syndicated loan) recognised in your jurisdiction?

There is no specific concept of an agent under Turkish law. However, agents and trustees are often used in syndicated loan transactions in Turkey. According to the conflict of law provisions of the International Private and Civil Procedure Law, any contract or document empowering an agent is subject to the laws and procedures of that agent's home jurisdiction. Therefore, validity of the agent's contractual rights would primarily be subject to the provisions of the foreign law governing that contract (unless conflicting with Turkish public order/policy rules).

18. Is the trust concept recognised in your jurisdiction?

The considerations in relation to the agency concept also apply to the trust concept (see Question 17).


Enforcement of security interests and borrower insolvency

19. What are the circumstances in which a lender can enforce its loan, guarantee or security interest? What requirements must the lender comply with?

Enforcement of a loan, guarantee or security interest is subject to the following main conditions:

  • A valid and effective contract.

  • Existence of a due and payable debt (including as a result of occurrence of an event of default).

  • No waiver of the lender from its contractual rights.

Events of default can be freely agreed between the parties. In the absence of such an agreement, the general provisions of the Code of Obligations require the lender to serve a default notice to the debtor and give a reasonable time period for the payment and/or due performance of its obligations. Default is deemed to have occurred at the lapse of that period.

Methods of enforcement

20. How are the main types of security interest usually enforced? What requirements must a lender comply with?

The Enforcement and Bankruptcy Law provides for two separate proceedings for the enforcement of security interests:

  • Execution proceeding without judgment. The lender can apply to the execution office along with the documents proving the existence of its receivables. On application, the execution officer must send a notice to the borrower ordering the payment within seven days following receipt of the payment order, to which the borrower can object to either:

    • the signature on the document;

    • the debt; or

    • the capacity of the creditor.

If no objection is made, the borrower must declare its property to the execution office. Failure to declare his property or misleading information can be punished with imprisonment, and failure of payment renders the execution final. If the security interest is based on a bill of exchange, the executive officer examines:

  • the nature of the bill;

  • the capacity of the lender to pursue execution proceedings; and

  • the expiry of the bill.

It then sends a payment order to the borrower, to be paid within ten days following receipt.

All objections must be made within five days following receipt by the execution court. In the absence of an objection, the execution becomes final following the ten-day payment period.

  • Execution proceeding with judgment. This procedure is necessary for receivables other than cash or security interests, but can also be applied to them. The lender can apply to the execution office with a decision given by the competent court, or a document with similar legal effect, such as:

    • a compromise certificate given by the court:

    • withdrawal or acknowledgement in court;

    • notary public certificates proving unconditional and absolute acknowledgement of a cash debt;

    • letters of guarantee in appeal or cassation;

    • letters of guarantee given by execution offices; and

    • similar documents under other regulations.

Following the application of the lender, the execution officer sends an execution order to the borrower requesting the payment within seven days following receipt of the order. The execution then becomes final unless the borrower pays the debt or requests a stay of execution for reason of:

  • expiration of the debt;

  • grant of respite; or

  • prescription of the debt.

Rescue, reorganisation and insolvency

21. Are company rescue or reorganisation procedures (outside of insolvency proceedings) available in your jurisdiction? How do they affect a lender's rights to enforce its loan, guarantee or security?

Composition agreement (Concordato). This is an arrangement to protect a financially struggling debtor company, which aims at finding a settlement with its creditors. If the debtor is not able to pay all of its debts to its creditors, the debtor can opt to enter into a composition agreement. Following the fulfilment of the composition agreement the debtor can be partially or temporarily released from its debts. There are three main types of composition agreement under the Execution and Bankruptcy Law:

  • Regular composition agreements.

  • Composition agreements during a bankruptcy procedure.

  • Composition agreement by way of abandonment of assets.

Restructuring of corporations via reconciliation. This is another arrangement through which a debtor company can apply for restructuring when:

  • It is not able to pay its due debts.

  • Its assets and receivables are not sufficient to cover its liabilities.

  • There is an imminent risk of occurrence of one of those conditions.

Although the Enforcement and Bankruptcy Law enables debtor companies that are not able to pay all of their debts to initiate a restructuring process via reconciliation, there is no established practice regarding the implementation of this procedure and, based on publicly available information, only one application has been made for the restructuring process via reconciliation, and one for the composition agreement.

Postponement of bankruptcy. A creditor can request the postponement of bankruptcy by presenting to the court a financial improvement project pointing out the objective and actual sources and measures, including a new capital contribution in cash. A financial improvement project usually outlines specific ways for the debtor to improve its revenue or cut its costs.

Under Article 179 of the Enforcement and Bankruptcy Law, if the court determines that a company's financial improvement project is serious and convincing, it can appoint an administrator (with full or limited powers) and postpone bankruptcy for up to one year (in exceptional cases, courts can grant additional yearly extensions up to three times). The court can also issue any orders which it deems necessary to protect the assets of the bankrupt company.

On the postponement of bankruptcy, no collection proceedings can be filed against the company and any proceedings previously initiated are suspended. However, proceedings for claims secured with pledges on movable or immovable property, or commercial enterprises, can still be initiated or continued during the postponement period, although pledged property cannot be sold and repossession measures cannot be taken (unless allowed by the court at its discretion).

22. How does the start of insolvency procedures affect a lender's rights to enforce its loan, guarantee or security?

Once a bankruptcy judgment is ordered by the court, all receivables secured by movable assets become due and payable, save for assets secured by immovable securities. However, interest continues to accrue on the receivables. The bankruptcy judgment creates a bankruptcy estate (iflâs masası), composed of all of the assets of the bankrupt company that are amenable to execution, wherever located, inside or outside Turkey, and including but not limited to:

  • Any movable or immovable properties, receivables, cash or deposited monies.

  • Usufruct rights and other limited real rights.

  • Copyrights and other intellectual property rights.

The bankruptcy estate also includes:

  • The pledged properties of the bankrupt company (excluding pledged properties of third parties).

  • The seized properties of the bankrupt company.

On announcement of the bankruptcy judgment (in a newspaper and/or trade registry gazette as applicable), the lender must apply to the bankruptcy office within one month from the announcement to record its receivables in the bankruptcy ledger. This application can be made verbally or in written form, and must state:

  • The amount of the claim (including interest, if any).

  • Whether the receivable is secured or privileged.

  • The address of the lender to be informed of the decisions to be taken by the board of trustees.

Further to applications made by the lender and other creditors, the board of trustees established by the execution office (iflâsidaresi) resolves claims with regard to:

  • Receivables of the creditors recorded in the bankruptcy ledger.

  • Ownership rights of third parties of the assets included within the bankruptcy estate.

The board of trustees prepares a schedule detailing the receivables of creditors and the ranking of the receivables, and then announces that schedule. The announcement of bankruptcy judgment ends all pending enforcements against the borrower.

In surety contracts (see Question 12), the creditor can request the fulfilment of its obligation from the surety provider without prior request from the debtor if the debtor faces insolvency. If so, even though the liability of the surety starts from insolvency, that liability is limited by the statute of limitation applicable to the secured debt (that is, no new prescription period will start), provided that the surety was granted without any time limitation under the relevant security contract.

As the guarantee is independent from the main contractual relationship between the creditor and the borrower, the creditor can in any case directly assert a claim towards the guarantor without needing to claim its receivable first from the borrower, should the main debt become payable. In case of bankruptcy of the borrower, the entire amount of the outstanding loan becomes payable and the guarantor is liable for the entire debt. In any case, the statute of limitation applicable to the liability of the guarantor is deemed separate from the one applicable to the borrower's debt.

23. What transactions involving loans, guarantees, or security interests can be made void if the borrower, guarantor or security provider becomes insolvent?

The following transactions made during the year preceding the date of insolvency can be made void:

  • Issuance of new pledges to secure an already existing debt, where the debtor has not previously undertaken to pay security interest.

  • Debt payments which are not made in cash or made through unusual methods.

  • Payments for undue debts.

  • Annotations in the register of title deeds strengthening private rights.

In addition, the following transactions can be challenged for invalidity:

  • Transactions between lineal kinship, foster children or affinity up to third degree.

  • Transactions of gratuitous nature (such as gifts, or sales with extremely low prices).

  • Lifelong support agreements with third persons performed within two years before the bankruptcy of the company.

If the insolvent debtor makes transactions with the intention of harming its creditors, those transactions are subject to cancellation within five years following performance of the transaction, provided that the creditor of the relevant transaction already had knowledge, or should have knowledge of the intention and the financial condition of the debtor.

24. In what order are creditors paid on the borrower's insolvency?

Under the Enforcement and Bankruptcy Law, debts arising from the expenses of the bankrupt estate administration are privileged over all other debts.

Taxes arising from the assets of the bankrupt company are privileged and the relevant tax authorities have priority up to the value of the relevant asset.

In third place, secured receivables are also privileged, and the relevant creditors have priority up to the value of the collateral securing those receivables, provided that the tax claims arising from the kind of the collateral have been paid to the relevant public authorities. The Turkish Civil Code determines the rank of security interests over the same asset, according to the establishment date of the securities.

Being raised to an emptied higher rank is not possible, and the lower rank does not receive any payment until receivables of the higher rank are fully satisfied. If the liquidation sum is insufficient to fully pay a rank of receivables, they are paid pro rata.

Unsecured receivables are ranked as follows:

  • First rank:

    • employee receivables incurred within one year prior to the bankruptcy judgment and statutory severance pay related to seniority and termination without sufficient notice arising as a result of the termination of the employment relationship due to the bankruptcy;

    • debts due to employee-related funds or charitable organisations;

    • receivables arising from child support.

  • Second rank: Receivables of individuals whose property has been left to the administration of a guardian or tutor and incurred from the guardianship or tutorship relationship.

  • Third rank: Receivables privileged by specific laws. Tax and other public claims which do not arise on assets are put into this third rank (tax on corporate income, tax on value increment, withholding tax, and so on).

  • Fourth rank: All other receivables that are not privileged.


Cross-border issues on loans

25. Are there restrictions on the making of loans by foreign lenders or granting security (over all forms of property) or guarantees to foreign lenders?

There is no restriction on granting security over property in favour of foreign lenders. However, enforcement would be subject to compliance with conflict of law rules applicable to the type of security. Turkish entities can obtain loans from foreign lenders provided this is through the intermediation of banks incorporated and licensed in Turkey. However, this is not possible in certain specific cases such as where the loan is extended for business abroad or is used abroad, or is obtained from export credit institutions or within the scope of an export credit guarantee, and is paid directly to the exporting company.

26. Are there exchange controls that restrict payments to a foreign lender under a security document, guarantee or loan agreement?

There are no restrictions or controls on currency exchanges. Therefore, borrowers can transfer foreign currency abroad through banks and/or financial institutions established in Turkey. Turkish banks must notify the Turkish Republic Central Bank within 30 days for any foreign currency transfer equal to or exceeding the equivalent of US$50,000 (except export, import and invisible transactions).


Taxes and fees on loans, guarantees and security interests

27. Are taxes or fees paid on the granting and enforcement of a loan, guarantee or security interest?

Documentary taxes

Contracts are in principle subject to a stamp duty of 0.948% on the contractual value. However, loan agreements and related security documents concluded with banks and other financial institutions are normally exempted from stamp duty.

Under Circular No. 1 of the Revenues Administration, the Resource Utilisation Support Fund (RUSF) rate applicable to Turkish currency facilities made available to Turkish resident companies by foreign banking and finance institutions is 3%. However, RUSF does not apply if the average maturity of a loan in foreign currency agreement exceeds three years. If the maturity is less than three years, the applicable rates are as follows:

  • 3% for loans less than one year.

  • 1% for loans from one year to less than two years.

  • 0.5% for loans from two years to three years.

No RUSF applies to extended loans for Turkish banks and financial institutions.

Registration fees

Registrations on a title deed are subject to a fee of 0.455% of the debt amount. However, under the Law on Fees, transactions such as payment or security granting in relation to loans obtained by Turkish companies from banks, foreign credit institutions and international institutions are exempted from these fees.

Notaries' fees

In principle, certification of loan contracts before a notary public is not required. If nevertheless requested by the parties, certification generates a fee of 0.113% of the contractual amount for each original signature. However, under the provisions of the Law on Fees, transactions such as payment or security granting in relation to loans obtained by Turkish companies from banks, foreign credit institutions and international institutions are exempted from these fees.

28. Are there strategies to minimise the costs of taxes and fees on the granting and enforcement of a loan, guarantee or security interest?

To minimise the application of the Resource Utilisation Support Fund, the loan must be granted either from a foreign bank or a financial institution, in a foreign currency and the term of the loan must exceed three years (see Question 27).



29. Are there any proposals for reform?

The main regulatory changes expected to affect lending transactions in the short and/or medium term include the:

  • Draft Law on Income Tax Law, which aims to gather legislation relating to Corporate Tax law and Income Tax law in one code, setting forth substantial changes and incentives.

  • Draft Amending the Regulation on Incorporation and Activity Principles of Financial Leasing, Factoring and Financing Companies, which authorises independent auditors instead of public accountants to approve reports submitted to the Banking Regulation and Supervision Agency (BRSA).

  • Draft Amending the Communiqué on Debt Instruments, which intends to increase compliance with international standards. This draft introduces a variety of changes concerning both domestic and cross-border issuances.


Online resources

General Directorate of Legislation Development and Publication

W www.mevzuat.gov.tr

Description. An official website that contains all pieces of legislation such as laws, regulations and directives (both past and current versions).

Banking Regulation and Supervision Agency (BRSA) (Bankacılık Düzenleme ve Denetleme Kurulu)

W www.bddk.org.tr

Description. This website is the official website of the BRSA and provides laws and regulations that the BRSA has issued and published, together with announcements, reports and statistics. The website provides some of the legislation in the English language.

Capital Markets Board of Turkey (CMB) (Sermaye Piyasası Kurulu)

W www.spk.gov.tr

Description. The CMB is the regulatory and supervisory authority in charge of the securities markets in Turkey. The website contains official information in Turkish and English and includes general information for foreign investors, and provides laws and communiqués that the CMB has issued and published.

Contributor profiles

Arpat Şenocak, Partner

Özdirekcan Dündar Şenocak Attorney Partnership (in association with Gide Loyrette Nouel in Turkey)

T +90 212 385 2950
F +90 212 278 8961
E senocak@odsavukatlik.com
W www.odsavukatlik.com

Professional qualifications. Attorney-at-law, Istanbul, Turkey; Neuchâtel, Switzerland.

Areas of practice. Mergers and acquisitions, banking and finance, projects and consultancy services to foreign investors in various sectors such as financial services, energy and infrastructure.

Non-professional qualifications. Chairman of the Swiss Chamber of Commerce in Turkey; Bachelor of Law, Neuchâtel University; Equivalency Degree (Law), Istanbul University.

Languages. English, French, Turkish

Nilay Çelebi, Associate

Özdirekcan Dündar Şenocak Attorney Partnership (in association with Gide Loyrette Nouel in Turkey)

T +90 212 385 2950
F +90 212 278 8961
E celebi@odsavukatlik.com
W www.odsavukatlik.com

Professional qualifications. Attorney-at-law, Turkey

Areas of practice. Banking and finance; capital markets.

Non-professional qualifications. Bachelor of Law, Istanbul University; Finance and Economics, University of California, Berkeley; LLM, Galatasaray University Law School.

Languages. English, Turkish

İklim Gülsün Kelekçi, Associate

Özdirekcan Dündar Şenocak Attorney Partnership (in association with Gide Loyrette Nouel in Turkey)

T +90 212 385 2950
F +90 212 278 8961
E kelekci@odsavukatlik.com
W www.odsavukatlik.com

Professional qualifications. Attorney-at-law, Turkey

Areas of practice. Banking and finance; mergers and acquisitions; consultancy to sponsors and lenders in the development and financing of projects.

Non-professional qualifications. Bachelor of Law, Marmara University; Master in European Union Law and European Policies, Paul Cézanne University, Aix-en-Provence; LLM in European Law, College of Europe, Bruges.

Languages. English, French, Turkish

Ece Çakırel, Associate

Özdirekcan Dündar Şenocak Attorney Partnership (in association with Gide Loyrette Nouel in Turkey)

T +90 212 385 2950
F +90 212 278 8961
E cakirel@odsavukatlik.com
W www.odsavukatlik.com

Professional qualifications. Attorney-at-law, Turkey

Areas of practice. Mergers and acquisitions; corporate and regulatory consultancy in regulated sectors such as banking, finance, insurance; project financing.

Non-professional qualifications. Bachelor of Law, Marmara University.

Languages. English, French, Turkish

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