Law on Movable Pledge for Commercial Transactions
The “Law on Movable Pledge for Commercial Transactions” (“Law”) numbered 6750 was published in the Official Gazette dated 28 October 2016 and numbered 29871 and will be in effect as of 01 January 2017.
The main scope of the Law is to extend the usage of the movable pledge right without delivery as a guarantee, to expand the scope of the movables that are subject to pledge, to provide the publicity for the movable pledge, to facilitate the access to financing by submitting alternative ways for foreclosure.
While the Repealed Commercial Enterprise Pledge Law dated 1971 and numbered 1447 annulled with this Law coming into force was narrowing the execution area of the movable pledge despite the financing needs and commercial improvements in the recent years, the Law aims to expand the credit usage opportunity with a favorable regulation and to provide a wider usage area for the movable pledge.
The essential changes regulated with this Law numbered 6750 are as follows:
• According to the Law, pledge agreement will be executed between credit institutions and merchant, craftsman, farmer, producer organization, natural and legal persons who are freelancers, and between merchants and/or craftsman. The pledge agreement will be executed in written or electronically and pledge right will be validly established upon registration of this agreement. Accordingly, publicity of the movable pledge will be provided. The scope of movables that are subject to pledge regulated under the repealed law have been extended and future assets that are planned to be obtained by enterprises and acquisition of movables have been included in the elements that can be pledged. Contrary to current legislations, it has been provided with this Law to put pledge on movables in subject independently from their tradename and business name.
• It has been made possible to facilitate the access of Small and Medium Sized Enterprises (“SME”) to finance resources and expand their credit volume. It can be noticed that the capital structure of SME mainly consists of movables, however a big part of guarantees requested by financial institutions are composed of real estates. In addition to this obstacle, SME obtain their financial resources required for their commercial transactions from credits provided by the bank. Moreover, guarantees requested in return for credits are a handicap for SME to access financing. It will be a great advantage for SME that with this Law it will be possible to prevent to put pledge on whole enterprise when movables of the enterprise are equivalent to debt.
• Practice of putting pledge on the enterprise using credit itself and its whole assets will be terminated. Since a limit has been regulated to pledge amount with this Law,credit institutions will be able to put pledge only on movables necessary rather than all the movables. Thus, it is aimed to have enterprises in debt maintain their commercial transactions conveniently and reduce pauses in commercial life.
• It will be possible for movables to be subject to more than one pledge. It will be enabled to benefit from movable which is subject to pledge in maximum capacity,since power of disposition restrictions on the pledged movables will be lifted.
• Lastly, the first pledgee will be able to request transfer of pledged movable’s property from execution office in the situation that debts that are in the scope of this Law are not performed in due time. On one hand, the transfer of the movable’s property to the pledgee without having to apply for foreclosure has been made possible however, on the other hand it will be a matter of losing ownership right of movable due to the pledger not performing its debt in due time.
In brief, in addition to the current legislation in the scope of foreclosure, it has been led to the pledgee to gain the property of the pledged movable in the situation that the debt is not performed in due time with Law on Movable Pledge for Commercial Transactions numbered 6750. It is also expected that the commercial transactions of the SME shall increase and the financial resources shall enhance with the occasion of this Law.
Att. Ecem Bağlarlıoğlu
& Att. Uğursan Yiğit Parmaksız