{"id":101946,"date":"2025-05-01T14:15:51","date_gmt":"2025-05-01T14:15:51","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=101946"},"modified":"2025-08-19T12:01:25","modified_gmt":"2025-08-19T12:01:25","slug":"turkiye-lending-secured-finance","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/turkiye-lending-secured-finance\/","title":{"rendered":"T\u00fcrkiye: Lending &amp; Secured Finance"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-101946","comparative_guide","type-comparative_guide","status-publish","hentry","guides-lending-secured-finance","jurisdictions-turkiye"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Balc\u0131o\u011flu Sel\u00e7uk Eymirlio\u011flu Ard\u0131yok Keki Attorney Partnership<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2020\/09\/BASEAK-logo-Core-CMYK.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Balc\u0131o\u011flu Sel\u00e7uk Eymirlio\u011flu Ard\u0131yok Keki Attorney Partnership<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2020\/09\/BASEAK-logo-Core-CMYK.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Lending &amp; Secured Finance laws and regulations applicable in T\u00fcrkiye<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do foreign lenders (including non-bank foreign lenders) require a licence\/regulatory approval to lend into your jurisdiction or take the benefit of security over assets located in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A foreign lender may lend into Turkey without any licence or regulatory approval if certain conditions are met, which mainly comprise the following:<\/p>\n<ol style=\"padding-left: 0\" type=\"i\">\n<li>the foreign lender should be duly licensed in its own jurisdiction to provide loans to third parties (or if there is no license requirement for this in its jurisdiction, the foreign lender should be allowed and authorised to provide loans to third parties pursuant to the laws of its own jurisdiction);<\/li>\n<li>the Turkish borrower should be an unsolicited borrower, who has contacted the foreign lender for the loan entirely of the Turkish borrower\u2019s own accord and not as a result of any solicitation by the foreign lender; and<\/li>\n<li>the loan should not fall within the scope of the restrictions on taking out loans from outside Turkey as provided in Decree No. 32 on Protection of Value of Turkish Currency (<strong>&#8220;Decree No. 32&#8221;<\/strong>) and other relevant Turkish forex laws and regulations.<\/li>\n<\/ol>\n<p>Referring to limb (iii) above, according to Decree No. 32, as a general rule, Turkish borrowers cannot take overdrafts or revolving credit facilities from outside Turkey; Turkish borrowers cannot take foreign-currency-indexed-TRY-loans from outside Turkey (or from a Turkish bank); natural persons residing in Turkey cannot take foreign currency loans from outside Turkey (or from a Turkish bank); and Turkish companies\u2019 taking foreign currency loans from outside Turkey (or from a Turkish bank) is subject to certain restrictions (<em>see section 3 below for further explanations on these restrictions<\/em>).<\/p>\n<p>There is no restriction under Turkish law on foreign lenders\u2019 taking security over assets located in Turkey.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws or regulations limiting the amount of interest that can be charged by lenders?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no specific rule under Turkish law limiting the interest that can be charged on a loan made to a commercial borrower.\u00a0 So, in principle, in those transactions the parties may agree on interest without any restriction.\u00a0 The parties may also agree to compound interest in which interest is added to principal at not less than three-month intervals.<\/p>\n<p>It is argued in Turkish legal doctrine that if interest is excessive, the commercial debtor might be able to challenge the interest clause on the basis of unfair advantage, or nullity due to breach of morality, or reduction of excessive contractual penalty.\u00a0 However, Turkish scholars also note that normally in commercial transactions these arguments should be given effect in exceptional cases only.<\/p>\n<p>Charging default interest on default interest is prohibited under Turkish law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws or regulations relating to the disbursement of foreign currency loan proceeds into, or the repayment of principal, interest or fees in foreign currency from, your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Decree No. 32, as a general rule, prohibits Turkish companies from taking out foreign currency loans from outside Turkey (or from a Turkish bank) but it also provides broad exceptions to this restriction. The following are two of the broadest of these exceptions:<\/p>\n<ul style=\"padding-left: 0\">\n<li>A Turkish company may take out a foreign currency loan if the sum of the outstanding principal amounts of all the foreign currency loans owed by the company (excluding, for the avoidance of doubt, the loan in question) is equal to or more than USD 15 million, or the equivalent of USD 15 million in another foreign currency.<\/li>\n<li>A Turkish company that has foreign exchange earnings may take out a foreign currency loan up to an amount equal to (a) total foreign exchange earnings of the company within the past three fiscal years less (b) the sum of the outstanding balances of all the foreign currency loans owed by the company (if any).<\/li>\n<\/ul>\n<p>As a general rule, i) the proceeds of any loan (whether denominated in foreign currency or TRY) taken by a Turkish borrower from outside Turkey must be brought into Turkey, meaning that the foreign lender is required to disburse the loan into the borrower\u2019s bank account with a bank in Turkey; and ii) the borrower must repay the loan and pay interest and fees to the foreign lender through a Turkish bank.<\/p>\n<p>Foreign currency loans may be disbursed into and repaid (together with interest and fees) from Turkey in foreign currency.\u00a0 Certain reporting requirements (mainly for statistical purposes) apply, which are fulfilled by the borrower\u2019s Turkish account bank in general.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can security be taken over the following types of asset:  i.\treal property (land), plant and machinery; ii.\tequipment; iii.\tinventory;  iv.\treceivables; and v.\tshares in companies incorporated in your jurisdiction.               If so, what is the procedure \u2013 and can such security be created under a foreign law governed               document?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, the following securities can be taken over the above-mentioned types of assets as noted herein below.<\/p>\n<ol style=\"padding-left: 0\" type=\"i\">\n<li><em>Real property (land)-<\/em>\u00a0 Mortgage can be created over real property (land) in favour of the foreign lender by (a) entry into of an official form mortgage agreement (mortgage deed) before a Land Registry Office; and (b) registration of the mortgage with the land register.<\/li>\n<\/ol>\n<p><em>Plant and machinery-<\/em>\u00a0 If mortgage is created over the real property (land) on which the plant and machinery is located, normally such mortgage also extends to and covers the plant and machinery.\u00a0 Having details of such plant and machinery annotated in the land registry records of the mortgaged real property (land) at the time of the creation of the mortgage will ensure clarity as to the assets falling within the scope of that mortgage.\u00a0 If no mortgage is created as above, and depending on the physical conditions of the plant and machinery in question, commercial movable assets pledge would be created over the plant and machinery in favour of the foreign lender as described herein below.<\/p>\n<ol style=\"padding-left: 0\" type=\"i\">\n<li value=\"2\"><em>Equipment<\/em>&#8211;\u00a0 Either commercial movable assets pledge or possessory pledge can be created over equipment in favour of the foreign lender.\u00a0 Commercial movable assets pledge can be created by (a) entry into of a commercial movable assets pledge agreement before a notary in Turkey; and (b) registration of the pledge with the pledged moveable assets register maintained by notaries.\u00a0 Possessory pledge can be created by (a) entry into of a chattel pledge agreement; and (b) transferring the possession and control of the equipment to the foreign lender or to a third party acting for the foreign lender.<\/li>\n<li><em>Inventory<\/em>&#8211;\u00a0 Either possessory pledge or commercial movable assets pledge can be created over Inventory in the same way as described in limb (ii) above.<\/li>\n<li><em>Receivables<\/em>&#8211;\u00a0 Either (a) receivables can be assigned and transferred to the foreign lender as security, by entry into of an assignment of receivables agreement; or (b) a pledge can be created over receivables in favour of the foreign lender, by entry into of a receivables pledge agreement.\u00a0 Notifying the debtors of the assignment, or the pledge, is generally advisable.<\/li>\n<li><em>Shares in companies incorporated in Turkey<\/em>&#8211;\u00a0 Pledge can be created over shares in a joint stock company by (a) entry into of a share pledge agreement; (b) delivery of share certificates representing the pledged shares to the foreign lender; and (c) registration of the pledge in the share book of the company.\u00a0 For pledge of shares in a limited company, execution of the share pledge agreement before a Turkish notary is required.\u00a0 For pledge of shares in a public company, which are held by CRA, the central securities depository of Turkey, in electronic (book-entry) form, a Turkish brokerage house\u2019s recording the pledged shares into the relevant pledge sub-account at CRA is required.<\/li>\n<\/ol>\n<p>Security over assets located in Turkey must be governed by Turkish law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a company that is incorporated in your jurisdiction grant security over its future assets or for future obligations?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes.\u00a0 Security assignment, or pledge, of future receivables is possible provided that those receivables are clearly described in the relevant assignment, or pledge, of receivables agreement such that they will be identifiable from that description once they fall due, or come into existence, in the future.<\/p>\n<p>A Turkish company\u2019s granting security for its future obligations is also possible, for which those obligations should be specified in the relevant security agreement in sufficient detail.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a single security agreement be used to take security over all of a company\u2019s assets or are separate agreements required in relation to each type of asset?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The type of security depends on the type of the asset in question because under Turkish law for each asset type, only certain types of security are available.\u00a0 Therefore, a separate security needs to be taken over each different type of asset and hence normally separate security agreements are required.<\/p>\n<p>Law No. 6750 on Moveable Assets Pledge in Commercial Transactions (<strong>&#8220;Law No. 6750&#8221;<\/strong>) was introduced on 1 January 2017 with a view to enabling the creation of pledge over specific assets in a commercial enterprise (machinery, equipment, inventory etc.), or over a commercial enterprise together with all of its assets as a whole, by way of (i) signing of a single pledge agreement before a notary and (ii) registration of the pledge with a newly established register (namely, the pledged moveable assets register maintained by notaries).\u00a0 However, there are quite a few ambiguities in Law No. 6750 and some of its provisions are also incompatible with the provisions of Turkish Civil Code (Law No. 4721) and Turkish Obligations Law (Law No. 6098).\u00a0 Therefore, in practice a commercial movable assets pledge under Law No. 6750 is mainly used for taking pledge over machinery and equipment only, to avoid the \u2018transferring possession and control of the pledged asset to the pledgee or a third party\u2019 requirement in possessory pledges.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any notarisation or legalisation requirements in your jurisdiction? If so, what is the process for execution?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Certain security agreements (such as commercial movable assets pledge agreement, vehicle pledge agreement, share pledge agreement relating to limited company shares) must be executed before a notary.\u00a0 While there is no such statutory form requirement for assignment of receivables agreements, executing these agreements before a notary is also recommended as this would put the assignee in a better position in an insolvency situation.\u00a0 Mortgage agreements must be signed before a Land Registry Office in official form.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any security registration requirements in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Mortgages must be registered with the land register.\u00a0 Commercial movable assets pledges must be registered with the pledged moveable assets register maintained by notaries.\u00a0 Pledges over public company shares (which are held by CRA in electronic form), motor vehicles, aircrafts, ships and certain other types of assets must be registered with the relevant registers concerning those assets.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any material costs that lenders should be aware of when structuring deals (for example, stamp duty on security, notarial fees, registration costs or any other charges or duties), either at the outset or upon enforcement? If so, what are the costs and what are the approaches lenders typically take in respect of such costs (e.g. upstamping)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Where a loan is provided to a Turkish borrower by i) a bank, foreign or Turkish; ii) a foreign credit institution; or iii) an international body (i.e. an IFI such as EIB, IFC, etc.), loan agreement and security agreements are not subject to stamp tax or charges (such as land registry charges, notary charges).\u00a0 Depending on the security structure, there would be land registry fees (if, for example, there is mortgage) and notary fees (if, for example, there is commercial movable assets pledge) but in relatively low amounts in comparison to the amount of stamp tax, land registry charges and notary charges if those were payable.<\/p>\n<p>In loans provided by foreign lenders, a tax\/levy called Resource Utilisation Support Fund (<strong>&#8220;RUSF&#8221;<\/strong>) would be a significant cost depending on the average term of the loan.\u00a0 Normally the rate of RUSF applicable to a foreign currency loan provided by a foreign lender to a Turkish company is, of the principal amount of the loan, (i) 3%, if the average term of the loan is up to one year; (ii) 1%, if the average term of the loan is one up to two years; (iii) 0.5%, if the average term of the loan is two up to three years; and (iii) 0%, if the average term of the loan is three years or more.\u00a0 Also, the rate of RUSF applicable to a TRY loan provided by a foreign lender to a Turkish company is, of the accrued interest, 1% if the average term of the loan is less than one year.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a company guarantee or secure the obligations of another group company; are there limitations in this regard, including for example corporate benefit concerns?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><em>Intra group guarantees<\/em>&#8211;\u00a0 A Turkish company can grant upstream, cross-stream and downstream guarantee, or security, for the benefit of another group company.<\/p>\n<p>Turkish Commercial Law (Law No. 6102) (<strong>&#8220;TCL&#8221;<\/strong>) requires that the controlling company must not exercise its control in a way that would make its subsidiary incur a loss.\u00a0 So if the subsidiary incurs a loss as a result of a guarantee or security granted by it for the benefit of another group company, the controlling company would have to compensate the losses of the subsidiary or grant a right of claim of equivalent value to the subsidiary.\u00a0 On the other hand, the controlling company\u2019s failing to fulfil this obligation does not affect the validity or effectiveness of the guarantee or security granted by the subsidiary.<\/p>\n<p><em>Corporate benefit<\/em>&#8211;\u00a0 In general, there is no corporate benefit concept under Turkish law.\u00a0 However, article 371(2) of the TCL also provides that a company shall not be bound by a transaction executed by its authorised representatives if it proves that the counterparty knew \u2013or in view of evident circumstances, was in a position to know\u2013 that such transaction is outside the objects (corporate purpose) of the company.\u00a0 Publication of the articles of association of the company in the Trade Registry Gazette is not of itself sufficient to establish that proof.\u00a0 Also, for the purposes of this provision &#8220;objects (corporate purpose)&#8221; is very broadly interpreted and refers to all acts necessary for or incidental to or consequential upon the attainment of the objects of the company.<\/p>\n<p>Normally a Turkish company would be able to bring a successful claim based on the abovementioned provision of the TCL in exceptional cases only.\u00a0 However, in cases where the guarantor does not gain any commercial benefit from providing the guarantee and the objects (corporate purpose) clause of its articles of association does not contain any reference to providing guarantee for third party indebtedness, this risk might be higher and in such a case the guarantee should be carefully considered in view of the abovementioned article 371(2) of the TCL.<\/p>\n<p><em>Financial assistance<\/em>&#8211;\u00a0 A company\u2019s providing guarantee for the benefit of a third party for acquisition of its own shares is prohibited (<em>see section 11 below for further explanations on the financial assistance prohibition under Turkish law<\/em>).<\/p>\n<p><em>Clawback<\/em>&#8211;\u00a0 In all cases where there is no visible commercial benefit to the guarantor in granting the guarantee or the guarantee is granted without receiving adequate benefit\/consideration, clawback risk should also be carefully considered (<em>see section 18 below for further explanations on clawback\/voidable company acts in insolvency<\/em>).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions against providing guarantees and\/or security to support borrowings incurred for the purposes of acquiring directly or indirectly: (i) shares of the company; (ii) shares of any company which directly or indirectly owns shares in the company; or (iii) shares in a related company?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>TCL prohibits any company from advancing funds or making loans to, or providing security or guarantee for the benefit of, a third party for acquisition of its own shares.\u00a0 The TCL does not provide an exhaustive list of forms of financial assistance; so, generally speaking, any direct or indirect attempt to provide assistance to, or facilitate, a third party to acquire the shares of the company might breach this prohibition.<\/p>\n<p>TCL also provides certain exceptions to financial assistance prohibition, which comprise (i) transactions falling within the scope of business operations of banks or financial institutions; and (ii) advances, loans and security granted to employees of the company or its subsidiaries for acquisition of the company\u2019s shares, provided that the requirements of the TCL relating to reserves of capital are observed.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can lenders in a syndicate (or, with respect to private credit deals, lenders in a club) appoint a trustee or agent to (i) hold security on the lenders\u2019s behalf, (ii) enforce the lenders\u2019 rights under the loan documentation and (iii) apply any enforcement proceeds to the claims of all lenders in the syndicate?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Turkish law does not recognise a trust concept.\u00a0 Therefore, normally a security agent should be used, rather than a security trustee, to hold security for the benefit of the lenders or to otherwise deal with the security.\u00a0 Furthermore, the answers of the questions above will vary depending on the type of the security, whether it is a security assignment (fiduciary assignment) or a mortgage\/pledge.<\/p>\n<ol style=\"padding-left: 0\" type=\"a\">\n<li><em>Security assignment (fiduciary assignment)<\/em>&#8211;\u00a0 Lenders can appoint a security agent (usually from the lenders) to accept, hold and enforce a security assignment in its own name and for the benefit of the lenders.\u00a0 Subject to the terms of the relevant assignment of receivables agreement made between the security provider as assignor and the security agent as assignee, the security agent can enforce the security on the instructions of the lenders (ideally, with all lenders\u2019 consent) and distribute the enforcement proceeds to the lenders in accordance with the terms of the intercreditor agreement or other relevant contractual arrangement made between the security agent and the lenders.<\/li>\n<li><em>Mortgage\/pledge<\/em>&#8211;\u00a0 As a result of the accessory nature of mortgage and pledge under Turkish law, a person can only obtain a valid mortgage\/pledge if that person is the creditor of the debt such mortgage\/pledge secures.\u00a0 In other words, the <em>secured creditor<\/em> (i.e. creditor of the secured debt) and the <em>security holder<\/em> (i.e. mortgagee, pledgee) must be the same person.<\/li>\n<li style=\"list-style-type: none\"><\/li>\n<li style=\"list-style-type: none\">In view of this Turkish law principle, in domestic syndicated lending transactions all lenders take a joint mortgage\/pledge over the security asset concerned in the same ranking, with each lender being a mortgagee\/pledgee and entitled to a proportion of the mortgage\/pledge as specified in the mortgage\/pledge agreement.\u00a0 The lenders also appoint one of the lenders as security agent, but for administrative purposes only.\u00a0 The security agent cannot enforce the mortgage\/pledge on behalf of the lenders because under Turkish law only lawyers can represent others in court.\u00a0 Therefore, to enforce the mortgage\/pledge each lender has to take enforcement action in its own name.\u00a0 Normally lenders act in concert in enforcing their mortgage\/pledge rights, on the basis of the provisions of their intercreditor agreement or similar contractual arrangement relating to enforcement of transaction security.\u00a0 Such contractual arrangements, however, do not have effect against third parties.<\/li>\n<li style=\"list-style-type: none\">Mainly in cross-border syndicated lending transactions involving a Turkish borrower, a parallel debt structure is also used in order to create mortgage\/pledge in favour of the security agent only, who acts for itself and as security agent for the benefit of the lenders (<em>see section 13 below for further explanations on parallel debt<\/em>).<\/li>\n<\/ol>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If your jurisdiction does not recognise the role of an agent or trustee, are there any other ways to achieve the same effect and avoid individual lenders having to enforce their security separately?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>To deal with the difficulties stemming from accessory nature of mortgage and pledge under Turkish law, using a parallel debt structure may be considered.\u00a0 This structure can be roughly described as (i) stipulating a parallel debt obligation of the borrower &#8211;<em>to pay to the security agent sums equal to the total amount of the debts the borrower owes to the lenders-<\/em> in the facility agreement; and (ii) creating the transaction security, including mortgage and pledge, in favour of the security agent as security for the performance and discharge of that parallel debt obligation.\u00a0 It is believed that by this means the security agent can hold and enforce security (including mortgage and pledge) for the benefit of the lenders.<\/p>\n<p>Parallel debt structure is generally used in cross-border syndicated loans provided to Turkish borrowers.\u00a0 It should, however, also be noted that this structure has not been tested in Turkish courts and available studies of Turkish legal scholars on parallel debt are also very limited.\u00a0 Therefore, before deciding to use the parallel debt structure in a transaction involving Turkish law mortgage or pledge, a careful analysis of the legal risks should be made on a case-by-case basis.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do the courts in your jurisdiction generally give effect to the choice of other laws (in particular, English law) to govern the terms of any agreement entered into by a company incorporated in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As a general principle under Turkish law, parties to a contract which bears a foreign element (e.g. if one of the parties is a foreign entity) may choose a foreign law (such as English law) to govern their contract and in such a case, Turkish courts are required to give effect to the parties\u2019 agreement on governing law.\u00a0 However, the application of the foreign law shall be precluded if such application is manifestly incompatible with the public policy of Turkey.\u00a0 Also, for matters falling within the scope of the mandatory provisions of Turkish law which, by reason of their particular purpose, are applicable irrespective of the foreign governing law of the contract (e.g. financial services laws, foreign exchange laws, lease laws relating to real properties, antitrust laws, consumer protection laws, import and export restrictions), such overriding mandatory provisions of Turkish law shall apply.<\/p>\n<p>According to the conflict of laws rules of Turkey, rights-in-rem (ownership, mortgage, pledge, etc.) over real properties and chattels in Turkey shall be subject to Turkish law.<\/p>\n<p>Finally, parties may agree to submit non-contractual obligations to a foreign law only after the tort is committed (in the case of tort) or the unjust enrichment has taken place (in the case of unjust enrichment).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do the courts in your jurisdiction generally enforce the judgments of courts in other jurisdictions (in particular, English and US courts) and is your country a member of The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (i.e. the New York Arbitration Convention)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>We are aware of Turkish Court of Appeal decisions where the court held there is de-facto reciprocity between Turkey and England in enforcement of each other\u2019s court judgments.\u00a0 Therefore, normally Turkish courts would enforce English court judgments provided that the other conditions set out in the International Private and Procedure Law of Turkey (Law No. 5718) for enforcement of foreign court judgments in Turkey (e.g. no incompatibility with Turkish public policy, proper notice of the proceedings etc.) are also satisfied.<\/p>\n<p>Although this requires further analysis on a case-by-case basis, it is likely that there is no reciprocity (neither treaty-based nor de-facto or de-lege) between Turkey and the United States in enforcement of each other\u2019s court judgments; therefore, US court judgments would not be enforceable in Turkey.<\/p>\n<p>Turkey is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Arbitration Convention) since 1991.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What (briefly) is the insolvency process in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Insolvency proceedings in Turkey are regulated by the Execution and Bankruptcy Law of Turkey (Law No. 2004) (<strong>&#8220;EBL&#8221;<\/strong>).\u00a0 Main insolvency proceedings are composition (concordat) proceedings and bankruptcy proceedings.<\/p>\n<p><em>Composition (concordat) proceedings<\/em>&#8211;\u00a0 Composition proceedings aim at restructuring ordinary unsecured claims of the creditors against the distressed debtor through a court-approved debt restructuring agreement (i.e. composition agreement).\u00a0 Ordinary unsecured claims comprise all claims of the creditors other than (i) secured claims; (ii) the first class claims as per article 206 of the EBL, which include certain employment law and family law claims; and (iii) certain public claims.<\/p>\n<p>The court grants the debtor a provisional moratorium (of up to three months) and appoints a provisional administrator to help in assessing the prospects for a successful composition agreement.\u00a0 If such prospects exist, the court grants the debtor a definitive moratorium (of up to one year).\u00a0 Within the definitive moratorium period:<\/p>\n<ul style=\"padding-left: 0\">\n<li>the debtor should reach an agreement with its creditors to restructure its debts;<\/li>\n<li>the composition agreement on this should be approved with the consent of a certain majority of the creditors; and<\/li>\n<li>that composition agreement should also be approved by the court.<\/li>\n<\/ul>\n<p>The court-approved composition agreement shall be binding on all ordinary unsecured claims of all creditors against the debtor, regardless of whether such creditors have consented to the composition agreement.<\/p>\n<p><em>Bankruptcy proceedings<\/em>&#8211;\u00a0 Bankruptcy proceedings vary depending on the bankruptcy procedure applied.\u00a0 In the bankruptcy through proceeding method, the creditor initiates a bankruptcy proceeding against the debtor at the relevant competent execution office.\u00a0 If the debt is not paid within a certain period of time, the creditor may file a bankruptcy lawsuit at the relevant competent commercial court for declaration of bankruptcy of the debtor.\u00a0 In case of declaration of bankruptcy, the receivables due to the creditors will be paid out of the liquidation proceeds and dissolution will be conducted by the bankruptcy administration.<\/p>\n<p>In the direct bankruptcy method, the creditor or the debtor itself directly applies to the relevant competent commercial court, without initiation of bankruptcy proceeding at the relevant execution office in the first place, and requests the court to declare the bankruptcy of the debtor.\u00a0 Application for direct bankruptcy (without proceedings) may be made if the debtor is unable to pay a substantial part of its debts on a continuous basis, or half of its assets are seized and the value of its remaining assets is insufficient to pay off its debts which will fall due within one year, or the value of its assets is less than the amount of its liabilities (i.e. if the debtor is over-indebted).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What impact does the insolvency process have on the ability of a lender to enforce its rights as a secured party over the security?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>After declaration of bankruptcy of the debtor, assets which are subject to a mortgage or pledge are considered to be part of the debtor\u2019s estate and will be realised by the bankruptcy administration.\u00a0 Realisation proceedings are governed by the EBL which generally provide for a public auction.\u00a0 Proceeds are applied towards payment of (i) enforcement costs, (ii) secured claims, (iii) the first class claims as per article 206 of the EBL comprising certain employment law and family law claims, (iv) public claims under Law No. 6183 on Collection Procedure of Public Receivables, and (v) unsecured claims.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Please comment on transactions voidable upon insolvency.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The following acts carried out by a Turkish debtor within the following time periods are voidable:<\/p>\n<ol style=\"padding-left: 0\" type=\"i\">\n<li>dispositions made for no consideration, or without receiving adequate consideration, within the two years prior to its insolvency or the declaration of its bankruptcy;<\/li>\n<li>payment of a debt that is not yet due, or granting of new pledge to secure an existing debt without having been obliged to do so, or settlement of a monetary debt by unusual means, within the one year prior to its insolvency or the declaration of its bankruptcy and while being over-indebted at that time; and<\/li>\n<li>fraudulent acts committed with the intent to harm its creditors within the five years prior to the initiation of debt enforcement or bankruptcy proceedings against it.<\/li>\n<\/ol>\n<p>The acts mentioned in limbs (i) to (iii) above are not exhaustive and Turkish courts have broad discretion to determine whether a transaction is voidable on the basis of the abovementioned principles.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is set off recognised on insolvency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes.\u00a0 In general, if a creditor had a right of set off against the debtor by the time the bankruptcy of the debtor was declared, such right of set off shall remain unaffected by the bankruptcy of the debtor.\u00a0 In such a case, the creditor can even set off his claims that have not yet fallen due at the time of the declaration of bankruptcy against due claims that the bankrupt debtor holds against him \u2013 which is normally not possible under Turkish law except in case of bankruptcy of the debtor.<\/p>\n<p>On the other hand, no set off is allowed in bankruptcy if (i) the obligor of an obligation owed to the debtor has become a creditor of that debtor only after declaration of bankruptcy of the debtor; or (ii) a creditor of the debtor has incurred an obligation to that debtor only after declaration of bankruptcy of the debtor.<\/p>\n<p>The provisions of the EBL on set off in bankruptcy are mandatory and cannot be varied by contract.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any statutory or third party interests (such as retention of title) that may take priority over a secured lender\u2019s security in the event of an insolvency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes.\u00a0 Turkish law provides for several statutory mortgage and other security rights, such as building contractor\u2019s statutory mortgage right and warehouse keeper\u2019s retention right, which under certain circumstances may take priority over a secured lender\u2019s security.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any impending reforms in your jurisdiction which will make lending into your jurisdiction easier or harder for foreign lenders?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>We are not aware of any such reform plans.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What proportion of the lending provided to companies consists of traditional bank debt versus alternative credit providers (including credit funds) and\/or capital markets, and do you see any trends emerging in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Debt finance provided by commercial banks is the most common source of external finance for companies and constitute vast majority of the lending in Turkey.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Please comment on external factors causing changes to the drafting of secured lending documentation and the structuring of such deals such as new law, regulation or other political factors<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>N\/A<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">5173<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/101946","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=101946"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}