By virtue of Article 47 of the new Capital Markets Law, Turkish
legal markets have welcomed the possibility of using a private sale
to enforce a security in case of a default by either an offset
mechanism against the debts and/or obligations of a debtor or the
sale of capital markets instruments (i.e., pledged shares) on the
Prior to the new Capital Markets Law, enforcing a security by
means of a private sale, other than through foreclosure proceedings
before a court, was questionable. A private sale was accepted in
Turkish legal doctrine only in concept and was considered within
the context of an up-front contractual agreement between the
collateral provider and taker whereby the collateral taker is given
the right in a relevant security agreement to enforce its right in
the collateral and cause it to be sold privately. Due to the
contractual nature of such an agreement, this method fell outside
the scope of bankruptcy law.
According to Article 47, security agreements, the subject of
which is a capital markets instrument (e.g., shares of a publicly
held company), must be made in written form. The ownership of the
instrument remains with the pledgor unless it is explicitly stated
in the relevant security agreement that the ownership/title of the
instrument is being transferred to the possession of the pledgee.
In case of an event of default or any other contractual or legal
enforcement event, the pledgee is entitled to enforce its security
interest through the private sale of the capital markets
instrument, and may reimburse the sale proceeds received in excess
of the value of the obligation, if any, to the debtor. In addition,
Article 47 provides a set-off mechanism for the pledgee that
enables the pledgee to take ownership of the capital markets
instrument in satisfaction of the debtor's obligations. In case
of a security agreement where the title of the collateral has not
been transferred to the collateral taker, the collateral taker may
request title to the capital markets instrument upon an event of
default or any other legal or contractual enforcement event in
addition to its right to a private sale.
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guide to the subject matter. Specialist advice should be sought
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