Turkey has been one of the fastest growing economies during the
course of the last decade. Its strong and resilient economy has
transformed Turkey in to one of the most important economic hubs in
its region. The banking sector has a crucial role to play in this
story of success. The ongoing tendency for more regulation
vis-a-vis the banking sector in Turkey will likely to create an
atmosphere in which the banks will impose more stringent rules on
various different parts as they still have concerns on collateral
assignments and related rights in Turkish legislation. In addition,
many international corporations operating in Turkey to pledges
their receivables from Turkish entities to the banks for their
global credit lines require to know more how to secure the
assignments in Turkey. In this article you will find more about the
The assignment of receivables and related rights are defined
under the Turkish Code of Obligations. Accordingly, the receivables
and the related rights are assignable to a third party without the
consent of the debtor which is contrary to the general belief and
unless restricted by particular laws, agreements and the nature of
the business allows.
The non-eligible receivables are counted are limited to those
subject to prohibition or restriction by Turkish Law such as
Turkish law allows the existing receivables to pass over to the
assignee and also any future receivables on the date such future
receivables arise. Together with the receivables all security
interest and other rights pertaining thereto are transferred to the
assignee as the nature and result of the assignment. Therefore the
law strictly requires making assignment agreements in written form.
In cases where the debtor is not notified the assignment, either by
the assignee or the assignor it rids of the debt upon payment to
the last known creditor in good faith.
In the event that the assignor and the debtors open a current
account, the assignor is also allowed to transfer and assign to the
assignee with a power of attorney to exercise on behalf of the
assignor, its rights and claims to terminate such account(s), to
determine and confirm the balance of such account(s) including
those rights and claims which result from the balance that was
determined or confirmed or will be determined or confirmed in the
future. Even there are some discussions about the non-assignability
of the future rights this is solved in practice thru providing the
accurate and complete records of assignor's receivables and all
payments and collections thereon to be provided the assignee with
an up-dated a list of all receivables.
If the assignor employs a third party or delegates any of its
one of the entities, affiliate, sister company, subsidiary for its
bookkeeping and/or data-processing, the Turkish law also allows
assignor to authorize the assignee to obtain the list of
receivables that eases the management of the relationship between
headquarters and Turkey based entities of foreign companies.
In the event of payment by the debtor(s) of receivables by
cheques, title of ownership to the cheques shall be transferred to
the assignee upon acquisition of possession by the assignor
pursuant to the article 190 of the Turkish Code of Obligations and
delivery of cheques and bills of exchange shall be replaced by the
assignor safekeeping them for the benefit of the assignee or, in
the event that the assignor does not acquire possession, by the
assignor transferring and assigning in advance to the assignee who
hereby accepts such assignment, any rights and claims to request
delivery of the documents from third parties. Pursuant to the
article 190 of the Code of Obligations, to the extent the assignee
is entitled to collect the receivables, it may request that all
documents relating to the receivables be handed over to it.
It seems the collateral assignments are well regulated in
Turkish law however there are still complications in execution of
such agreements arising out of the assigning parties positioning
especially in transactions where intermediary companies are
involved. Since the issuance of the invoices are not only for
payment purposes in transactions where the intermediary exporters
are involved, the circulation of invoices many times poses a risk
on banks to define the real right owner of the receivable.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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