Turkey: Novelties Introduced By The Movable Pledge Law

Last Updated: 4 May 2017
Article by Burcu Eren and Ayça Özbek

As of January 1, 2017, Law No. 6750 on Pledge over Movable Assets in Commercial Transactions ("Movable Pledge Law"), which was enacted on October 20, 2016, entered into force and abolished Law No.1447 on Commercial Enterprise Pledge ("Commercial Enterprise Pledge Law"). The Movable Pledge Law introduces significant changes and offers more practical methods for establishing pledge over movable assets as explained below.

Scope of the Pledge

Under the Commercial Enterprise Pledge Law, a pledge could have been established over all of the movable enterprise assets used in the operation of such commercial enterprise, subject to certain exceptions. The Movable Pledge Law deviates this principle and sets forth that if establishing pledge over certain items provides enough security to satisfy the secured obligations, the entire commercial enterprise shall not be pledged as a whole. So that, the Movable Pledge Law allows the establishment of pledge over any of the following movable assets which are exclusively listed under Article 5:

  • receivables;
  • trees yielding perennial products;
  • intellectual property and industrial rights;
  • raw materials;
  • animals;
  • all types of income and revenues;
  • all types of licenses and permits that are not qualified as an administrative approval and not registered to another registry;
  • rental fees;
  • tenancy rights;
  • vehicles, equipment, tools, construction equipment, movable equipment of the enterprise such as all kinds of electronic devices including electronic communication devices;
  • consumable materials;
  • stocks;
  • agricultural products;
  • trade names and/or business names;
  • commercial enterprises and/or industrial enterprises;
  • commercial plates or commercial lines;
  • commercial projects;
  • carriages; and
  • among those mentioned above; movable properties, rights and joint ownership rights which are in the possession of third parties.

The Movable Pledge Law also allows to establish pledge over an enterprise's prospective movable property, the proceeds obtained from an enterprise's existing or prospective movable property, and existing or prospective receivables arising from all types of agreements.

Registry for Movable Assets

The Movable Pledge Law provides the establishment of a registry for movable assets ("Registry") with a view to ensure the public accessibility and transparency of pledges over movable assets. Following the establishment of the Registry, the right of pledge and its effectiveness against third parties will be perfected through registration with the Registry without transferring the physical possession of the movable asset to the pledgee, and the disputes regarding the effectiveness of the pledge against third parties are expected to gradually diminish since the Registry will be ensuring the public accessibility regarding information on pledges over movable assets, and priority amongst the creditors will be determined according to  the records kept before the Registry.

The Registry will keep the records of pledges established over any movable assets, except for the movable assets that have their own registries.

Execution of the Pledge Agreement

As per Article 4 of the Movable Pledge Law, parties are no longer required to execute an agreement drafted exclusively by notary public. Moreover, an important exception has been brought to the rule set forth under the Law No.5070 on Electronic Signature which provides that security agreements (except for bank letters of guarantee) cannot be executed by electronic signature. Accordingly, parties now have the option to execute a pledge agreement either in writing or in electronic form (signed with an electronically secured signature) and register the pledge agreement with the Registry for perfection. Furthermore, the Movable Pledge Law does not require the secured amount to be stated exclusively in Turkish Lira under the movable pledge agreement and apparently allows the designation of such amount in foreign currency unlike the Commercial Enterprise Pledge Law. However, this issue is expected to be clarified upon enactment of the implementation Regulation.

Execution of the pledge agreement and any transactions before the Registry including perfection of the pledge are exempt from taxes, charges or other fees.

Pledge agreements can be executed by and between (i) Turkish banks, financial leasing companies, factoring companies and Turkish public institutions that are authorized to lend or provide guarantees, merchants, craftsmen, farmers, producer organizations, self-employed individuals and legal entities acting as lenders; or (ii) merchants and/or craftsmen.

As per Article 4 of the Movable Pledge Law, negative pledge provisions and provisions restricting the pledgor's disposal rights over the pledged assets will be deemed invalid. In addition to the foregoing, the Movable Pledge Law also stipulates some obligations for the parties. Accordingly, as per Article 12 of the Movable Pledge Law, the pledgors are obliged to register the transfer of the title of the pledged assets and/or the underlying debt with the Registry. Incompliance with these obligations will result in imposition of the penalties as explained below.

Degree System

One of the significant changes introduced by the Movable Pledge Law is the degree system. The degree system for the establishment of pledge set forth under the Movable Pledge Law is similar to the degree system stipulated for immovable assets under the Turkish Civil Law No 4721. As per Article 10 of the Movable Pledge Law, establishment of multiple pledges over the same movable asset will be possible and priority of the pledgees will be determined according to the degree of their pledges.

However, if the degree of the pledge is not explicitly stated in the pledge agreement, priority of pledges over the same movable asset will be determined according to their registration date.

Alternative Rights of the Pledgee Upon Default of the Pledgor

The Movable Pledge Law provides that, to the extent the pledgor fails to perform its obligations towards the pledgee, the pledgee will be entitled to (i) request the transfer of ownership of the pledged movable asset from the execution offices provided that such pledge is perfected at the first degree, (ii) transfer their receivables to asset management companies, or (iii) use leasing or licensing rights over the pledged assets provided that the transfer of physical possession of such assets is not necessary.

If creditors cannot satisfy their receivables by the means outlined above, execution of the debt can be pursued as per general provisions under Turkish execution and enforcement legislation.

The pledgee should apply to the Registry for the foreclosure of the pledge within 3 (three) business days upon satisfaction of the secured receivable. If the pledgee fails to apply for the foreclosure within such period, it may be subject to an administrative fine equal to 10% of the secured receivable.


As per Article 16 of the Movable Pledge Law, the pledgor or transferee of a pledged movable property shall be penalized with a judicial fine in an amount not exceeding half of the amount of the secured obligations upon complaint by pledgee if it:

  • uses the pledged property contrary to the Movable Pledge Law;
  • does not transfer the title of the pledged property in case of non-payment of debt;
  • damages or destroys the pledged property with the intention of causing damage to the pledgee;
  • does not register the transfer of the title of the pledged assets and/or the underlying debt with the Registry; and
  • acts to mislead the Registry.


Novelties introduced under the Movable Pledge Law offer a more practical and innovative method for the perfection of pledges over movable assets. However, despite such positive aspects, it also brings uncertainties on various aspects, which remain to be clarified upon issuance of the Regulation implementing the Law as well as its implementation by the relevant authorities such as the Registry and the courts in practice.

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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