A. GENERAL

Transfer of assets and transfer of a commercial enterprise are regulated under the Turkish Code of Obligations numbered 6098 ("TCO") and the Turkish Commercial Code numbered 6102 ("TCC") respectively. Transfer of assets and transfer of commercial enterprise are very controversial concepts under Turkish Law which are not easily distinguished under the applicable legislation.

Pursuant to Article 11 of TCC, a commercial enterprise is defined as a business;

  1. aiming to make an income exceeding the limit identified for craftsman and
  2. that has continuous and independent activities.

In scope of the above, in order to refer to a transfer of commercial enterprise, the above-mentioned conditions should be met in relation to the transferred business in question and the transfer must be made via a written agreement bearing the conditions set out under Article 133 of Trade Registry Regulation (i.e. (i) name-surname of the parties and notification addresses, (ii) elements excluded from the transfer, (iii) unconditional undertaking regarding the transfer of the commercial enterprise as a whole and in a continuous manner, and (iv) sales price and payment terms) and shall be registered with the competent Trade Registry and announced at the Turkish Trade Registry Gazette.

Pursuant to Article 11 of TCC, in the event of a commercial enterprise transfer, all elements of the relevant enterprise, which may include intellectual property rights, machines, cars, immovable properties, leasing rights, trade name etc; may be transferred in a single transaction, without the need of separate transactions and disposal for each element. In this regard, it should be noted that for the transfer of immovable properties allocated to the commercial enterprise, the written agreement should also be registered with the relevant land registry as a closing action supplementary to the validity of the transfer itself.

Even though the applicable legislation states that the transfer of a commercial enterprise shall become effective as of the date of its registration with the relevant Trade Registry; in practice, the trade registry offices in Turkey decline to register transfer of commercial enterprises due to various reasons and this non-compliance with law is yet to be overcome.

B. LIABILITIES

Pursuant to Article 202 of TCO; assets or commercial enterprises shall be transferred together with its liabilities as a whole and cannot be transferred by including the assets only since the assets of a commercial enterprise are the guarantees of the respective liabilities and that the creditors of a commercial enterprise enter into a debt relationship by relying on the relevant enterprise's current assets.

Accordingly, the entity that takes over an asset or a commercial enterprise together with its liabilities, shall become jointly liable -together with the transferor- towards third parties for the payment of the liabilities arising from the said assets, for a period of 2 years as of the date of announcement of the relevant transfer. The mentioned 2-year period shall commence from the notice or announcement date for due debts and from the date such debts become due for undue debts. Unless the notification and announcement requirement has not been completed, the 2-year-period shall not commence. As a principle, pursuant to Article 196 of TCO, in order for a debtor to be replaced by a new debtor, an agreement between the creditor and the new debtor must be executed; however, Article 202 constitutes an exemption to such regulation.

C. LABOUR AGREEMENTS

In scope of Article 6 of Labour Law numbered 4857, in the event where a workplace or a part of a workplace is transferred to a third party on the basis of a legal transaction, the employment agreements existing in the relevant workplace shall be transferred to the transferee as a whole and therefore, the employment date of the transferred employee shall be regarded as the first day of employment by the transferor. In this regard, the transferee cannot terminate the employment agreement on the grounds of transfer and in case of such termination, it shall be deemed as unjust. The termination rights of the transferor or the transferee arising from economic and technological reasons, change of work organization or the right of immediate termination of the employee or employer for justified reason, are reserved.

Similar to the provisions of Article 202 of TCO; in case of transfer of employees, the transferor and transferee shall be jointly liable from the debts that became due prior to the transfer and that are due at the date of transfer. The liability of the transferor in this regard shall be limited to 2 years as of the date of transfer.

D. CANCELLATION OF ACT OF DISPOSAL

Pursuant to Article 280 of Enforcement and Bankruptcy Law numbered 2004; all transactions made by a debtor whose assets are not sufficient to cover its debts and made with the intention to harm its creditors may be cancelled in case there are clear indications that the financial situation of the debtor and its intention to cause harm are known or required to be known to the other party of the transaction. In this regard, any party who acquires all or a substantial part of a commercial enterprise shall be deemed to have known the debtor's intention to harm the creditors and the debtor will be deemed to have acted with the intention to harm its creditors. The aim of the relevant regulation is to protect the rights of creditors' from being harmed by a debtor and with the said regulation, the legislator makes a presumption on the existence of the transferee's knowledge of such intention. In order for this presumption to be disproved, the abovementioned transaction should be notified to the creditors and announced 3 months prior to the closing of the relevant transaction.

E. APPROVAL OF TURKISH COMPETITION AUTHORITY

Pursuant to the regulations of Law on Protection of Competition, certain merger and acquisitions are subject to the mandatory clearance of Turkish Competition Authority within the interim period, i.e. before the closing of the relevant transaction.

As per Article 5 of the Communiqué no 2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board ("Communiqué"); a merger by two or more undertakings or the acquisition of direct or indirect control over all or part of one or more undertakings by one or more undertakings or by one or more persons who currently control at least one undertaking, through the purchase of shares or through any other means shall be considered a merger or an acquisition, provided there is a lasting change in control. In this regard, transfer of a commercial enterprise may fall under such definition of acquisition if the transferred enterprise generates a turnover. Pursuant to Article 7 of the Communiqué; a merger or acquisition exceeding the below stated thresholds will be subject to the approval and clearance of Turkish Competition Authority:

  1. Total turnovers of the transaction parties in Turkey exceed TRY 750 million, and turnovers of at least 2 of the transaction parties in Turkey each exceed TRY 250 million, or
  2. The asset or activity subject to acquisition in acquisition transactions, and at least 1 of the parties of the transaction in merger transactions have a turnover in Turkey exceeding TRY 250 million and the other party of the transactions has a global turnover exceeding TRY 3 billion.

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.