With a view to increasing the scope of pledge on movable properties, claims and other rights and allowing for alternative remedies in the event of default, Law No. 6750 on Pledge on Movables in Commercial Transactions (the "Law on Pledge of Movables" or "New Law") was published in the Official Gazette no. 29871 on 28 October 2016, and entered into force on 1 January 2017.

In addition, a range of secondary legislation providing details about the operation of the new regime was published in the Official Gazette no. 29935 (bis) on 31 December 2016 and entered into force on 1 January 2017. These secondary legislations are in relation to the following:

  • Regulation on Register of Pledged Movables
  • Regulation on Creation of Pledge in Commercial Transactions and Execution Upon Default
  • Regulation on Valuation of Movables in Commercial Transactions

The New Law abolished the widely used Commercial Enterprise Pledge Law No. 1447 (the ¨Former Law)¨ thus put an end to one of the most frequently used security interest in the Turkish financial markets.

In this new regime, the non-possessory pledge system, which had made the commercial enterprise pledge so favourite for a long time in the Turkish market, will be adopted to a broad range of movable properties, claims and other rights. The publicity requirement in the former system was tried to be satisfied by the notarization of commercial enterprise agreement before public notaries. In this new system, the parties will no longer need to notarize the movable pledge agreement but instead register the agreement with the movables pledge registry system ("TARES Registry"). The records will be publicly accessible. Any third party proving their interest and relevance will be able to make enquiries in the register. The further details in relation to the new system of pledge on movables are as below.

Scope of Pledge

In the former system, the scope of the pledge was rigid and limited. A pledge created over a commercial enterprise could include only the following: (i) the trade name and commercial title; (ii) the machinery, equipment, tools and transportation vehicles dedicated to the operation of the commercial enterprise, as of the date of registration of the pledge; and (iii) intellectual property rights such as licences, trademarks, models, drawings, etc. The former system lacked creation of security interest over any raw materials, incomes and revenues etc. as part of the commercial enterprise pledge. In addition, the former system did not allow excluding in any case the trade name and commercial title as well as moveable operational equipment of an enterprise from the scope of the pledge. Therefore, in the former system, when the pledgor decides to grant more than one commercial enterprise pledges, several practical problems especially in relation to its scope had been experienced.

In the new regime, a broad range of movable properties can be included into the pledge under Article 5 of the Law on Pledge of Movables. Accordingly, similar to the former system, a pledge still can be created over:

  1. trade names and/or business names, commercial enterprises and/or industrial enterprises and
  2. movable equipment of the enterprise such as all kinds of equipment, tools, construction equipment, electronic devices including any electronic communication devices.

In addition to these, the new regime broadens the scope of commercial pledges and now includes:

  1. intellectual property and industrial rights,
  2. all types of licenses and permits that are not qualified as an administrative approval and not registered to another registry,
  3. tenancy rights and rental fees, iv. vehicles (including railroad cars),
  4. consumable materials,
  5. raw materials and inventories,
  6. commercial plates or commercial lines,
  7. commercial projects,
  8. among those mentioned herein movable properties, rights and joint ownership rights which are in the possession of third parties

The New Law also contemplates for the agribusiness companies and allows creating security interest over the agricultural properties such as:

  1. trees yielding perennial products;
  2. animals; and
  3. agricultural products.

And one of the most interesting novelties of the new regime is that a pledge can now be created over:

  1. Receivables; and
  2. All types of income and revenues.

Previously, in order to create a security interest over receivables, income and revenues, the parties either execute a notarized assignment agreement or deposit such revenues in a bank account pledged under a separately executed bank account pledge agreement. Although, the new regime allows for creating a pledge over receivables, income and revenues and registering them with TARES Registry, to what extent the market practice in relation to assignment of receivables and bank account pledges will change is not yet certain.

Execution and Registration of Pledge Agreement

As per Article 10 of the Implementation Regulation1, movable pledge agreements can be executed by and between (i) Turkish banks, financial leasing companies, factoring companies, Turkish public institutions that are authorized to lend or provide guarantees, and also 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 Law, the security interest will be created upon the registration of pledge agreement with TARES Registry. In the new regime, the parties to the pledge agreement no longer has to appear in person before the public notary and sign the standard form 'commercial enterprise pledge' agreement prepared by the notary itself. The parties, as per Article 4 of the Law, can instead sign a written agreement prepared by the parties and register it with the TARES Registry. Alternatively, instead of executing this agreement in writing, the parties can now sign the agreement by using secured e- signature. Although the Law No. 5070 on Electronic Signature reads that security agreements cannot be executed by electronic signature, the New Law provided an exception to the mentioned restriction.

Following the establishment of TARES Registry, the right of pledge and its effectiveness against third parties will be perfected through registration with TARES Registry and without the need to transfer physical possession to pledgee.

One of the important novelties here is that the secured amount in the former system had to be stated in Turkish lira, however now the parties can determine the secured amount in foreign currencies as well. Pursuant to Article 9 of the Implementation Regulation, the parties should explicitly state the type of currency of the secured amount in the pledge agreement.

Lastly, the execution of the pledge agreements and any transactions before the TARES Registry are exempt from taxes, charges or other fees.

Degree and Priority System

The new regime adopted a degree and priority system similar to those stipulated for the immovable assets under the Turkish Civil Law No. 4721. Accordingly, the security provided by the pledge, will be limited to (i) the amount and (ii) the degree of the pledge as explicitly stated in the registration. The New Law allows creating of a movable pledge in the second or later degrees provided that the amount of the pledge, which will have a priority over the one created, is stated in the registration.

Under Article 10 of the New Law, the parties may agree in the movable pledge agreement that the pledgee-creditor(s) may have the right to benefit from the degree, which is deregistered. The same article also allows parties to grant this right under an agreement other than the mortgage pledge agreement, provided that that such side agreement granting the automatic succession right is also registered with TARES Registry.

Additionally, Article 10 of the New Law allows parties to create multiple pledges over the same movable properties or rights and to explicitly determine the degree of the pledge created. However, if the parties fail to explicitly state the degree of the pledge, then the priority will be determined on the basis of the date of registration. In this respect, Article 11 of the New Law reads that in the event that more than one security interest is created and the priority among them is not determined, the security interest that is registered earlier will have priority.

Remedies Available in the Event of Default

In the event the pledgor fails to perform its obligations, the New Law entitles the pledgee to (i) file a request with the execution offices to transfer the ownership of the pledged movable asset if such pledge is registered as the first degree, (ii) transfer their receivables to asset management companies incorporated under the Banking Law No. 5411 or (iii) use leasing or licensing rights over the pledged assets.

If the pledgee-creditor cannot be satisfied by any of the aforementioned means, then the Movable Pledge Law allows resorting to the general execution methods provided under the Execution and Bankruptcy Law No. 2004.

Deregistration of the Pledge

If the claim is discharged, then the pledgee is under the obligation to apply to the Registrar with the request to deregister the pledge, and such deregistration should be completed within 3 (three) business days upon the satisfaction of the secured obligations. If the pledgee fails to apply for de-registration within such period, the pledgee may be subject to an administrative fine equal to 10% of the secured obligation. The Law also allows the pledgor to apply for de-registration provided that the secured obligations, be it present or future, actual, contingent or prospective, are satisfied.

Penalties for Non-Compliance

In the event that the pledgor

  1. Fails to use the pledged asset in accordance with the Law;
  2. Fails to transfer the ownership of pledged asset in the event of non-payment of debts;
  3. Damages or destroys the pledged movables with the intention to harm creditors;
  4. Fails to register the transfer of the ownership of pledged asset or the assignment of receivables with TARES Registry; and
  5. Carries out acts or transactions with the aim of deceiving the Registry;

then upon the complaint of the pledgee-creditors whose claims are not fully or partially satisfied, an administrative fine equal to half the secured amount can be imposed to the pledgee.


The new non-possessory commercial pledge system overhauled the archaic commercial enterprise pledge system. If the TARES Registry website can function effectively, this new type of pledge will become an essential component of security packages for the financing transactions.

For the full text of the Law on Pledge on Movables in Commercial Transactions (only available in Turkish) please click here.


1. Regulation on Creation of Pledge Right in Commercial Transactions and Execution Upon Default, published in the Official Gazette dated 21 December 2016 and numbered 29935 (3rd repeated)

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.