The Law on Pledge over Movable Assets in Commercial Transactions numbered 6750 was published in the official gazette on 28 October 2016 and has entered into force on 1 January 2017 (the "Movable Pledge Law"). With its enactment, the former Commercial Enterprise Pledge Law dated 21 June 1971 and numbered 1447 (the "CEP Law") has been repealed.

The Movable Pledge Law introduces a number of innovations as for pledges to be perfected upon various types of moveable assets, rights of claim, and also includes a possibility to form a pledge over the commercial enterprise as a whole. This is surely the most interesting aspect of the Movable Pledge Law which signifies a leaning towards the concept of a "blanket lien" which in classic sense an unavailable option under Turkish law due to the default statutory principle of the need to strict delineate the secured assed.  

As mentioned above one of the fundamental amendments introduced with this new legislation is the ability to lay a pledge upon (almost) the entire commercial enterprise not only for the existing commercial assets but also for assets to be acquired as well and without any necessity to execute an additional protocol to include those future assets into the pledge scope. This certainly adds favorably onto the practical side as there would not be any formality or paperwork to extend the pledge as and when the commercial enterprise expands in tandem.  


Unlike the former CEP Law, the Movable Pledge Law does not require all aspects of the commercial enterprise including commercial name, title, machinery, equipment, licenses and IP rights to be included in the security package. The former law envisaged the commercial enterprise as a whole and one indivisible unit thus only allowed the whole enterprise to be pledged.  The new legislation however leaves discretion to determine the scope of the pledge to the parties, allowing them to exclude certain commercial assets out of the scope, if agreed. Types of assets permitted be included within the scope are:

(i) receivables; (ii) perennial plants; (iii) intellectual property rights; (iv) livestock; (v) raw materials; (vi) any kind of earnings and revenues; (vii) licenses and permits which do not require registration with other registries and which do not qualify as administrative permits; (viii) rental income; (ix) tenancy rights; (x) any and all commercial equipment, including machinery, tools, vehicles and electronic communication apparatus; (xi) perishable goods; (xii) stocks; (xiii) agricultural products; (xiv) commercial titles and/or trade names; (xv) commercial or artisanal enterprises; (xvi) commercial license plates or commercial transportation lines; (xvii) commercial projects; (xviii) coaches; and (xix) any combination of the foregoing list of movable assets which are subject to joint ownership or which are used by third parties.This is a much longer permitted assets list as compared to the CEP Law. The parties of the agreement will decide content of the pledge and will register each selected asset separately by entering into the Pledged Movables Registry (the "Pledged Movables Registry) to be included to the scope.

In addition to the above, the new legislation allows establishment of pledge over future/unmatured assets or rights or their proceeds provided that they are clearly defined under the pledge agreement. This aspect will surely be very instrumental in many finance deals such as securitization of future cash flows of a certain asset pool. Certainly, these new aspects will also greatly aid the collateralization related issues in commodity financing deals as well where segregation (thus delivery of physical control over secured assets) requirement of the commodity in these deals posed a great amount of unpracticality and legal ambiguity in potential enforcement of the security laid thereupon.  


The Movable Pledge Law increases the scope of parties eligible to be a party to the pledge agreement and allows pledge agreement to be executed between;

(i) credit institutions and traders, craftsmen, farmers, producer organizations and self-employed individuals and legal entities and

(ii) traders or craftsmen

These amendments aim to enable a broader use of the system under the Movable Pledge Law.


According to the Movable Pledge Law, the security interest created is prioritized by a degree system. The parties may decide to adopt a fixed degree system or an acceleration system (where pledge automatically moves up to an empty slot) and more importantly have the ability to determine the priority in between various pledges by assessing different degrees thereto. Unlike the CEP Law, the new system is not a "first come first served" system.


In order to be able to place a pledge over an entire enterprise's assets, the new legislation imposes a restriction that is a "loan to value" ratio requirement, which requires an assessment to be made between the value of assets owned by that enterprise and the covered debt amount. The principle is that if the individual assets of that enterprise are sufficient to secure the debt, one cannot establish pledge over an entire commercial enterprise. According to the secondary legislation the permitted loan to value ratio is 1:1.2.  Clearly the law aims to strike a balance between the creditor and the debtor interests and attempts to block an over collateralization imposition by the secured creditor.


An important amendment is in relation to the formal requirement for execution of a pledge agreement. With this new legislation, the agreement must be drafted from within the Pledged Movables Registry system either by secure e-signature or actual hand signature. If the parties choose actual hand signature option than the agreement must be signed and approved before an officer of the Pledged Movables Registry or before any public notary after being printed online from the system.


Practice for perfection of the pledge also greatly changed in the new movable pledge system. Now, one of the parties to the agreement (either the pledgee or the pledgor) has to be pre-registered to the official Pledged Movables Registry system before executing the agreement. This is done by way of an application to be made to a notary.

After registration and logging into the online system, steps imposed by such electronical database has to be precisely followed to have a print-out copy of the draft agreement. Different sheets must be filled for each asset to be included into the scope of the pledge (for example; receivables or raw material sheets). Parties will need to answer whether such asset currently exists or is a future one. Thereafter, together with the print-out copy, parties have to go to a public notary to sign the agreement unless they have used electronic signature.

From the Pledged Movables Registry, the software automatically leads you to form an agreement which is drafted in very basic, often insufficient, terms. In principle, the Pledged Movables Registry software is designed to enable parties to incorporate special terms for the agreement and there is a special part where the system asks the user whether there are any special contractual terms and conditions to be entered. Currently, many notaries (wrongfully!) claim that the commercial enterprise pledge has to be in the exact content envisaged by the system and no additional terms may be incorporated in to the agreement draft which hopefully will be resolved soon after the registration practice settles.

The Pledged Movables Registry also enables the registrants to be able to investigate any existing movable pledge already placed on a company by entering the company's MERSİS (Central Registration System Number) number or real person's Turkish identity number.

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.