By Orkun Akseli


On 20 October 2016 Turkish Parliament passed a new law. The Act entered into force on 1 January 2017. It is accompanied by three regulations governing the principles on the implementation of the Act with regard to exercise of rights in default, valuation of movables and organisational structure and mandate of the Pledged Movables Registry. The new Act is based on a well-established system that has been in use for over four decades. The aim of the new Act is to enable SMEs to have better access to finance and increase their ability to compete. It introduced non-possessory security interest on a clearer legislative basis. In case there are gaps in this new Act, the provisions of Turkish Civil Code related to the traditional pledge of movables (TCC arts. 939-949 [possessory pledge], TCC arts. 950-953 [lien] and TCC arts. 954-961 [pledge over receivables]) shall apply. It is important to note that the traditional pledge of movables (possessory pledge) is still applicable as part of the Turkish Civil Code. The new Act does not affect possessory pledge agreements, but only repealed 21 July 1971 dated 1447 numbered Pledge of Commercial Enterprise Act which used to govern non-possessory pledge in relation to commercial transactions and enterprises. [1] Any agreement made pursuant to the repealed legislation before the entering into force of the new Act will continue to be enforceable.

Scope and Aims

The Act aims to promote the use of non-possessory security interests, to broaden the type of movables that can be used as collateral, to achieve publicity via registration and to present alternative methods in the enforcement of security interests. The Act applies to the creation, perfection, priority and enforcement of non-possessory security interests. It excludes capital market instruments, derivatives, financial transactions and bank deposits and movables that have been registered in the Land Registry. The Act applies to non-possessory security interest agreements between credit institutions and merchants, artisans, farmers, production organisations, self-employed natural and legal persons; and between merchants and/or artisans.


Non-possessory security interest is created with the registration of the non-possessory security interest agreement to the Registry (article 4). The agreement can be concluded in writing or electronically. The only point perhaps that increases the cost is that the agreement has to be certified by a Notary Public or that the agreement needs to be concluded before a Notary Public in order to be registered. However, it can be argued that this is also a measure to prevent any fraudulent agreements.

A non-possessory security interest agreement should contain the following: (a) if the parties are commercial enterprise, commercial titles, MERSIS number (Central Registry Recording System – a number that is given to legal persons in their dealings with government and public institutions), the name and signature of the authorised person on behalf of the company; if the parties are natural persons the Turkish Republic ID number, full name and signature; if the parties are farmers, the Turkish Republic ID number, full name, signature and Farmer Registry System number; if parties are production organisations, authorised persons’ names, signatures and the production organisation document number; (b) the subject matter of the debt, amount, if the amount is not specific the agreement should indicate for which amount the pledge serves as a security, the type of currency and the maximum amount of pledge; (c) the asset that is the subject matter of pledge and the serial number, trade mark, manufacture year, chassis number, Custom Tariff Statistics Position or PRODTR industry code.

Types of Assets

Article 5, which has a long list of movable assets on which it is possible to create a security interest includes receivables, IP rights, raw material, and railway rolling stock. It is also possible to create security interest over the whole of the commercial enterprise. In this case, all assets related to the business of the enterprise present at the time of the creation of the security interest will be deemed to be pledged. If these assets are required to be registered in specialised registries, these registries will be informed and any security interest created under this Act will be subordinated. Commercial enterprise or artisan enterprise non-possessory security interests will be reported to the commercial or artisan registries. It is possible to create security interests future movable assets and proceeds from existing or future movable assets. The Act also allows creation of security interest over one or multiple movable assets.

The security interest over the movable asset cover the fixtures. Parties to the non-possessory security interest agreement may decide to include present or later in time accessories within the scope of the pledge. It is possible to create a non-possessory security interest over movable assets that mix or converge. In this case, it is deemed that the security interest is created over the mixed or converged asset.

Pledged Movables Registry

The Act requires the creation of a Pledged Movables Registry (art. 8). This is required to create and to enable third party effectiveness (perfection), to determine priority rights among creditors, and to register the non-possessory security interest over movable assets and assignment of receivables. The Registry is public. If the movable asset is required to be registered in another registry, it cannot be registered in this general registry under this Act.

Third Party Effectiveness

Security interest will be effective against third parties when it is registered in the Registry (art. 9). Therefore, when together read with the creation section, above, creation and third party effectiveness of the security interest occur at the same time. The security provided by the non-possessory security interest is limited to the amount of security and its rank. Non-possessory security interest can be established in the second or lower ranks as long as the amount of the earlier security right’s amount is indicated in the register. Creditors may advance among ranks and any agreement to that effect outside the Pledge agreement, in order to be valid, should be registered in the Registry (art.10).


If there is more than one security interest over the same asset without ranks, priority among these interests will be determined according to the time of creation. If they have ranks, priority will be determined according to ranks (art. 11).

In order to allow a lower ranked creditor to advance to a higher rank, the first ranked creditor should be paid before any other creditor.

Security interests over mixed or converged assets have the same priority as they did before the assets mixed or converged. If these assets have the same rank, their registration moment will be taken into account in order to determine priority.

Rights and obligations of parties

These are determined in the non-possessory security interest agreement (art. 12). Grantor/possessor is under the obligation to protect the value of the asset and the creditor may request from the court to order grantor to take measures to protect the value of the asset. In case of risks arising from delays, the creditor may have the right to take relevant measures without the involvement of the court. Creditor has the right to monitor the asset. Grantor is responsible to compensate any losses that may arise from the reduction of the value of the asset. Grantor is also under the obligation to register the transfer or assignment of the asset in the Registry.

Post-default rights

A creditor who is ranked first may request the transfer of ownership of the asset from the Enforcement Office (article 14). The Enforcement Office informs the Registry of this transfer. The creditor may transfer the asset to an asset management company which will take over the rank of the creditor. The creditor may also utilise leasing or licensing rights as long as there is no need for transfer of possession. If the debt is not paid by using these methods, the creditor may utilise the general enforcement provisions. The Ministry has the right to prepare regulations to govern other matters related to post-default rights.

Termination of the claim

Within three working days as of the termination of the claim creditor must request the removal of security interest from the Registry (art. 15). Failure to do this will lead to administrative monetary penalty which will be paid by the creditor. The penalty amount is 1/10th of the original debt. If the debtor has paid off the debt completely or via other means, the security interest will be removed from the Registry upon the creditor’s request. If the creditor does not request removal of the security interest from the Registry, the debtor can do that by providing proof of payment and satisfaction of the debt.


Grantor or third party transferee may have to pay judicial monetary penalties which cannot be more than half of the owed amount (article 16). This is the case if (a) the pledged asset is used against the provisions of this Act; (b) the ownership of the pledged asset is not transferred despite non-payment; (c) the pledged asset is destroyed or damaged purposely; (d) the pledged asset’s transfer or assignment has not been registered in the Registry; and (e) activities that aim to falsify Registry take place.

Regulation on the Pledged Movables Registry

This Regulation is based on article 8 of the Pledge of Movables in Commercial Transactions Act. The Regulation requires the creation of an electronic registry. The second part of the Regulation deals with the creation and operation of the Registry. The Regulation requires the creation of a Registry centre with a certain personnel in charge of overseeing the operation of the electronic registry system. This centre ensures a number of things including registration records are kept electronically and are public; an infrastructure is established so that other registries can electronically access to the general registry for cross-check purposes and vice versa; the records are kept securely and are backed up. The centre personnel checks the registration request to decide whether the request has the necessary conditions required under the Act for registration (including whether the request has been made by the parties to a non-possessory security interest agreement, whether the request is accompanied by the agreement and whether the agreement has been made in accordance with the Act and whether relevant authorisations has been obtained). The Ministry of Justice has the supervision and auditing rights. Documents physically submitted to the Registry for registration, amendment, removal and other purposes will be kept both physically and electronically. Documents kept electronically are archived. Data sharing between the Registry and other registries is made electronically. If other registry is not an electronic registry than data sharing is made physically. Records are kept in Turkish.

Third Part of the Regulations deals with the Registry services (art. 15- 32). Registration or amendment request is made in accordance with the request of the parties to the non-possessory security interest agreement. Registration can also be made upon court order. Removal request may also be made by the authorised representatives of the secured creditor. Grantor or the third party transferee or their authorised representatives may request the registration of the transfer of the asset. Third party security interest transferees may also request the registration of the transfer of security interest. Secured creditor and grantor or their authorised representatives may request the registration of moving into an available rank. Article 23 enumerates the required documents at the time of registration. In the case of registration of non-possessory security interest agreement: (a) a copy of non-possessory security interest agreement prepared and signed in accordance with the relevant Act and Regulations; (b) information that specifies the asset that is the subject matter of security; (c) the originals of IDs that show the ID numbers of parties or their authorised representatives; and (d) originals or certified copies of authorised representatives’ authorisations. In the case of transfer of the pledged asset registration number, documents that prove the transfer of the pledge asset, originals of IDs that show the ID numbers of parties or their authorised representatives; originals or certified copies of authorised representatives’ authorisations are necessary. Similar are required in the case of transfer of the non-possessory security interest and moving to the available rank.

Registration request may be denied by the Registry if (a) the agreement is not signed, (b) the agreement lacks the mandatory information, (c) conditions required for registration are absent; (d) required document by the Registry have not been presented; (e) matters that will be registered is against public policy or do not adhere to the parties’ truthful statement; and (f) in the case of advancement to other ranks, the secured amount in the agreement is claimed to be registered without consent and against other creditors (art. 27).

Non-possessory security interest agreement may be amended. If there is only one secured creditor, the agreement may be registered with the same registration number by making amendments in the amount of debt, secured amount and the duration of the agreement. Same registration number may be used if the following are amended in the agreement: (a) the pledged asset is replaced by using another asset as collateral; (b) in case of multiple pledged assets, removing some of them from the scope of the registration; (c) the abatement of debt amount; and (d) abatement of secured amount. If there are multiple secured creditors of the same pledged assets, an abatement in the assets in favour of one creditor does not make any change in the other creditors’ pledged assets. It is not possible to amend the non-possessory security interest agreement against the subsequent creditors. If the debt is increased against the interests of other secured creditors, a new agreement needs to be concluded and registered for the increased amount. If the secured amount is increased against the interests of other secured creditors, a new agreement needs to be concluded and registered for the increased amount.

The security agreement may be removed from the Registry if the following occurs: (a) the claim is extinguished and the secured creditor requested removal; (b) the grantor sends notice in accordance with the court order that the debt has been paid and claim is extinguished; (c) the court orders that the security agreement should be removed. The secured creditor within three working days from the date of the extinguishing of the debt should request the removal of the registration from the registry.

Anyone who can prove its interest can query on the Registry system. In the query the following information can be found: (a) grantor’s information; (b) pledged assets’ type and specific information; (c) registration date and time; (d) secured creditors’ rank and number; (e) amount of debt and/or secured amounts; (f) accepted rank system and whether the secured creditors have the right to advance to an available rank.

The Registry has no responsibility for the wrongful or incomplete entry to the system.

[1] For ease of use and to avoid confusion, in this note non-possessory security interest will be used to denote pledge that does not require transfer of possession.