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Legal Alerts

Redefinition of Movable Pledge Seeks to Boost Collateralization for Commodity Financing

Legal Alerts
Banking & Finance

Recent Development

Pledge over movable assets (menkul rehni) has long been perceived as an impractical method for collateralization as the perfection of it required the transfer of the physical possession (zilyetlik) of the pledged asset to the pledgee. Neither the lenders nor the borrowers accepted such transfer of possession as it would be impractical for the lenders to physically maintain the asset and the borrowers would need to keep and operate the asset to continue their businesses.

The only exceptions to this requirement was (i) the commercial enterprise pledge, which however, principally requires pledging the whole commercial enterprise rather than a sufficient amount of movable and (ii) pledge on assets the ownership of which is evidenced by registration into special registry.

The Turkish collateralization system has been modified in order to facilitate and diversify collateralization options and enable small and medium businesses to swiftly secure financing.

In line with the foregoing, on October 20, 2016, the Parliament adopted the Law No. 6750 on Pledge over Movable Assets in Commercial Transactions (the “Movable Pledge Law“) abrogating the Law No. 1447 on Commercial Enterprise Pledge and introducing more favorable and easier procedures for perfection of pledges over movable assets. The Movable Pledge Law is published on October 28, 2016 and will be effective as of January 1, 2017 and will not be applicable for the commercial enterprise pledges established before this date.

What the Law brings

Registry and Perfection

  • Transfer of physical possession is no longer necessary for perfection. The pledge is perfected by registration into the Movable Assets Registry (the “Registry“).
  • The Registry maintained by the Ministry or an entity to be designated by it, will be established to oversee the recording and tracking of pledges over movable assets. The Registry will keep the records of pledges established over any movable assets, except for the movable assets that have their own registries (e.g., the motor vehicles registry).
  • The Registry (i) ensures the perfection of the pledges over movable assets and (ii) makes the perfection of such pledges public and grants effect against third parties.
  • To establish a pledge over a movable asset, parties must execute a pledge agreement either in writing or in electronic form (signed with a electronically secured signature), and register the pledge agreement with the Registry.
  • Pledge agreement 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. Under the Movable Pledge Law, a merchant is any individual or legal entity that carries out commercial operations through a commercial enterprise. Therefore, legal entities established and operating abroad would also be considered merchants to the extent that they carry out commercial operations through a commercial enterprise.
  • The pledgee should apply to the Registry for the release of the pledge within three business days of the discharge of the secured obligations. If the pledgee fails to apply for the release of the pledge in due course, it may be subject to an administrative fine equal to 10% of the secured obligations.
  • Execution of the pledge agreement and any transactions before the Registry including perfection of the pledge are exempt from any tax, charge, fee or other expenses.

Scope of pledge

  • Movable assets that can be pledged through a registration with the Registry are exclusively listed under the Movable Pledge Law. The list include trade names; commercial enterprises; commercial projects; receivables; intellectual property and industrial rights; raw materials; all types of proceeds; rental fees; tenancy rights; stocks; inventories, machinery; equipment; vehicles and other movable enterprise assets. A movable pledge can also be established over contingent movable assets, such as future cash flows, receivables and assets to be accrued.
  • Although the Movable Pledge Law continues to allow the perfection of a pledge over a commercial enterprise – which includes, principally, all movable assets allocated to the enterprise’s operations – it allows the pledge to be perfected on any of the foregoing movable assets, not on the entire commercial enterprise, to the extent the security coverage provided by such movable asset is sufficient.
  • In case the pledgee defaults on its obligations, the Movable Pledge Law introduces an exception to the Lex Commissoria, allowing for a first-degree pledgee to request the transfer of ownership of the pledged asset to itself, provided that the interests of the subordinated pledgees are secured. Further, a pledgee may also transfer its receivable to an asset management company.


The Movable Pledge Law’s changes offer a much easier and innovative method for the perfection of pledges over movable assets. Businesses seeking financing can now utilize their movable assets more effectively as a source of collateral for their loans, which in turn, would be expected to increase the businesses’ ability to obtain financing for their operations. Further, the Movable Pledge Law also facilitates collateralization of commodity financings, as pledges over commodities can now be a part of loans without need to transfer the physical possession of the assets to the pledgee.

Should you have any questions about how these changes might affect or create financing opportunities for your company, please contact us.