Türkçe
Unfortunately, many companies have lost their economic competence due to the economic problems experienced over the past year and the additional negative effects caused by the Coronavirus (COVID-19) epidemic and they sought different efforts to ensure the performance of their debts. Especially, the tendency of the banks to refrain from allocating facilities forced companies to create alternative financing resources. In that respect; it became inevitable for many companies to sell their assets or some parts of their commercial enterprises to third parties. However, is the sale of assets and commercial enterprises within this scope actually a right choice? Or is it an additional financial risk for companies due to legal regulations introduced by the legislator to protect creditors?
WHAT IS THE DIFFERENCE BETWEEN THE SALE OF ASSETS AND SALE OF COMMERCIAL ENTERPRISE?
Requirement for Written Form
In accordance with the 3rd paragraph of Article 11 of the Turkish Commercial Code (“TCC”), which regulates the transfers of commercial enterprises; “The commercial enterprise may be transferred as a whole and may be subject to other legal transactions without the need to make mandatory disposal transactions separately for the transfer of the assets that it owns. Unless otherwise provided, the transfer agreement is considered to include long-term assets, operating value, tenancy rights, trade name and other intellectual property rights, and assets that are constantly dedicated to the business. The transfer agreement and other contracts related to the commercial enterprise as a whole must be executed in written form and registered to and announced in the trade registry.”
As can be understood; pursuant to Article 11/3 of the TCC, the transfer of a commercial enterprise as a whole is made in written form and registered to and announced in the trade registry. In that respect, the written form and registration are conditions for validity and if these conditions are not fulfilled, the transfer of commercial enterprise will be null and void.
However; contracts to be executed regarding separate transfers of assets under Turkish Code of Obligations are not subject to any form requirement. In that respect; the transfer of movable property of an enterprise can be realized with the transfer of possession, and it would not be necessary for such transfer to be made with a written contract.
Liability for Debts
In accordance with Article 202 of the Turkish Code of Obligations; (“TCO”);
“A transferee who has taken over an asset or an enterprise together with its actives and passives will be responsible for the debts of such asset or enterprise against the creditors as from date of notification of such transfer to the creditors or the date of announcement of such transfer in Trade Registry Gazette for commercial enterprises or date of announcement of such transfer in one of the newspapers distributed through Turkey for other assets. However, the transferor will also be jointly liable for such debts of the assets or commercial enterprise for a period of two years together with the transferee. This period will commence as from the date of notification or announcement for the due debts and as from the date of maturity for the immature debts.”
As can be understood; in order to accept that there is a commercial enterprise transfer under Article 202 of the TCO, it is necessary to take over the enterprise together with its actives and passives, in other words with its assets and liabilities. However, in this case, the transferee will be liable for the current debts of the acquired commercial enterprise and the transferor will also remain liable for such debts for 2 years together with the transferee.
However, in a transfer of assets which does not constitute an essential element of the business, only the movable or immovable property subject to the transfer is transferred and the transferee has no responsibility for the existing debts of the commercial enterprise.
For these reasons; many companies prefer the sale of the company assets separately instead of transferring the assets included in the commercial enterprise as a whole and thus, they aim to satisfy their financial needs and to prevent the sale of the assets at lower prices in auctions to be conducted by the bailiff offices under possible enforcement proceedings. In addition; the fact that the party taking over the assets does not assume any liability in relation to the existing debts of the commercial enterprise also facilitates the sales in question.
However, certain legal regulations have been made to prevent commercial enterprise owners to pursue such a way to avoid the conditions and responsibilities envisaged for the transfer of commercial enterprises.
UNDER WHAT CIRCUMSTANCES THE ASSET TRANSFERS ARE REGARDED AS COMMERCIAL ENTERPRISE TRANSFERS?
In order for an asset transfer to be regarded as a commercial enterprise transfer, the “essential elements” of the business must have been transferred. In other words; if the commercial enterprise which transfers its assets cannot continue its existing business and commercial activities without the assets subjected to transfer or its capacity decreases significantly, then it will be accepted that there is a commercial enterprise transfer under Article 202 of the TCC, instead of a transfer of asset under the TCO. In this case, it will be necessary to comply with the written form and registration conditions stipulated under Article 202 of the TCC, and the transferee will be responsible for the debts of the enterprise which is subjected to transfer.
This approach is also accepted by the Supreme Court with the decision of 8th Chamber numbered 2013/16270 E. 2014/14177 K. and dated 04.07.2014 which states that “… Pursuant to Article 179 of the Code of Obligations (Article 202 of the TCO), it is not necessary to transfer all of the commercial enterprise or the assets to maintain the transfer of workplace. The transfer of an important asset of the business is also a transfer of workplace. Since the transfer of the tunnel formwork materials amounting to 700,000 TL in the construction site following the maturity of the debt is the transfer of the majority of the enterprise, the third person who took over the goods will be responsible for the debts of the enterprise in accordance with Article 179 of the Code of Obligations and this transfer will not affect the rights of the creditors accordingly.”
Therefore; subjecting the essential elements of the commercial enterprise to individual sales in order to eliminate such responsibility and to refrain from compliance with the validity conditions will not provide any protection for the parties and the transaction to be performed will be invalid as it does not comply with the conditions set out under Article 202 of the TCC.
At this point, the first question that comes to mind is whether it is possible to make a regulation under the transfer contract that merely the actives (assets) of the commercial enterprise will be transferred and such transfer will not include the passives (liabilities) of the commercial enterprise. Although this issue is controversial in the doctrine, it is accepted by the Supreme Court with its established decisions that the regulation in question is mandatory. As it is stated in the decision of the General Assembly of the Supreme Court numbered E. 2014/19 K. 2015/1743 and dated 24.06.2015; “… Since the provisions of Articles 179-180 of the Repealed Code of Obligations (TCO m.202-203) are mandatory, it is not possible to nullify or exclude the same by means of registration, contract, transfer status or administrative acts. The nullification or limitation of such mandatory provisions may only be maintained by laws. “
In that respect; the regulations indicating that the transferee will not be responsible for the debts of the commercial enterprise or that the responsibility of the transferor will terminate on the transfer date will be legally invalid.
WHAT ARE THE CONSEQUENCES IF AN ASSET TRANSFER IS REGARDED AS A COMMERCIAL ENTERPRISE TRANSFER?
In accordance with Article 280 of the Enforcement and Bankruptcy Law No. 2004; “All transactions made by a debtor, who does not have sufficient assets to satisfy its debts, to harm his creditors can be canceled in cases where the debtor’s financial situation and the intent to cause harm are known or should have been known by the other party of the transaction.”
In accordance with the last paragraph of the same Article; “it is assumed that the person, who acquired or purchased all or a significant part of the commercial enterprise or the existing commercial commodity in the workplace, knows that the debtor aims to harm its creditors and it is also assumed that the debtor has the intention to harm his creditors. This presumption of law may only be overruled by proving that such transfer is notified to the creditor, who filed the litigation for the cancellation of such transfer, at least three months prior to the date of transfer/sale in a written manner or by announcement in the Trade Registry Gazette; if this is not possible, by announcement through appropriate means to ensure that all creditors have been notified.”
As can be seen; if the essential elements of a commercial enterprise having difficulties in paying its debts are transferred without complying with the conditions specified under Article 202 of the TCC, the creditors of the company will have the right to request for the cancellation of such transfer.
Within the scope of the related article mentioned above; in the event that all or a substantial portion of the assets of a commercial enterprise is transferred and the transferor cannot fulfill his debts to its creditors, it is accepted as a presumption of law that the transferee knows that the owner of the assets is in economic difficulty and that the transfer is intended to harm the creditors. In this case, the transferee can only overrule this presumption by proving that the creditor who filed the annulment case has been notified about the transfer three months prior to such transfer or that the announcement obligations specified in the above-mentioned Article have been fulfilled. Otherwise; the related transfer will be canceled by the court and both parties of the transfer will suffer some financial losses due to this cancellation.
ERKUT LAW OFFICE
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