Can Bankruptcy Proceedings Be Initiated Against Branch Offices of Companies Whose Head Offices Are Located Abroad? 20 July 2017

I. Does the Branch Office of a Company Whose Head Office is Located Abroad Have Legal Personality?

According to Turkish Law, the requirements for a branch office are having close association with the parent company, independency from the parent company with regard to external affairs, having separate location and separate management from the parent company. Besides, it is possible for a company whose head office is located abroad to establish branch offices in Turkey.

Paragraph 4 of Article 40 of the Turkish Commercial Code numbered 6102 (“TCC”) states that “The branch offices of commercial enterprises whose head offices are located abroad are registered in Turkey as local commercial enterprises; without prejudice to the provisions of laws of the country where the head office is located related to commercial name.”

Since the branch office of a company whose head office is located abroad is registered to the Trade Registry independently from the parent company, it is accepted that the branch office has a separate legal entity.

II. Can a Branch Office Declare Bankruptcy under Enforcement and Bankruptcy Law?

Enforcement and Bankruptcy Law numbered 2004 (“EBL”) allows to initiate the bankruptcy proceedings of branch offices of companies whose head offices are located outside of Turkey. Paragraph 2 of Article 154 of the EBL titled ‘Competent Authority for Bankruptcy Proceedings” regulates that, “The competent authority for branch offices of commercial enterprises whose head offices are located abroad is the execution office at the place of the single branch office in Turkey or the place of the main branch office in case more than one is established.”

According to this provision, an application to the execution office at the place of the branch office is required to initiate bankruptcy proceedings. Therefore, initiating the execution proceedings against the head office is not an obligation.

III. Can Bankruptcy Proceedings Be Initiated against Head Offices instead of Branch Offices?

Another question of whether bankruptcy proceedings can be initiated against head offices instead of branch offices would come to mind when the abovementioned explanations are taken into consideration.

Paragraph 1 of Article 154 of the EBL states that “the competent authority for bankruptcy proceedings is the execution office at the place where the transactional center of the debtor is located”. According to this provision, if the bankruptcy proceedings are initiated against the head office, the execution office at the location of the head office shall be the competent authority. Therefore, if the head office in concern is in a foreign country, an issue of jurisdiction arises.

At this point, it must be noted that “If the debtor and creditor determine the competent execution office through a written agreement, execution office of this place shall be competent even for bankruptcy proceedings. However, jurisdiction agreements shall not be executed regarding bankruptcy lawsuits and bankruptcy lawsuits must be filed in commercial courts where the transactional center of the debtor is located.” as stated in Paragraph 3 of Article 154 of the EBL. Therefore; although the debtor and creditor are permitted to determine the competent execution office, it is regulated that bankruptcy lawsuits can only be filed before the court where the transactional center of the debtor is located.

Türkçe Versiyonu İçin

http://www.kasaroglu.av.tr/tr/31205/Merkezi-Yurtdisinda-Bulunan-Subenin-Iflasi-Istenebilir-Mi

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