Transfer of Commercial Enterprise in Economic Difficulties to Third Persons 26 November 2018
Due to the economic distress in our country, unfortunately it is well known fact that several companies are in financial difficulties and their solvency is weakened. These difficulties cause the real and legal persons possessing the title of merchant to seek for different ways and fall back on the practical solutions which may be accepted as collusive most of times. One of these methods is the transfer of commercial enterprise.
Recently, it has been seen that; the real and legal person debtors transfer their assets to third persons by collusive transactions with the intent of hiding their assets from creditors. However, the legislator protects the creditors by enacting a number of provisions in Turkish Commercial Code, Code of Commercial Enterprise Pledge and Enforcement and Bankruptcy Code.
First point to be underlined is the requirement of the separation of the transfer of certain assets and transfer of commercial enterprise. Namely, the transfer of certain assets of enterprise and the transfer of enterprise as a whole have different legal characters and should be evaluated separately in accordance with the characteristic of each legal case. If the debtor could not conduct the commercial activities without the transferred assets, the transaction cannot be considered as transfer of certain assets; but merely as transfer of commercial enterprise and such transaction shall be subjected to provision regarding the transfer of commercial enterprise.
According to Article 11/3 of Turkish Commercial Code; a written agreement between the parties, registration and announcement are required for the transfer of commercial enterprise. The written agreement is a condition for the validity of the agreement; otherwise the agreement shall not bear its effects. Under Article 133/3 of The Trade Registry Regulation, the registration is mandatory in order to validly conclude the transfer agreement. This registration has an institutive effect. As for the announcement, it is a requirement envisaged in order to prevent acquisition of assets by third persons and to eliminate the good faith. Therefore, the transfer of commercial enterprise can be valid provided that a written transfer agreement is concluded and such transaction is registered to the relevant trade registry.
The legislator envisages that the assets and liabilities of the commercial enterprise must be transferred together in order to protect the creditors in the transfer of the commercial enterprise. In accordance with Article 202 of Turkish Law of Obligations; the transferor together with the transferee will remain liable for such debts for a period of two years. On the other hand, liability of transferee will continue after two years.
In accordance with Article 280 of Enforcement and Bankruptcy Code; in case of the transfer of commercial enterprise, the creditors have right to claim the cancellation of transfer in order to collect their credit where creditors of transferor are not able to collect their credits and it is understood that transfer of commercial enterprise had been executed with purpose of hiding assets from creditors and to harming its creditors.
For these reasons; if a company is planned to transfer its commercial enterprise to a third party in order to overcome its financial difficulties and pay its debts, it is important that such transfer should be exercised in compliance with all legal requirements in order to prevent the cancellation of the transaction. Similarly; the creditors believing that the commercial enterprise was transferred for preventing them to collect their credits, may claim the cancellation of such transfer.
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