Client Alert:

Parliament Introduces Wide Sweeping Amendments to the Enforcement and Bankruptcy Code

Parliament Introduces Wide Sweeping Amendments to the Enforcement and Bankruptcy Code

A new legislation titled The Law Amending the Enforcement and Bankruptcy Code and Certain Laws (“New Amendment”) has been published in the Turkish Official Gazette on 30 November 2021 and entered into force on the same day. The New Amendment inter alia introduces an extensive revision of the Enforcement and Bankruptcy Code (“Code”) in terms of attachment and sale procedures as well as widening the authority of the enforcement courts. This client alert aims to provide a general overview of the revised rules of enforcement.

1. Authority To Render Suspension of Enforcement Decisions

Previously, an application to suspend the enforcement of a court judgment pending appeal had to be made to the Regional Court of Appeal or the Court of Cassation. This was criticized for adding to the already heavy workload of the appellate courts and causing delay to a simple application that could otherwise be addressed swiftly. The New Amendment responds to such criticisms and shifts the authority to render suspension of enforcement decisions from the appellate courts to the local enforcement courts.

2. Amendments to Attachment Procedures

The revision of the rules concerning the attachment of assets and the preparations for their judicial sale presents itself under the following three main topics.

  • i. The enforcement officer who attaches property that is not recorded in a registry shall appraise the attached property and may consult an expert when necessary. The appraisal of assets recorded in a registry must be conducted by experts who are accredited with the Regional Board of Experts and approved by the Ministry of Justice.
  • ii. Property that has been attached but have not been taken under custody shall be taken under custody and prepared for delivery to the buyer when a request for sale is made, failing which the sale cannot take place.
  • iii. The possessor of a movable property is deemed its owner. A movable property that is under the joint possession of the debtor and a third party would still be deemed to be in the possession of the debtor. The New Amendment allows the movable property to be entrusted to the third party instead of being taken under custody, on condition that the third party who claims ownership of the movable property consents for the property to remain in its possession. On the other hand, the movable property may be taken under custody if the third party’s application to recover the movable property is dismissed by the enforcement court.

3. Amendments to Sale Procedures

The New Amendment introduces a set of new/amended provisions regulating the various phases of a judicial sale. The most striking amendments are listed below.

  • i. In the previous version of the Code, the time limit for requesting the sale of movable and immovable property was 6 months and 1 year, respectively. The time limits have been unified by the New Amendment which stipulates that the 1-year time limit shall be applicable for both types of property. Where the sale of the attached property is requested within the time limit but could not be effected, the time limit shall be extended by an additional year. Please note that the time limits for requesting the sale of a property pursuant to a right of lien still differ for movable and immovable property and ships.
  • ii. A request for sale can be made by the creditor or the debtor. The requesting party must deposit an advance covering the entire costs of the sale when making the request. This was different in the previous version of the Code which only required the costs of the sale to be deposited within 15 day of being ordered to do so by the Bailiff. The attachment will be lifted if the sale is not requested and the sale costs are not deposited within the time limit.
  • iii. The debtor may be granted authority by the Bailiff to sell its own attached property, provided that the sale value is not less than 90% of the property’s appraised value or the total amount of the preferred claims (vis-à-vis the party requesting the sale) that are secured by the property concerned, whichever is higher, plus the total costs of execution accrued to that date. The application of this procedure is subject to the debtor’s request made within 7 days from service of the valuation report.
  • iv. The scope of the utilization of electronic platforms is extended to the sale of attached property. Accordingly, an attached property can now be auctioned online within the electronic sale portal integrated with the National Judiciary Network Informatics System. Furthermore, the pre-sale and post-sale procedures applicable to movable and immovable property have been unified.
  • v. The pre-auction, post-auction, pre-tender and post-tender procedures have been revised to be in harmony with the use of electronic platforms. The procedures applicable to movable and immovable property have been unified.
  • vi. The rules applicable to applications for the annulment of tenders have been revised. One of the most notable changes is the requirement to deposit a pro-rata fee and 5% countersecurity, both based on the tender value by any person applying for the annulment of a tender, other than (i) the creditor who requested the sale, (ii) the debtor, (iii) the interested parties recorded within the relevant registries and (iv) the beneficiary of a limited in rem right.

The revisions introduced to the Code by the New Amendment aim to achieve a more consistent, simpler and modern process in terms of enforcement proceedings, benefiting from electronic means to conduct certain procedures remotely. Although some of the revisions have already started to attract criticism, it would be fair to say that for the most part the amendments pave the way for a simpler enforcement system.

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