True Sale
Perfection and Priority
Notice of Assignment
Substantive Consolidation
Tax Liability
Authorization, Licences and Collection
Consumer Receivables


Under Turkish law, Turkish banks are the originators of transferred receivables. On the initial closing date of a transaction the originator sells and assigns the transferred receivables to a special purpose vehicle (SPV) incorporated outside the Republic of Turkey.

The relevant certificates are issued by a trust. The SPV transfers a promissory note to the trustee for the benefit of certificate holders, which is secured by the SPV's right, title and interest in and to the transferred receivables and transaction documents. The securities issued by the trust on the closing date represent undivided beneficial ownership interests in the assets of the trust. The aggregate principal amount and interest rate of the certificates should match the principal amount and interest rate of the SPV note.

'Receivables' comprise the originator's existing and future rights to receive payments through transactions undertaken with MasterCard International Incorporated, Europay International, Visa International Service Association and American Express Ltd.

The amount of receivables sold by the originator to the SPV and pledged to the trust to secure the SPV note is outlined in the transaction documents as being an aggregate amount equal to that necessary to reduce the aggregate outstanding principal balance of the certificates, together with all interest and other amounts owing with respect to the certificates, to zero.

Occasionally, the trust will receive insufficient collections to make all outstanding principal and/or interest payments in respect of the certificates by an expected final payment date, or certain events will occur. As a result, the trustee demands that the originator pay the outstanding amount of principal and accrued interest under the certificates for the benefit of the certificate holders.

Upon the occurrence of stipulated events, the trustee establishes a reserve account which is pledged to the trustee with a view to providing additional insurance to certificate holders in the event that the collections on transferred receivables prove insufficient.

The originator is permitted to engage in subsequent sales of receivables (in addition to the transferred receivables), provided that the interests of any subsequent purchasers are either held equal or subordinated, to the interests of the trustee on behalf of certificate holders, and certain other conditions are satisfied (including a cash-flow coverage test and a ratings confirmation requirement with respect to the certificates). A paying agent is appointed to act on the trustee's behalf for the benefit of certificate holders and any subsequent purchasers for the purpose of allocating collections on receivables among the relevant purchasers.

Payments of principal and interest on the certificates issued to the certificate holder are guaranteed by an insurance company pursuant to the terms of a financial guaranty insurance policy. Where the insurance company is drawn to pay a shortfall in interest or principal amounts payable to the certificate holders, it has a right to reimbursement from the originator and the assets of the trust, and is subrogated to the rights and remedies of the certificate holders (including any rights to demand and receive payment of the reacquisition amount from the originator).

The originator has various indemnification obligations to the certificate holders and insurance company in respect of costs, expenses and indemnification obligations that the certificate holders or insurance company may incur.

True Sale

Under Turkish law a 'true sale' is recognized as the assignment of existing and future receivables, provided that such an assignment is made by the assignor to the assignee without recourse to the assignor (Articles 162 to 172 of the Turkish Code of Obligations (Law 818)). However, in the event of the assignor's insolvency, bankruptcy or non-performance, the assignee has recourse against the assignor which does not affect the validity of the true sale. Thus, a true sale of transferred receivables from the originator to the SPV is possible under Turkish law and results in a transfer which effectively removes the assets in question from the originator's estate so that they are placed beyond the reach of the originator's third-party creditors or its receiver, liquidator, administrator or trustee in bankruptcy.

Under Article 163 of the code, an assignment is valid provided that a written agreement is concluded for assigning existing and future receivables between the assignor and assignee (there are no other legal requirements for establishing a true sale of the transferred receivables). Giving notice to a debtor does not affect the validity of such an agreement, while the absence of giving such notice releases a debtor from its obligations where it pays the assignor directly. However, if a notice is not served to Visa, American Express, Europay and/or MasterCard by the originator and/or SPV, then neither Visa, American Express, Europay or MasterCard is obliged to pay the SPV.

The same legal requirements apply to a 'true sale' of both current and future receivables.

In the event that a Turkish bank incurs any financial difficulties, the Banking Supervisory Board will either transfer its management and shares to the Savings Deposit Insurance Fund, or cancel its banking licence by declaring insolvency (Turkish Banks Act (Law 4,389 as amended)). In the event that the bank's management and shares are transferred to the Savings Deposit Insurance Fund, the bank is not deemed to be insolvent or bankrupt and continues all of its banking activities in accordance with its licence. However, in the event that its banking licence is cancelled, liquidation ensues. Thus, a true sale of transferred receivables includes future receivables arising after commencement of the transfer of the originator's management and shares to the Savings Deposit Insurance fund, but not after the commencement of insolvency, bankruptcy or receivership proceedings.

The originator cannot generate further receivables in the event that its banking licence is cancelled. Furthermore, its agreements with MasterCard, American Express, Europay or Visa regarding the generation of receivables cannot be altered.

The originator's creditors cannot challenge the originator's receivables or receivables incurred prior to cancellation of the banking licence until the licence is cancelled. However, upon cancellation, no receivables are incurred as the originator is unable to perform any activities for the generation of receivables.

Furthermore, cash from those receivables credited to the SPV account cannot be challenged by the originator's creditors, trustee or receiver in bankruptcy. However, this should be confirmed by a lawyer in the jurisdiction where the bank accounts are held as, under the Turkish conflict of law rule, bank accounts are subject to the laws of their location.

Even if structured as a present sale to be immune from claims of creditors or a receiver, liquidator or trustee in bankruptcy, there is no risk that the transaction could be recharacterized as one in which the originator retains an interest in future receivables, as an assignment of future receivables would be recognized as a true sale.

The particular description of the receivables to be sold does not create any risk of recharacterization of the transaction. So, for example, the transaction cannot be viewed as a loan by the SPV to the originator (or by the trust or certificate holders to the originator) secured by the transferred receivables. Nor can it be viewed as a present sale of receivables but as an agreement to make a series of future sales of receivables as and when generated.

In the event that the originator's banking licence is cancelled as a result of its financial difficulties or insolvency, it cannot re-acquire requisition amounts, and all amounts owed by it from the sale of the receivables become due and payable and must be registered as an unsecured claim with its liquidators.

Neither the originator nor its affiliates may continue to service the transferred receivables or act as collection agents during the period following the sale once its banking licence is cancelled.

Perfection and Priority

The Turkish Civil Code (Law 4,721) governs the granting of security interest over present and future receivables. According to Article 954, a pledge can be established over credits and other assignable rights. An agreement to constitute a pledge of a credit which is not represented by a negotiable instrument must be in writing (Article 955). The pledgee and pledgor may notify the debtor of the pledge. Under Article 939, title ownership of the credits and rights pledged to a pledgee remain with the pledgor. The pledgee can only cash them in and offset the cash against its claims secured by such a pledge. Thus, although granting a present security interest in future receivables (including post-petition receivables) is possible, such a security interest does not constitute a true sale. However, in the event that the receivables are cashed and deposited into a bank account in, for example, the United States, a security interest may be granted under US law due to the aforementioned Turkish conflict of law rules.

In the event that the originator grants an assignment of, or security interest in, the receivables to more than one purchaser or secured lender through fraud, mistake or otherwise, the purchaser that first notified the debtor of the assignment or security interest has priority over other purchasers. The assignment or pledge agreement with respect to the receivables is binding upon the debtors only if they are notified accordingly.

Notice of Assignment

MasterCard, Europay, American Express and Visa have no obligations in the event that they are not notified of the assignment of a receivable (including a future receivable), and have no liability if they make payment under a receivable directly to the originator (Article 165 of the Turkish Code of Obligations (Law 818)). However, absence of such a notice does not affect the validity or enforceability of the assignment against the originator.

Where MasterCard, Europay, American Express and Visa do receive notice of the assignment, they must pay the assignee. If they pay the originator after receiving notification they are still obliged to pay the same amount to the assignee, which is also binding on any third-party creditors of the originator.

The forms of consent and agreement, and notice of sale contemplated to be delivered to and acknowledged by MasterCard, Europay, American Express and Visa in connection with the transaction are adequate for the trustee to secure the benefit of any obligor notice.

Other than execution, delivery and acknowledgment of receipt of the notice, no other formality need be observed in order to establish that such notice has become effective.

Notice of assignment may be given to MasterCard, Europay, American Express and Visa in respect of future receivables arising after the date of such notice. However, they will be released from their payment obligations if they have made any payment to the originator prior to such notice.


If the originator effects the present sale of transferred receivables (including future and post-petition receivables), there is no basis in domestic law for any of the following to rescind or void the sale, or otherwise claim any right or interest in any such receivables or proceeds thereof:

  • the creditors of the originator;
  • the receiver or liquidator;
  • the originator itself; or
  • a trustee in any applicable insolvency proceedings.

There are no grounds on which the sale could be voidable, unless the the assignee is aware of or has acted together with the assignor, in a fraudulent transfer.

Third parties are powerless to prevent the SPV from acquiring any of the future receivables and related collections as they are generated.

In the event of the originator's bankruptcy or receivership, any existing contract with MasterCard, Europay, American Express or Visa is automatically terminated and the originator becomes unable to enter into a new contract with any of them which is free of the claims of the SPV and/or trustee. The claims of the SPV and/or trustee from the originator become unsecured credits and rank equal with the claims of other unsecured credits.

According to Article 280 of the Execution and Bankruptcy Law (Law 2,004), an assignment of receivables becomes null and void if the assignor makes it within the two years prior to insolvency or bankruptcy with the intention of preventing the collection of claims of third-party creditors, and the assignee is aware of this intention. As a result, collections under receivables received during such period may be recovered by the originator's receiver, liquidator, bankruptcy trustee or creditors.

According to Article 324 of the Commercial Code (Law 6,762) a company may file a petition for voluntary bankruptcy if it becomes unable to pay its debts or loses two-thirds of its net worth (ie, paid-up capital plus legal reserves). According to Article 171 of the Execution and Bankruptcy Law (Law 2,004) any creditor may petition the bankruptcy of a debtor before the relevant commercial court of first instance should a debt fall due. In both voluntary and involuntary bankruptcy procedures, the company's bankruptcy must be declared by the commercial court of first instance. The relevant timescale for the purposes of such 'preference' or 'suspect' period is within two years of the date of filing the lawsuit. However, according to Article 16 of the Banks Act (Law 4,389 as amended), all the executionary and bankruptcy procedures against the originator shall be suspended and only the Savings Deposit Insurance Fund can petition for its bankruptcy if the originator's banking licence is cancelled. All executionary and bankruptcy procedures are suspended and no third-party creditors, including the SPV and/or trustee, can take legal action against the originator (prohibited actions include continued remittance by MasterCard, Europay, American Express or Visa of collections on future receivables (including post-petition receivables) to the trustee's account).

In insolvency proceedings, the originator's business and/or assets are liquidated and sold by bankruptcy officials. The purchaser is allowed to acquire such business and/or assets subject to the SPV's and/or trustee's rights in the future receivables.

The claims of the SPV and/or trustee against the originator become unsecured claims ranking equal with those of all other unsecured creditors.

Substantive Consolidation

In the event of the originator's bankruptcy, in no circumstances may the originator's receiver, liquidator, bankruptcy trustee or creditors treat the assets of the SPV together with the assets of the originator for the purposes of satisfying the originator's debts.

Tax Liability

The payment to be made by the SPV to the originator is regarded as a consideration made against the true sale. Neither the SPV, trust, insurance company, certificate holders nor trustee is subject to any Turkish taxes, or deemed to be licensed or to have permanent representation in the Republic of Turkey by entering into the transaction. The transaction is treated as a current sale of all current and future receivables by the originator to the SPV.

The assignment of receivables from the originator to the SPV or the taking of any additional steps to enforce or perfect such assignment from the originator to the SPV shall be subject to the following transaction and execution taxes:

  • stamp taxes imposed by the Stamp Tax Law (Law 488, as amended) in the amount 0.75% (prevailing on the date of introduction of all relevant agreements and documents and payable on such date without penalty);
  • court charges imposed pursuant to the Law on Charges (Law 492) in the amount of 5.4% of the amount in question (one-quarter of which is payable at the commencement of any suit or action and the remainder of which is payable upon judgment);
  • court charges payable in connection with the bringing of any appeal; and
  • attorneys fees payable in accordance with the tariff in force at the time of filing a lawsuit as published in the Official Gazette, together with the other court expenses.

The corresponding assignment of a security interest in order to secure the SPV note to the trustee is not subject to any tax.

Payments received by the trust, trustee, certificate holders and insurance company are not subject to Turkish taxes, provided that none of these is an entity incorporated or organized in the Republic of Turkey, or:

  • is engaged in trade or business in the Republic of Turkey through a corporation, limited liability company, trust or partnership;
  • has other contractual joint ventures or arrangements with a resident of the Republic of Turkey; and/or
  • is a participant in other financing arrangements with other residents of the Republic of Turkey, such as lending money to a resident of the Republic of Turkey or holding or guaranteeing notes from other receivables transactions sponsored by Turkish residents.

However, if an entity conducts business in the Republic of Turkey through a separate branch office through which payments are received, corporate and income taxes apply.

Authorization, Licences and Collection

The following are not required to qualify to do business in the Republic of Turkey or otherwise obtain a licence to engage in any specific business as a result of participating in the transaction:

  • the SPV;
  • the trustee;
  • the trust;
  • the certificate holders; or
  • the insurance company.

In particular, the insurance company is not required to be licensed or meet any other requirements under insurance regulations in the Republic of Turkey in order to issue a policy.

No governmental or financial authority approvals or formalities are necessary for the SPV to:

  • purchase transferred receivables from the originator;
  • receive collections of transferred receivables either directly from MasterCard, Europay, American Express or Visa, or through the originator; or
  • enforce its rights against MasterCard, Europay, American Express or Visa, whether in its own name or in that of the originator, in the courts of the Republic of Turkey.

Similarly, no approvals, formalities or payment of any special taxes is necessary for the trust or trustee (on behalf of the certificate holders and insurance company) to:

  • acquire the SPV note;
  • receive collections of the receivables either directly from MasterCard, Europay, American Express or Visa, or through the SPV; or
  • enforce its rights against MasterCard, Europay, American Express or Visa, whether in its own name or in that of the SPV, in the courts of the Republic of Turkey.


Under the International Private and Procedure Law (Law 2,675), a court judgment of a country other than the Republic of Turkey may not be enforced in the Turkish courts unless:

  • a treaty in effect between such country and the Republic of Turkey provides for the reciprocal enforcement of judgments;
  • there is de facto reciprocity in the enforcement of judgments between the two countries; or
  • a provision in the law of such country provides for the enforcement of judgments of the Turkish courts.

Moreover, in any suit or action against the originator in the Turkish courts, the originator, SPV, trust, trustee, certificate holders and/or insurance company, as foreign plaintiff(s), may be required to deposit security for court costs unless the plaintiff is considered to be a national of (i) one of the contracting states of the Hague Convention (ratified by Law 1,574), or (ii) a state that has signed a bilateral treaty with the Republic of Turkey which is duly ratified and contains a waiver on a reciprocal basis.

Consumer Receivables

Finally, in the event that the transferred receivables to be purchased are deemed to be 'consumer' receivables under domestic law, no legal or regulatory restrictions apply with regard to their purchase by the SPV.

For further information on this topic please contact Melis Cosan Baban or Ahmed Pekin at Pekin & Pekin by telephone (+90 212 313 35 00) or by fax (+90 212 313 35 35) or by email ([email protected] or [email protected]).