Once the new Code of Obligations enters into force on July 1 2012, Turkish banks will become reluctant to accept suretyships (the most common type of personal guarantee under Turkish law). Turkish banking practice has been always to obtain the suretyship of all shareholders for loans granted to companies. The new code aims to eliminate the current tendency to provide suretyship against loan debts of bank clients, and the new provisions make it more difficult to execute a valid and proper suretyship arrangement.


'Suretyship' is defined under the existing code as a promise by one party (the surety) to assume responsibility for the obligation of another person on such person's default. It is essential in this legal relationship that the primary debt validly exists; otherwise the suretyship will not be binding on the surety, since its obligation is a secondary one attached to the primary obligation. For validity, the suretyship agreement must be executed in writing and must specify the maximum amount assumed by the surety.

The three types of suretyship are:

  • ordinary suretyship, whereby the lender must first seek collection from the primary obligor and may ask to be compensated by the surety only if the primary obligor fails to fulfil its obligation;
  • several suretyship, whereby the lender is free to seek collection from either the primary obligor or the surety; and
  • joint suretyship, whereby there is more than one surety where the surety obligation is either ordinary or several depending on the agreement.


Among many changes introduced by the new code, the following are likely to have the most significant impact on banks, the most common group of lenders in a suretyship relationship.

The validity requirements of a suretyship agreement have been increased by requiring that a surety specify the maximum guarantee amount and contract date in its own handwriting on the suretyship contract. Furthermore, when entering into a several suretyship this should also be stated in the surety's handwriting on the contract. These impractical requirements are likely to challenge the banks, as their loan documentation is mostly in standard printed format.

In addition, the surety is now required to gain approval for the suretyship from his or her spouse. Unless there is a court order for the couple's separation, the surety's spouse must consent to the suretyship by the time of the contract, at the latest.

However, the most important change is the prerequisites set forth for lenders in a several suretyship situation. While the existing provisions allow lenders to seek collection from either the primary obligor or the surety, the new code requires lenders to send notification to the defaulting primary obligor notifying it that it has failed to fulfil its obligations, unless the primary obligor's financial situation clearly indicates that it will be unable to fulfil its obligations. These requirements reduce the protection of several suretyships currently available to lenders, and this type of suretyship will essentially be treated the same as the ordinary suretyship.

Where a joint suretyship has been arranged to create a several liability among the sureties, the lender is currently free to seek collection of the whole amount from each of the sureties without pursuing the others. Under the new code, the lender will instead be required to start execution proceedings against all sureties in order to claim the whole amount from any one of them.

Where a joint suretyship is arranged to create partial liability on each surety (ie, each surety has committed to pay a certain portion of the whole amount), the new code allows each surety to offer to pay its portion to the lender. Such surety shall be released from its obligations if the lender does not accept payment.

Finally, the new code has expanded the scope of a surety's obligation to include:

  • the amount corresponding to a primary obligor's obligation;
  • accrued interest; and
  • the expenses of the proceedings pursued against the primary obligor.

While the new code adds further items to this list, it strictly prohibits the inclusion of any provisions in the contract that also oblige the surety to make any penalty payments within this scope. This will also cause significant changes to standard suretyship documents, as penalty payments frequently appear within the scope of the surety's obligations.


By tightening the surety provisions, the new code puts lenders in a difficult position with respect to sureties, which will be better protected by the new regime. In this sense, personal guarantees will not be the banks' favourite type of guarantee and the use of other types of collaterals on loan documents is likely to increase, such as letters of credit, letters of guarantees and pledges.

For further information on this topic please contact A Cem Davutoglu or Duygu Tanisik at Davutoğlu Attorneys At Law by telephone (+90 212 281 7100), fax (+90 212 281 6040) or email ([email protected] or [email protected]).