Türkiye collection profile

Due to the confidentially and data protection rules, obtaining financial information on domestic companies may be difficult.

However, by cross-verifying information provided by the buyers (on-site visits, extensive phone calls, etc.) or by specialized data providers, Allianz Trade allocates each company a grade reflecting its financial health and how it conducts business. Grades represent a core of our knowledge and analyses, and help clients identify and avoid risk. Data is continuously monitored to offer the most up-to-date information to support management decisions.

Liability for business debts is determined by legal structures, which are described as follows:

• Sole Proprietorship is available for small businesses managed by an individual and for which no corporate structure is necessary. In this case, the owner is held liable for all business debts. 
• Two or more individuals may also decide to share ownership and responsibilities through Partnerships, in which case the partners may be jointly and individually liable for the actions of the other partners. Limited Liability Partnerships (Komandit Sirket) alternatively offer limited liability to the partners.
• Limited Liability Companies (Limited Sirket, Şti) represent the great majority of businesses in Türkiye because they require minimal capital funds (TRY 50,000, around EUR 1,130) while the partners’ liability is limited to their capital contribution. 
• Joint Stock Companies (Anonim Sirket, AŞ) are used for larger structures willing to divide their capital (at least TRY 250,000, around EUR 5,650) into shares. In these entities, the shareholders’ liability is limited to their capital contribution. Under the registered capital system, the minimum may be TRY 500,000 (around EUR 11,300). At least 25% of the capital must be paid at incorporation, with the remainder within 24 months.
• Foreign companies may alternatively settle in Türkiye through Branch Offices, which provide no liability limitations to the foreign parent company. Joint Ventures may take the form of commercial partnerships (Komandit Sirket and Kollektif Sirket) but they may also be set up through incorporated entities as listed above.

Türkiye has a Civil Law system inspired by Swiss Law, and in which the judiciary is made up of two distinct bodies of law. On one hand, the ordinary jurisdiction divides into First instance Courts rendering decisions in first instance, District Courts of Appeal and a Court of Cassation, acting as the court of final jurisdiction on civil law matters. In relation to business, disputes are dealt with by specialized commercial (Ticaret Mahkemeleri), intellectual and industrial property (Fikri ve Sinai Haklar Mahkemeleri), labour (İs Mahkemeleri) or enforcement (İcra Mahkemeleri) courts. On the other hand, the administrative jurisdiction exclusively focuses on disputes involving public bodies through Tax and Administrative Courts in first instance, District Administrative Courts acting as Appellate Courts and a Council of State acting as the final jurisdiction instance. 
Overall, although Turkish authorities emphasize that the country has made significant efforts to harmonize domestic rules with EU standards, business lawsuits remain slow and costly despite digitalisation efforts.

Collection costs must be settled as provided in the contract though, they are rarely charged to the debtor in practice and mainly serve as a negotiation tool. Even if there is no related clause in the contract, when legal action is commenced, the court would normally order the defeated party to pay collection costs (Law No. 6100 on Civil Procedures, Law No.492 on Charges).

Use of Retention of Title (RoT) agreements, aiming to preserve ownership of goods until the related invoice is paid in full, are admissible in Türkiye provided that the provisions have been registered with a notary in the debtor’s place of registration. It should be noted that RoT agreements do not provide a complete safeguard, particularly when goods are sold by the debtor to a third party acting in good faith, when legal action becomes impossible. 
RoT agreements are normally used to gain priority during insolvency proceedings, however, when the debtor fails to fulfil their payment obligations, the creditor may also rely on a RoT to request the return of the goods. Unless the parties reach an amicable solution, however, commencing legal action would be necessary.

The most common payment methods are as follows:

• Bank transfers are among the most popular payment means for international transactions as they are fast, secured, and supported by an increasingly developed banking network internationally and domestically. For export transactions, transfers are usually guaranteed through Export Credit Insurance, which helps minimize the risk of sudden or unexpected customer insolvency. Allianz Trade’s worldwide network of risk offices monitors the financial well-being of customers and grants them a specific credit limit up to which clients may trade and claim should something go wrong.
• Alternatively, Standby Letters of Credit (a bank guarantees the debtor’s credit quality and repayment abilities) are often used in relation to export shipment transactions, since they constitute reliable guarantees which can be triggered as a ‘payment of last resort’ if the client fails to fulfil a contractual commitment.
• Also, irrevocable and confirmed Documentary Letters of Credit (a debtor guarantees that a certain amount of money is made available to a beneficiary through a bank once certain terms, specifically agreed by the parties, have been met) are increasingly relied upon.
• Although bank guarantees are fairly available, promissory notes and checks are often used in Türkiye as transferable debt recognition titles, allowing the holder to acquire a Payment Order from the Enforcement Bureau (Icra Dairesi) and to obtain seizure of the debtor’s assets without going through the courts. Importantly, bounced checks may also generate heavy financial penalties and since 2012, the issuer can be prevented from using checks for ten years upon the decision of an administrative judge.

In practice, many debts in Türkiye are recovered through negotiation before resorting to litigation.

Before initiating legal action against a debtor, it is crucial to assess the company’s assets and operational status to confirm whether recovery is feasible. Additionally, verifying the debtor’s financial condition is essential: if insolvency or bankruptcy proceedings have been opened, enforcing a debt becomes impossible under Turkish law.

When the debt is certain and undisputed, the Enforcement and Bankruptcy Law No. 2004 o provides a fast-track Payment Order proceedings before the bailiff’s office for the recovery of the debt. The debtor is then summoned to pay or submit their objections within seven days (five days if the debt arises from a bill of exchange) from the service date of the Payment Order. If the debtor remains silent, the creditor may obtain attachment of the debtor’s movable and immovable assets (including bank accounts) and also the debtor’s receivables from third parties. If the debtor brings a defence, the claim must be resolved through an ordinary lawsuit. In most cases, it is legally mandatory to proceed first with a legal intermediation. In case the parties cannot find an amicable solution at the legal mediation, they are free to initiate legal actions before the courts. 

The creditor would file a claim with the court and notify the debtor, whom is given up to two weeks to file a defence. The parties are then given an opportunity to exchange arguments and evidence but, prior to rendering a decision, the court would normally encourage the parties to negotiate a compromise (although rarely achieved in practice). 

The courts normally award remedies in the form of damages, specific performance, declaratory judgments or injunctions (to do or abstain from doing something), but punitive damages are not available under Turkish law. 

Invoices, accounting statement, selling contract, purchase orders, shipment documents, and customs export documents.

Time limitations for filing claims range from two to ten years depending on the cause of action. As a general rule in debt law, the creditor should commence proceedings for debt collection either through the courts or execution offices, within ten years of the due date, unless a shorter limitation period is specified by statute.

The law on Civil Procedures provides precautionary measures to help preserve the creditor’s interests pending a final decision. Upon request, the courts could order provisional measures aiming at preserving the status quo and at avoiding irreparable damage (attachment of the debtor’s assets, mandatory injunctions to do something, prohibitory injunctions to prevent from doing something, declaratory judgments aiming at protecting a right, orders for the payment of interests, etc.). It would, however, be necessary to demonstrate that the claim has a good chance of succeeding and that damages alone would not suffice in the absence of precautionary measures. In emergency situations, the court may make its decision ex parte (i.e. without the debtor being present) but the court would usually request that the claimant provides security on costs in order to protect the respondent from irresponsible action. Precautionary measures must be enforced within one week of notification to the parties, though the debtor’s counterclaims would not prevent enforcement. Turkish arbitration law entitles arbitrators to order precautionary measures.

Decisions rendered by first instance courts may be appealed before the District Court of Appeal and the decisions rendered by this court may be appealed before the Court of Cassation. Filing periods for appeals vary from eight days to one month, with respect to which type of court the decision is rendered from. There are also monetary restrictions that prevent lower-value cases from being subject to appeals. For such cases, decisions of first instance courts are absolute.

First instance court judgments ordering the payment of a debt are enforceable immediately upon notification, even if the defeated party has appealed against the court decision. A debtor wishing to halt the execution office proceedings until the decision of the Court of Cassation must provide an acceptable security, valued as (in common practice) the entire debt amount plus 90 days of interest, and obtain a stay order from the Court of Cassation. If the debtor fails to pay or to act, the creditor may request garnishment of the debtor’s assets and of third parties’ receivables from the bailiff.

Undisputed proceedings may take six months (for enforcement actions), however more complex cases/lawsuits may require 2 to 5  years (even more) before a final and enforceable decision is rendered.

Litigation expenses mainly consist of term fees, expert/survey fees, witness fees and Court of Cassation fees. As a general rule, the litigation expenses shall be imposed on the defeated party.

Domestic companies hardly rely on Alternative Dispute Resolution methods such as mediation (which is prerequisite to start the legal action) or arbitration (the Law No. 4686 on International Arbitration is applicable to disputes involving a foreign element and where Türkiye has been chosen as the place of arbitration). In practice, however, the effects of ADR are limited and the courts’ interference during the process is inevitable.

decisions, under the Turkish International Private and Procedural Law No. 5718 of 2007, normally requires recognition of the decision by domestic courts prior to enforcing it. As in most countries, the courts would normally ensure (among other points) that the foreign tribunal did not declare on subject matters falling exclusively under the jurisdiction of Turkish courts, that the foreign decision is final and binding in the issuing country, and that the ruling does not conflict with domestic public policy. The process is complicated by a tendency of domestic courts to conduct thorough exequatur proceedings focusing on the existence of reciprocity requirements, in the form of a reciprocal recognition and enforcement treaty, or of de facto reciprocal recognition practices. As a result, enforcement proceedings may be lengthy.

Türkiye is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, therefore international arbitration awards ought to be enforced fairly rapidly, provided that they are final and binding in the issuing country.

The liquidation and bankruptcy procedure of a company in Türkiye is governed by the Turkish Commercial Code (Law No. 6102) and the Execution and Bankruptcy Law (Law No. 2004). In 2003 and 2004, amendments to the Execution and Bankruptcy Law indeed led to the introduction of additional procedures, as banking institutions recognized that supporting debtors facing economic turmoil (through restructuration procedures) could be more constructive and efficient than merely organizing their liquidation. 

Safeguarding proceedings are normally opened for debtors facing difficulties likely to make them insolvent even though their business is viable. These preventive measures may be commenced upon the debtor’s initiative but, insofar as no time limitations are provided by law, they may well become detrimental to the creditors. 
When the proceedings are conducted under court supervision, the debtor and their creditors would normally aim to negotiate a business continuation plan. It would then be possible to apply for an extension order shielding the company from enforcement claims for one year (extendable up to four years).

Liquidation would in practice remain the default insolvency procedure. Creditors seeking their debtor’s liquidation must first request payment of the debt through the competent execution office and obtain a bankruptcy payment order. If the debtor fails to pay within seven days, the creditor may file a bankruptcy lawsuit before the Commercial Court and request interim measures to be taken (preparation of an inventory of assets, appointment of a trustee, etc.). Once the bankruptcy decision is granted, it is sent to the bankruptcy office which then executes interim measures, supervises the proceedings, calls for the creditors’ meeting and sells the assets. It should be noted, however, that since the office is not entitled to sell assets below certain thresholds, liquidation sales may be inefficient and would thus not be in the creditors’ interest.

In the liquidation process, receivables secured by pledge, severance wage and pay in lieu of notice of labour, receivables of employees’ provident funds, settlement for a spouse or children, preferred claims have priority over other types of receivables.

Under a Retention of Title agreement, ownership of the goods remains with the creditor who may therefore bring a claim arguing that the moveable goods in question are not within the bankruptcy assets.

All under value transactions  granted two years prior to the issuance of a garnishee, insolvency or bankruptcy order may be cancelled. Pledges, payments for undue debts, and transactions with extraordinary payment methods may be cancelled if such transactions were conducted within one year prior to the order. Transactions detrimental to the creditors may also be cancelled if the creditors commenced execution proceedings against the debtor (through garnishment or bankruptcy proceedings) within five years from the transaction date and provided that the other party to the transaction was aware of the financial state of the debtor.