The Law on Chattel Mortgage in Commercial Transactions numbered 6750, which entered into force on January 1, 2017, is intended to facilitate the access of small and medium sized enterprises, which have become an important element of economic and social development in the world economy, to financing and thus contribute in the growth of the country’s economy.
The enacted law has bridged a very important gap and has facilitated access to financing for the SME’s that invest a significant part of their capitals on assets defined within the scope of chattel mortgage, and primarily the machinery and equipment necessary for their production.
This is very important from the perspective of the developing regions in our country. The regulation has offered an alternative for the needs of enterprises/operators for securities, under circumstances where enterprises invest in regions where industry has not developed or is under development and their real properties and other securities remain inadequate because the values of plots in such regions are low. The law indirectly encourages industrialists for investment and secures the value of the made investments from the financial perspective.
Another important point concerning the law is the fact that it does not only facilitate the access of enterprises to financing but also increases the alternatives that can be used as securities considerably. Enterprises demanding funds may pledge the followings as security subject to commercial pledge, thanks to this law :
The TARES (Taşınır Rehin Sicili – Chattel Mortgage Registry) regulation has been taken into force by the Ministry of Customs and Trade in order to expedite the adaptation of this law to commercial life and establish a transparent platform. The transactions in TARES are conducted within the Turkish Union of Notaries organization, under the supervision of the Ministry of Customs and Trade, and SME’s, merchants, tradesmen, farmers, producer organizations and the self-employed are able to use this system and pledge their assets, in amounts adequate to meet the securities they need. For example, it is possible for a company to pledge assets worth 50,000 TL, rather than all its assets, in order to meet the need for 50,000 TL securities. In this way, enterprises acquire the flexibility to use their other assets for security purposes, in line with their needs. The purchased asset is pledged and the seller is secured by the system in forward sales transactions, and thus the purchaser provides the financing of the machinery, without an intermediary finance organization. Furthermore, the system also allows the ability to see which machinery of the company or the individual are pledged.
When we examine the realized transactions, the notaries state that there are some transactions, but are not intense because the system is new, while some notaries express that they have not made any transactions yet.
With this law, the need arises for each element mentioned above to be appraised by individuals who are expert in their fields. The actions that will be taken in case the values of such assets change because they are sold or used during the period they are secured become quite important especially from the perspective of commercial banks and finance organizations. In this context, the need arises for clear and in-depth reports, where the appraised enterprises are examined on sector, commercial enterprise and asset specific basis, and the parameters that such examinations depend upon are defined.
Commercial banks approach the matter much more cautiously at the point of accepting moveable assets as securities, when we look at the transactions in the sector. Transactions for purposes of securing are at quite low levels by banks that are not owned by the state. We might say that there are three factors influencing this circumstance. Primarily, the ability of the moveable assets to maintain their value, and the potential changes in their values depending on different parameters or when their locations are altered for any purposes, pose a high risk for banks. And, the second factor is the lack of a company structure that would allow the ability to carry out all asset appraisal transactions as specific to real properties and moveable assets in the sector. Although Real Property Appraisal Companies are mentioned as the most competent organizations performing appraisals, it is not possible to say that they are authorized to appraise all types of assets that have been mentioned above. Furthermore, the need for monitoring processes to ensure the consistency of the financial model that will define the value of the asset that will be secured and determine the credit risk of this value, also stands out as an important aspect.
With this law, the need arises to examine and evaluate whether moveable estates will be evaluated as a whole, with the real property they are located on and the commercial enterprise or not, in detail. In other words, it becomes critically important to appraise a value that expresses the actual circumstance, and to determine whether maintaining this value is economically feasible or not when the security is liquidated and the assets are removed, in the reports prepared for chattel mortgage purposes.
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