Client Alert:

GRANTING POWER OF SALE TO THE DEBTORS: A MOST WELCOME DEVELOPMENT

GRANTING POWER OF SALE TO THE DEBTORS: A MOST WELCOME DEVELOPMENT

Pursuant to the Enforcement and Bankruptcy Code No. 2004 (“Code”), the sale of the debtor's attached assets, is carried out by the bailiff’s office via an auction, upon the request of the debtor or creditor. Provided that the creditor or the debtor requests the sale of the attached assets within 1 year from the date of the attachment, the bailiff’s office finalises the sale within 2 months in terms of movable assets and within 3 months in terms of immovable assets.

With the latest amendments to the Code, a new procedure has been introduced which entitles the debtors themselves to sell the attached assets, if they obtain a certificate of authorization. The long-awaited implementation regulation for this new procedure, namely the Regulation on Granting Power of Sale to the Debtor as per the Enforcement and Bankruptcy Law (“Regulation”), was published in the Official Gazette dated 28 May 2022 and entered into force.

Pursuant to the Code and the Regulation, the debtor wishing to benefit from this procedure must apply to the bailiff’s office for a certificate of authorisation within 7 days from the service of the valuation report of the attached asset. Upon receiving the application, the bailiff shall stop the sale via an auction and issues a certificate of authorisation for the voluntary sale of the attached assets and serve it on the applicant. The debtor is then granted 15 days for the sale of the assets. The content of the certificate of authorisation is detailed under the Article 5 of the Regulation. One important piece of information that is required to be included in the certificate, is the minimum price for which the attached assets may be sold, which is determined by the bailiff. In addition, if the attached asset mentioned in the certificate is registered under any registry, such as an immovable asset or a vessel, the bailiff notifies the relevant registry.

The sale shall have to be finalised and the sale proceeds deposited to the account of the bailiff’s office by the buyer, within the 15-day period. Thereafter, the transaction is submitted to the approval of the enforcement court. The enforcement court may approve or reject the transaction within 10 days at the latest. If the sale is approved by the enforcement court, the ownership of the property will be transferred to the buyer; otherwise, and if the transaction is rejected, the sale proceeds shall be returned to the buyer.

One of the benefits of this new procedure is that the sale of the attached assets is finalised swiftly, compared to the sale by auction. The 2 and 3 month sale periods under the Code are mostly not complied with in practice and the sale by auction takes much longer than anticipated due to the bureaucracy and the ever increasing workload of the bailiffs’ offices. The new procedure aims to finalise the sale within an average of 1 month. Thus, the creditor will be able to recover the receivable as soon as possible; and the debtor will be freed of the debt and the burden of interest, which would otherwise continue to incur while to procedure drags on.

Another positive aspect of the procedure is that it eliminates the risk of selling the asset under the market price, which was highly criticised in terms of the sales by auction. It is quite possible that the property will be sold at its real market value, if the attached asset is voluntarily sold by the debtor.

As one can imagine, the option of the sale of the assets by the debtor carries with it a number of benefits for both the debtor and the creditor. Nevertheless, we shall have to monitor how this procedure will be implemented in practice and whether it will have the desired effect.

Please do not hesitate to contact us for any queries you may have.

TAGS

corporate, finance, regulation, e-commerce, petroleum, arbitration, railway, istanbul, foreign awards, energy, advance dividends, national markers, natural resources, letter of guarantee, interim dividends

RECENT NEWS

We have received your submission. Thank you!