1. INTRODUCTION
With the entry of the 6102 numbered Turkish Commercial Code (“TCC”) on the July 1, 2012, the commercial enterprise, the components that are subject to the transfer, the scope and form of commercial transfer agreements have been stated by defining the “commercial enterprise” for the first time. The TCC which determines the transfer of the commercial enterprise, the Turkish Code of Obligations (“TCO”) numbered 6098 which determines the transfer of liabilities in the commercial enterprise transfer, the Code of Execution and Bankruptcy (“CEB”) numbered 2004 that determines articles related to the cancellation of a commercial transaction and The Act On The Protection of Competition (“Competition Act”) numbered 4054 which determines the conditions subject to the permission of the Competition Board (“Board”) have been used in this study. In addition to this, the provisions of the Turkish Labor Code (“LC”) numbered 4857 related to issues about work and employee status’ as a result of a commercial enterprise transfer has been used as well.
2. Definition and Requirements of a Commercial Enterprise
2.1. Definition of a Commercial Enterprise
The definition of the commercial enterprise is stated in the Trade Registry By-Laws even though there is no definition in the Previous Turkish Commercial Code (“Previous TCC”) numbered 6762. The TCC, with the purpose of resolving this deficiency, included the definition of a commercial enterprise. Inspired by the Trade Registry By-Laws, the TCC stated the concept of commercial enterprise as “enterprise in which transaction targeting to profit in excess of the limit foreseen for an enterprise operated by a tradesman are continuously and independently carried out” (Article 11). With this Article, the enterprise is brought into a general concept and it is stated that every commercial enterprise is also considered a business. In accordance with the definition above, the components that separate a commercial enterprise from other enterprises can be summarized as follows; (i) to generate revenue that exceeded the limit foreseen for an enterprise by a tradesman, (ii) continuousness, (iii) independency, (iv) targeting to generate revenue1.
2.2. Requirements for the Commercial Enterprise Transfer
2.2.1. Requirements for the Transfer of Actives and Passives Together
Article 202 of the TCO states that, all actives and passives shall be transferred together2 for the transfer of the enterprise. The commercial enterprise transfer has to take place within the scope of the TCC, although the transfer of actives and passives together is not compulsory. Parties may come to an agreement to keep some components out of the transfer on the condition that the relevant commercial enterprise is sufficient enough to continue its activities with assets transferred3.
Within the transfer of a commercial enterprise, the transferring of whole actives and passives is not necessary but this does not mean that the commercial enterprise can only transfer with its actives. As per the main doctrine view, pursuant to Article 202 4 of the TCO, the transfer which only includes the transfer of actives will be considered void. Forasmuch the legal theory of the doctrine view is based on the thought of taking creditors under protection. Thus, there is no possibility of an unpaid balance for people who have the right to claim from the commercial enterprise. However, the opposite doctrine view states that in case the transferor provides a necessary and sufficient assurance, the transfer of the commercial enterprise without liabilities will not be an issue in terms of law.
2.2.2. Written Form Requirement of a Transfer Agreement
As per Article 11 of the TCC, the transfer agreement of the commercial enterprise and other agreements subject to the commercial enterprise as a whole shall be in written form and shall be registered and published in the trade registry5. Besides, it is not extensively determined that whether the register has a constituent effect on the commercial enterprise transfer or not. However, it is a huge deficiency that even the commercial enterprise pledge has to be in official form while official form requirement of the commercial enterprise transfer6 is not determined in law.
2.2.3. Authorization of the Competition Board
Article 7 under the title of “The Mergers and Acquisitions Calling for the Authorization” of the “Communique on the Amendments Made to the Communiqué Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board” numbered 2010/47 states that mergers and acquisitions are subject to an authorization. According to this Article, in case an authorization of the Board is necessary for the transfer of commercial enterprise, it is obliged to obtain an authorization of the Board after the transfer agreement has been signed.
3. Consequences of the Commercial Enterprise Transfer
3.1. Consequences of the Commercial Enterprise Transfer Within the Scope of the Competition Act
In case that the commercial enterprise transfer, which is subject to permission, is not notified to the Board, the Board shall decide on the following:the commercial enterprise transfer can be terminated, all unlawful legal acts can be eliminated, any shares or assets seized can be returned, if possible, to their former owners, whose terms and duration of the acquisition process determined by the Board. Or if not possible, these shares or assets can be assigned and transferred to third parties. Thereby the assignee shall not participate in the management of the undertakings acquired within the period, until these are assigned to their former owners or third parties. Furthermore the assignee has to take other required precautions as well.
In further addition, as a result of making the notification, the Board shall impose on natural and legal persons having the nature of an undertaking and on associations of undertakings or members of such associations formed at the end of the previous financial year. The administrative fine in thousands of annual gross revenues of undertakings and associations of undertakings or members of such associations which generate by the end of the financial year precede the decision of the Board, which generate by the end of the financial year closest to the date of the decision.
3.2. Consequences of the Commercial Enterprise Transfer Within the Scope of the Commercial Law and the Code of Obligations
3.2.1. Termination of The Capacity as the Mercant
The mercant that transfers his commercial enterprise will lose the capacity as the Mercant unless he does not own another enterprise. The person who loses the capacity as the Mercant shall register in the trade registry and has to announce the same in the trade registry gazette within 15 (fifteen) days. This person can be pursued by insolvency for 1 (one) more year after the announcement8.
3.2.2. Transfer of the Components of the Commercial Enterprise to the Assignee
As per second sentence of the 3rd paragraph of Article 11 of the TCC, unless otherwise agreed between the parties, it is deemed that the commercial enterprise transfer includes the fixed assets, goodwill, right for rental, trade name and other intellectual property rights and assets allotted to the enterprise at all times.
• Fixed Assets
As per Article 11 of Previous TCC, unless otherwise agreed between the parties, it is stated that, facilities of the commercial enterprise shall be included in the commercial enterprise transfer. In the TCC, instead of the “facilities’’ concept, the ‘’fixed assets’’ concept is consciously preferred. This concept stands for properties owned by the commercial enterprise. Fixed assets are composed of the properties that the commercial enterprise ownes to continue its business activity. In this respect, headquarters and branch buildings, work and transportation tools which belong to the commercial enterprise are considered as fixed assets.
• Goodwill
In Turkey the term ‘peştemaliye’ and in international literature the term good-will is used to describe abstract assets that are acquired in addition to concrete assets. Every commercial enterprise constitutes a customer portfolio during its activities. When the assignee continues to provide service to transferor’s customers without having difficulty to find a customer, it is accepted as an intangible value of that commercial enterprise. Goodwill, as stated in the justification of the TCC, is an element which has an economic value. This element hassometimes more economic value than fixed assets in an enterprise or components that are allocated to the other enterprises.
• Tenancy Right
As per the third paragraph of Article 11 of the TCC, in case that the transferor has a rental right on the real estate of the commercial enterprise that he transferred, this right will transfer to the assignee with the transfer9. Evacuation of the renter within the scope of the tenancy agreement is reserved under the provision of the TCO.
• Trade Name
The Trade name is used in commercial affairs by the merchant; it is set out in Article 49 and following Articles of TCC. The Trade name is adhering strictly to the enterprise and it is not possible to transfer it without the enterprise. Therefore, unless it is clearly defined in the transfer contract, the trade name will be transferred to the transferee depending on the commercial enterprise.
• Other Intellectual Property Rights
In the transfer of an enterprise with its assets and liabilities, unless otherwise agreed, the transfer contract includes the brands of the enterprise or other intellectual property rights such as the patent right of the enterprise10. According to Article 11 of the TCC, these rights will be acquired by the entirety with the written commercial enterprise transfer contract and shall register in the trade registry and has to be announced in the same way in the trade registry gazette.
• Assets Allotted to the Enterprise At All Times
The scope of the allocated items of the commercial enterprise is not mentioned individually in the law. This matter shall be reviewed separately according to each condition. For instance, in the Supreme Court’s decision it is stated that, even though the parties did not determine a private line and telephone within the scope of the transfer, it is accepted that all these commercial operations are allocated for the commercial enterprise which publishes newspapers11.
3.2.3. Joint Liability of the Assignee and the Transferor
As mentioned above, the merchant who transfers his commercial enterprise will lose the capacity of a merchant unless he does not own another enterprise. However, losing the capacity of a merchant does not mean that the transferor can be discharged from his liabilities. The legislator holds the transferor severally responsible for 2 (two) years with the assignee due to the debts arising from his assets and enterprise. As per Article 202 of the TCO, beginning from the date of notification of the transfer of commercial enterprise to creditors or the date of announcement in the Trade Register Gazette for commercial enterprises and the date of announcement in one of the newspapers broadcasting across Turkey for non-commercial enterprises, the assignee shall be responsible to creditors due to the debts arising from his assets or enterprise. According to this, the debts regarding the commercial enterprise shall be transferred to the assignee without a debt assumption agreement12. Within this period, the assignee and the transferor shall be jointly liable for the debts of the commercial enterprise as required by law13. Without doubt, the law-maker acts with the intention of protecting the creditor14. Liability is restricted for a period of 2 (two) years with regards to the transferor. This is a prescription period which the judge shall take into account on its own motion even if it is not stated in the trial by the parties.
3.3. Consequences of the Commercial Enterprise Transfer Within the Scope of Execution and Bankruptcy Law
In case that conditions which are stated below occur, the transfer of the commercial enterprise will be able to constitute a subject to the cancellation of commercial transaction and this lawsuit will be able to cause the cancellation of the commercial enterprise consequently. The first result of the relevant action between the parties of the transaction is to become voluntary joinder whose sides are transferor and third person assignee. Thus, as per the Article 202 of the TCO, the parties who have joint obligations rising from law, are also joinder of proceed within the context of execution and bankruptcy law. Therefore in case of an abortive trial, the transferor and assignee that are jointly liable in terms of material law, remain to be voluntary joinder in respect to execution and bankruptcy law. Action for cancellation of the commercial transaction and the annulment of the commercial enterprise will be able to discussed in conditions which are stated in Articles 278 and 280 titled ‘Invalidity of Gratuitous Transactions’, ‘Invalidity Due To Loss’ and ‘Cancellation Due to the Intention of Harming Third Parties’ of the CEB.
To file these two kinds of actions for the annulment of transactions that are given below, the creditor, must have a claim against the transferred enterprise and a certificate of insolvency which indicates that the creditor fails to collect his claims from the debtor. In this case, for the cancellation of the commercial transaction to comes into order, it should be researched if there is a creditor who already has a certificate of insolvency15.
To file cancellation of a commercial transaction mentioned as per 3rd paragraph of Article 278 of the CEB, first of all parties that cannot be able to collect their claims from the commercial enterprise have to exhaust their rights arising from Article 202 of the TCO and accordingly they have to start an enforcement proceeding against the relevant commercial enterprise. In case that the executive proceeding remains inconclusive, parties who cannot be able to collect their claims from the commercial enterprise will be able to file cancellation of a commercial transaction stated in the CEB Article 278/3 as a ‘contract that the debtor accepts a quite low price as a consideration according to the value of the subject which creditor gave during the forming of the contract’. The right to file a cancellation action will be time-barred after 5 (five) years starting from the date on which the transaction subject to the cancellation is done16. Even though it has been mentioned about ordering the invalidity of the transaction with the action for cancellation of a commercial transaction; this invalidity does not have a material meaning. In other words, as a result of an annulment decision, the status of property does not change and the creditor will have the right to sell the goods subject to the transaction that is cancelled with implementing the seizure as if that good belongs to the debtor and receive his debt from the sale price. Therefore, the remaining part of the sale price shall be given to the third person who has a property right, but not the debtor. In this case, the transfer of the subject enterprise with a price that is highly below the market price will be enough for annulment of the subject transaction, whether the assignee knows about the price ,is in a situation that he/she needs to know or acts in a good faith that will not affect the cancellation of transaction. In various Supreme Court’s decision, the Supreme Court states that the acceptation of the unbalance between the real value of the transferred commercial enterprise and the price that the debtor admits as a consideration is highly low. The difference between them should be at least 1 (one) time17.
Alternatively the creditor can apply for a cancellation of the transaction within the scope of CEB, Article 280. According to this provision, the creditor can take a transaction action only if he submits that there is an act on the purpose of causing damage in the transfer of a commercial enterprise18. In other words, the transaction made by the debtor should be in a non-manner of good faith or of a cautious merchant just as defined in Article 20 of the TCC and the relevant transaction should cause a financial difficulty. As per the 3rd paragraph of Article 280 of the CEB, a presumption which is in favor of the creditor has been brought. According to the relevant presumption, in cases where a third person takes over the debtor’s entire or substantial part of the commercial enterprise, it is assumed that the third person is informed about the debtor’s intention of harm. The presumption brought with Article 280 of the CEB may only be disproved under two conditions. First of all at least 3 (three) months prior to the transfer, the debtor or the third party shall prove that they have notified the creditor in written form of the transfer or shall prove that they have published the transfer in visible signboards located at the commercial enterprise and additionally have published the transfer in the Trade Registry Gazette. If this is not possible, they shall prove that they have used the appropriate tools in order to enable the third parties to get informed of the transfer; this presumption would have been assumed to be disproved. However, for the dismissal of the transaction action, the relevant presumption has to be disproved; in addition to this the creditors shall not prove the foreseeable provision under the first first paragraph of Article 280.
3.4. Consequences of the Commercial Enterprise Transfer Within the Scope of the Labour Code
With the transfer of a commercial enterprise, the question relating to the liability for the existing rights and claims becomes a current issue. Article 6 of the LC is a mandatory rule that states that current labour contracts shall be transferred to the employer with all its rights and obligations in case of a transfer of the entire or substantial part of the commercial enterprise19. Rights and obligations arising from the labour contract are personnel regulations, internal regulations, and work place applications, instructions promulgated by the employer and other related rights and obligations. In other respects, the transfer of the workplace contains the same provision that assure the employee’s debts which arose before the transfer date. This provision also holds the assignee and transferor jointly and severally liable for debts that arose before the transfer, to be paid within 2 (two) years of the transfer date20.
The assignee shall be liable for the debts which arose between the transferor and employees before the enterprise transfer. Assignee and transferor may agree upon it with a contract to assure that the transferring employer shall be liable for these claims with a limitation of the assignee’s own period or that the assignee or the transferring employers shall be liable for these claims. These provisions shall be obligatory to both parties but not to the employees. This kind of contract shall qualify as a recourse contract between the transferee and thre transferor21.
Nevertheless, as per the fifth paragraph of Article 6 of the LC, the commercial enterprise transfer does not create a rightful cause of a cancellation of the employment contract either of the employers or employees.In other words, the commercial enterprise transfer does not constitute a ‘substantial alteration in working condition’ by itself and does not allow parties to cancel the labour contract with a rightful cause.
4. Conclusion
As noted above, unless there is a provision to oppose the transfer contract, the contract is deemed to include the fixed assets, good-will, tenancy right, trade name and other intellectual property rights and assets allotted to the enterprise at all times.
As per Article 202 of the TCO, the enterprise shall be transferred with all its assets and liabilities. However, from this expression, it should not be understood that the transfer of all estate components of the commercial enterprises is obligatory. If continuance of the activities is possible with the assets transferred, a non-transfer of some of the individual components does not prevent the implementation Article 202 of TBC.
Transferee and transferor shall be jointly and severally liable for 2 (two) years to assure the preservation of the creditor’s interest. Additionally, the act of transfer shall be subject to the cancellation of a commercial enterprise with conditions stipulated at the CEB.
As a result, a commercial enterprise has a significant importance and a system which provides advantage for the business life. All issues have to be determined in regards to the enterprise because liabilities for previous debts cause a risky commercial operation.
FOOTNOTE
1 ARKAN, Commercial Undertaking Law, Ankara, 2012, p.27.
2 POROY/YASAMAN, Commercial Undertaking Law, 10. Edition, Istanbul, 2004, p.42.
3 Justification of the TCC Article 11.
4 Poroy/Yasaman, p.42; Arkan, p.42.
5 Fatih ARICI, Transfer of the Commercial Undertaking With Assets And Liabilities, Istanbul 2008, p.37.
6 Mehmet BAHTİYAR, Commercial Undertaking Law, 11. Edition, Istanbul 2012, p.37.
7 Official Gazette Date – No: 7.10.2010 – 27722.
8 CEB Article 44.
9 ARKAN, ibid, p.44.
10 TEKİNALP, Intellectual Property Law, December 2005, 4. Edition, p.431.
11 Court of Appeal 11.CC, 20.02.1975 dated and 1974/3626 E., 1975/1217 K.
12 ARKAN, ibid, p.45.
13 Court of Appeals 21st Civil Law Chamber 26.9.2005 case number 2005/2921 E., 2005/8294 K.
14 ARKAN, ibid, p.46.
15 Controlled by the courts.
16 CEB Article 284.
17 Court of Appeal 17th Civil Law Chamber 3.12.2012 case number 2012/12662 E., 2012/13378 K.
18 Court of Appeals 17th Civil Law Chamber T.17.3.2011 case number 2010/1721 E., 2011/2046 K.
19 Mollamahmutoğlu, Labour Law, 2. Edition, Ankara 2005, p.168.
20 Sevimli, Effect of Workplace Transfersto Labour Contract, İş, Güç, Endüstri İlişkileri ve İnsan Kaynakları Dergisi C:7, edition:1, 2005, p.16.
21 Justification of LC Article 6.
