Transfer of Debts and Liability For Debts in Commercial Business Transfer

With the transfer agreement of the commercial enterprise, the assets, and liabilities of the enterprise pass to the transferee. When the commercial enterprise is transferred, the issues of who will be responsible for the debts, in what amount, for what period, and from when are kept in mind and are frequently the subject of disputes between the parties. To shed light on these questions and problems, in this article, we focused on the issue of “debt transfer in the commercial enterprise transfer”, which is a kind of debt transfer.

  1. How Does the Transfer of Commercial Business Accrue?

The transfer of the commercial enterprise is realized with a transfer agreement between the transferor and the transferee. With the contract, whose legal nature is a debiting transaction, the transferor is obliged to transfer the assets of the business to the transferee.

In accordance with the integrity principle regulated in Article 11 of the Turkish Commercial Code No. 6102, unless otherwise stipulated, the transfer agreement is deemed to include fixed assets, business value, tenancy right, trade name and other intellectual property rights, and assets that are permanently assigned to the business. Since the contract concluded between the parties does not stipulate otherwise, it must be accepted that the transfer contract also covers the transfer of the right of tenancy arising from the lease contract between the defendant and the lessor out of action to the plaintiff.”[1]

The parties may exclude some assets or liabilities from the transfer agreement. However, this has a limitation. The criterion here is that the transferred state of the enterprise has the “operating capability”, that is, it is suitable to continue its activities. The continuation of the activities of the commercial enterprise should be possible in its acquired status.

  1. Transfer of Debts to the Transferee in the Transfer of Commercial Enterprise

The issue of the transfer of debts in the transfer of commercial enterprises is regulated in the Turkish Code of Obligations. After the business transfer agreement is made, the business debts pass to the transferee by law (automatically), upon notification or announcement of this transfer transaction to the creditors. For the debts to be transferred to the transferee, it is not necessary for each creditor of the enterprise and the owner of the enterprise to make a separate debt transfer agreement. Under ordinary conditions, it is possible for one person to take over the debt of another, by a contract with the creditor. However, the legislator has foreseen such an exception to facilitate the transfer of commercial enterprises and reduce the number of transactions.

According to Article 202 of the Turkish Code of Obligations, “The person who takes over an asset or a business together with its assets and liabilities, shall be liable for the debts in the assets or the business against them, starting from the date it notifies the creditors or announces it with an announcement to be published in the Trade Registry Gazette for commercial businesses and in one of the newspapers distributed throughout Turkey for others.

  1. Is it Possible to Exclude Some Debts from the Scope of Transfer?

With the transfer of the enterprise, the transfer of the debts of the enterprise takes place automatically in accordance with the provision of the law. It is debatable whether this provision is mandatory, that is, a provision that cannot be agreed otherwise between the parties. According to the general acceptance, the transfer of some elements included in the commercial enterprise may be excluded from the scope of the transfer. From this point of view, it can be said that it can be decided not to transfer some debts of the enterprise to the transferee. However, according to the prevailing view in the doctrine, the agreements regarding the non-transfer of some of the debts or the amount to be responsible for the debt amount will only be valid between the transferor and the transferee. These limitations are not valid for the creditors and cannot be brought against them.

According to another view, liability for certain debts can be limited and this limitation can be asserted against creditors when they are notified and announced.

Another problem arises at the point of whether the transferee will be held responsible for debts that he/she did not know, unexpected, and could not foresee during the transfer. In accordance with the principle of trust, it is considered that the transferee should not be held responsible for such debts.

  1. The Principle of Joint Responsibility of the Transferor and the Transferee for Debts

In the continuation of Article 202 of the Turkish Code of Obligations, it is regulated that as a result of the transfer of commercial enterprise, the transferor will continue to be jointly and severally liable for these debts for two years together with the transferee. To put it more clearly, the person primarily responsible for the existing debts of the business is the new owner who has taken over the business. However, it was deemed appropriate to hold the transferor responsible together with the transferee for a period of 2 years. This situation aims to prevent malicious transfers. During this 2-year period, the creditor can request the receivable related to the commercial enterprise from the old creditor, from the new one, or from both, if he/she wishes. The creditor may be satisfied with the full payment of the debt by any of them, or it is possible for them to pay the debt jointly. In this purely internal relationship, this is an issue between the transferor and the transferee themselves. For the creditor, both the transferor and the transferee are fully liable for the entire debt, and therefore it does not matter to the creditor who pays.

The 2-year period regulated in the law is a period of disqualification. At the end of 2 years, creditors can no longer apply to the transferor to pay their debts. Respectively, the person who takes over the business becomes solely responsible for these debts.

  1. Beginning of the Transferor’s Two-Year Liability Period

The beginning of the period starts from the date of notification or announcement for debts that have become due. For non-due debts, this period will start from the date the debt is due. In the last paragraph, it is stated that this period will not run if the transferee does not make the notification or announcement.

The issue of when the debt will become due is not regulated in the Law. Due debt means a debt that can be claimed and sued by its creditor. As a rule, the moment when the receivable becomes due is the moment of birth of the debt. As soon as a debt arises, its creditor has the authority to demand its payment. Although this is the rule, it may be determined by the agreement of the parties or by a legal provision or due to the nature of the business, when the debt becomes due. In such cases, the receivable becomes due only on that date. For example, a term debt becomes due when the maturity date comes, and a contingent debt becomes due when the condition is fulfilled.

The two-year joint liability principle is a provision to protect the creditors of the commercial enterprise. Because during the transfer, the transfer permission or approval of the creditors is not sought. It is aimed to ensure that the creditors, who will be faced with a brand-new debtor, apply to both the transferor and the transferee.

  1. Liability for Debts in Fraudulent Transfers Made with the Purpose of Harming the Creditors

The case of showing a legal transaction to a third party by mutual agreement, which is also called collusion in law, generally aims to smuggle money or goods from that third party. The Court of Cassation approved the following decision: which was made about the defendants who wanted to harm their creditors by making collusive transfers, that is, by getting rid of the company’s debts, even though there is actually no commercial enterprise transfer in question:

“.. claiming that the debtor company and the defendant company are in bad faith, the debtor company only changed their titles in order to smuggle goods from their receivables, the transfers made are collusive, as it can be understood from the Trade Registry Gazette, the defendant company was founded on 04.06.2014 and at that time the debtor company was also at the same address at that time and changed its address on 17.07.2014 approximately 1.5 months later, as such, all transactions between companies are collusive transactions in order to leave their clients’ rights and receivables fruitless, that the majority of the employees of the company are the same, and without prejudice to their rights regarding the surplus, demanded and sued for the collection of 80.000.- TL with legal interest to be accrued as of the date of the lawsuitthe defendant company, S.Ö. Sağlık Hiz. İnş. Gıda San. Tic. Ltd. Şti. has taken over the enterprise named Ö.S.Tıp Merkezi, and all the operating rights of this enterprise, all the fixtures and all medical units in the enterprise, for a price of 10.000.- TL, with the operating rights, with the operating rights transfer agreement, dated 27.06.2014, numbered 4874 by the Suruç Notary Public. In this context, … to accept the case on the grounds that in the examination of SGK records and other records and documents in the file, many employees of the debtor Suruç Özel Sağlık Hiz. İnş. Gıda San. Tic. Ltd. was transferred to the defendant company after the transfer of operation and at the same time, Özel Suruç Tıp Merkezi was transferred to the defendant company, by Article 202 of the Turkish Code of Obligations, No. 6098 in force as of the date of the transfer of the operation, it is clear that the operation belonging to Özel Suruç Tıp Merkezi and all the rights and fixtures belonging to this enterprise has been transferred within the scope of the operation transfer protocol between the parties, that the fields of activity of both companies are the same, that Ş.A, who is the shareholder of the defendant company, is also an employee of the debtor company, in this context, although two separate legal entities seem to exist, that both companies continue their commercial operations in the same hospital and since continuity is essential in commercial enterprises, that the next company is a continuation of the previous one, that the defendant company is liable for the debts of the debtor company pursuant to Articles 134, 135, 136, 180 and 184 of the TCC, as well as in accordance with the rules of universal succession, taking into account the articles of 202 of TCC and the following, that the defendant company and the debtor company are in agreement and cooperation in order to prevent the claimants from taking their receivables,…[2]

CONCLUSION

The issue of who will pay the business debts after the transfer of the commercial enterprise is one of the main disputes between the transferor and the transferee and the creditor parties. Although it is regulated that the debts of the enterprise will be deemed to have been transferred by law with the transfer of the enterprise, the situation is not as easy as it seems. Issues such as notifying and announcing the transfer to the creditors are important in terms of who will be responsible for the debts. In addition, the transferor operator was held responsible for the debts for 2 years together with the transferee. It is often difficult to detect the beginning of this period. To prevent such disputes, commercial business transfer agreements should be prepared by expert lawyers, and the principles of liability for business debts should be arranged as clearly as possible and without leaving any room for hesitation.

REFERENCES

EREN, Fikret, Borçlar Hukuku Genel Hükümler, Bbeta Yayıncılık, Ankara, 2011, p.1200-1205.

AYHAN/ÖZDAMAR/ÇAĞLAR, a.g.e., p.139.

ERDEM, Ercüment, “Türk Ticaret Kanunu Uyarınca Ticari İşletmenin Devri”, p.1001(Author’s Note: This article has been prepared based on the paper presented at the Symposium on French-Turkish Law of Obligations Reforms organized by Istanbul University Faculty of Law and Association Henri Capitant on April 9, 2012.),(access: https://journal.yasar.edu.tr/wp-content/uploads/2014/01/28-Erc%C3%BCment-ERDEM.pdf).

AYDIN, Sema/KAPLAN, Hasan Ali/ŞEN KALYON, Arzu, “Ticari İşletme Devri ve Devrin Hukuki Sonuçları”, Gazi Üniversitesi Hukuk Fakültesi Dergisi, volume:XVII, year:2013, issue:1-2.

The decision of 11. Civil Chamber of the Court of Cassation (Court Merits No. 2020/1855, Decision No. 2020/4642 of 02.11.2020), see also. The decision of 11. Civil Chamber of the Court of Cassation (Court Merits No. 2020/2569, Decision No. 2020/1848 of 20.02.2020)

Turkish Commercial Code Justifications, Article 11. (access: http://www.ticaretkanunu.net/wp-content/uploads/2010/04/Turk-Ticaret-Kanunu-Madde-Gerekceleri.pdf, access date: 18.01.2021).

[1]Turkish Commercial Code Justifications, Article 11. (access: http://www.ticaretkanunu.net/wp-content/uploads/2010/04/Turk-Ticaret-Kanunu-Madde-Gerekceleri.pdf, access date: 18.01.2021).

[2] The decision of 11. Civil Chamber of the Court of Cassation (Court Merits No. 2020/1855, Decision No. 2020/4642 of 02.11.2020), see also. The decision of 11. Civil Chamber of the Court of Cassation (Court Merits No. 2020/2569, Decision No. 2020/1848 of 20.02.2020)