INTRODUCTION

In Türkiye, joint stock and limited liability companies may engage in lending transactions within the framework of the Turkish Code of Obligations No. 6098 and other relevant legislation. However, the circumstances under which these transactions will be considered as financial institutions or banking activities may pose legal risks for companies, as legal transactions and contracts that may fall within the scope of the activities of financial institutions within the scope of the Law and/or Legislation will be considered unlawful and will constitute a risk for both parties to the dispute. The lending and financing activities of companies set up in Türkiye may in some cases may considered as financing or banking activities and subject to regulation. This is particularly the case under the Turkish Code of Obligations No. 6098, the Financial Leasing, Factoring and Financing Companies Law No. 6361 and the Banking Law No. 5411. This article will examine in detail how lending transactions of companies can be managed in line with the provisions of the Turkish Code of Obligations, in which cases they may overlap with activities that are monopolized by financial institutions and banks, and what should be considered in this context.

1. Evaluation of the “Lending” Activity in Turkish Legislation

For a long time, this issue was covered by Decree Law No. 90 on Money Lending. However, this Decree Law was repealed following Article 52 of Law No. 6361 on Financial Leasing, Factoring, Financing and Savings Finance Companies. In this context, although there are many legal sources referring to the Decree Law, Law No. 6361 must be applied in this context.

Nevertheless, when the content of the Decree Law No. 90 on Money Lending is examined, it is understood that the Decree Law No. 90 regulates and supervises the activities of “real persons, financing companies and factoring companies engaged in the business of lending money on a continuous basis in return for interest or any other consideration under any name or by obtaining mortgages ”. Within this scope, it is clearly understood that the activity of “lending” is the subject of regulation.

As can be understood from the repealed Decree Law, the activities within the scope of the said legislation are related to persons and organizations that continue this business in a “continuity” dimension in return for “interest” or “consideration”. The main purpose here is to supervise the activities of persons and institutions that operate as a modern-day financial institution and provide income and profit through different return and collateral instruments within the scope of borrowing or money lending, and simple use lending agreements between the parties within the scope of the Turkish Code of Obligations No. 6098 are excluded from this scope, as is clearly understood from the wording of the law. In this context, it would be correct to evaluate the simple debt relations between the parties within the scope of the Turkish Code of Obligations No. 6098.

2. Lending (Lending for Use) under the Turkish Code of Obligations

According to the Turkish Code of Obligations, simple lending transactions are regulated by the loan for use (loan agreement). According to the lending agreement regulated under Articles 386-398 of the Turkish Code of Obligations No. 6098, it is possible for one party to lend a certain amount of money or other types of goods to the other party. Such lending transactions are allowed under the TCO, unless they are a financial institution’s activity.

The lending agreement may be of an ordinary nature or interest-bearing. However, these lending transactions must be conducted within certain limits and must not turn into a commercial continuous lending activity. Following the Turkish Code of Obligations No. 6098, companies may lend money to group companies, employees, or shareholders in certain circumstances, but such lending must not be for commercial gain.

The following points should be taken into consideration in lending activities that are use lending:

• Lending should not become a continuous and systematic commercial activity.
• The repayment of the loan should be conditional, but the transactions should not be aimed at financial gain.
• The repayment terms and conditions should be clearly defined.

Although the addition of fees/activities/associated legal rights to the transaction in question does not constitute a contradiction in accordance with the Turkish Code of Obligations No. 6098, if these transactions fall within one of the transactions specified in the special laws (which will be detailed below), the relevant articles of law will be applied and, as we will discuss in detail, the institutions and organizations that can carry out these activities are clearly regulated.

3. Activities within the Scope of Financial Leasing, Factoring and Financing Companies Law No. 6361 and Banking Law No. 5411

A crucial point of distinction is whether the companies’ lending transactions fall within the scope of the Financial Leasing, Factoring and Financing Companies Law No. 6361 and the Banking Law No. 5411. These laws regulate and limit the authority of financial institutions to perform certain activities.

Under the Law No. 6361, the organizations that may operate are as follows;

• Financial Leasing Companies : Companies that provide long-term financing through lease agreements.
• Factoring Companies : Organizations that provide financing services to provide cash flow by taking over the receivables of companies.
• Financing Companies : Companies that provide consumer loans and other financial services.

These companies are licensed and supervised by the Banking Regulation and Supervision Agency (BRSA). The lending transactions of companies other than such institutions that provide financing cannot be carried out without the permission of the BRSA, and if they are carried out, it is not possible to talk about a “valid” transaction since the transaction in question will be carried out by a legally unauthorized institution.

1. Activities under Law No. 6361;

• Financial Leasing Agreement: The lessor, upon the request and election of the lessee, leaves the possession of a property that it has purchased or otherwise obtained from a third party or from the lessee itself, or has previously taken into its ownership, to the lessee in return for a lease fee to provide all kinds of benefits.
• Factoring Agreement : The collection provided by the factoring company to its customer by taking over the receivables arising from the sale of goods or services evidenced by invoices and the receivables arising from the sale of goods or services that can be evidenced within the framework of the procedures and principles determined by the Board.
• Financing Agreement : Crediting the purchase of any kind of goods or services by making payment directly to the seller upon delivery or supply of the goods or services in the name and account of the real or legal person buying the goods or services.
• Savings Financing Contract: Giving the customer the right to use financing for the acquisition of housing, roofed workplace or vehicle, provided that predetermined conditions are met based on a certain savings amount and period, and giving the company the obligation to manage, repay and finance the accumulated savings amount of the customer and the right to receive an organization fee.

The activities that fall within the scope of these definitions and explanations can be performed by legal entities authorized under Law No. 6361.

Banking Law No. 5411 defines the scope of bank activities. Banks may engage in transactions such as lending, deposit collection and credit card services. Companies that are not banks are prohibited from engaging in activities such as lending for permanent or commercial purposes. Article 4 of the Banking Law specifies the activities that banks may perform, and lending is particularly important among these activities.

1. Financing Institutions and Transactions that may fall within the scope of Banking Activities

To decide whether the lending activities of companies are mixed with the activities of financing institutions, some criteria should be considered are as follows:

• Lending Activity : If companies lend money to third parties on a continuous and commercial basis, this activity may be considered within the scope of the activities of a financing institution or a bank. These transactions in credit activities are activities that can be conducted by financing companies or banks.
• Deposit Acceptance : Companies are prohibited from collecting deposits from the public or third parties without being a bank. Article 60 of Banking Law No. 5411 clearly regulates that only banks may accept deposits.
• Interest and Financial Profit Objective : If the company aims to earn interest or financial profit from lending transactions, this may be considered as banking or financing activities.
• Leasing and Factoring : Companies may not engage in leasing and factoring activities regulated by Law No. 6361 unless they are licensed to do so.

4. Considerations in Lending Activities without being a Financing Institution:

The lending activities of companies that do not have the status of a financial institution or a bank are subject to certain limitations. If these restrictions are not followed, companies may face serious legal sanctions. The issues that companies should pay attention to when making lending transactions without being a financing institution can be listed as follows:

• Lending should not be continuous: Companies may conduct incidental lending transactions. However, if these transactions become continuous, turn into commercial activities, and gain a professional character, they can be considered as financing activities.
• Avoid Public Lending Activities: Lending transactions should be limited to a specific group (e.g., group companies, employees, or shareholders) and should not be made available to the public or to a broad customer base.

CONCLUSION

The lending and financing activities of companies established in Türkiye must be conducted within certain legal frameworks. To operate as a financing institution, companies must meet the necessary conditions and follow legal regulations. Otherwise, they are likely to face legal problems. In other words, the lending activities of companies in Türkiye are permissible if they are conducted within the scope of the Turkish Code of Obligation No.6098 but may cause legal problems when mixed with financing or banking activities. It is of utmost importance that companies limit their lending activities and do not become financing institutions. Since Law No. 6361 and the activities regulated by the Banking Law require a license, such transactions should be avoided. Otherwise, companies may be subject to BRSA supervision and face severe sanctions.

Article written by Yalçın & Toygar Law Firm.