Corporate demergers (bölünme) are frequently used in Turkey to separate business lines, isolate risk, prepare for investment, or reorganize group structures. Unlike a simple asset sale, a statutory demerger under the Turkish Commercial Code is designed to move assets and liabilities in an organized way—often with effects similar to universal succession for the transferred portions. However, demergers raise a sophisticated legal issue that is central to secured finance and property law: what happens to in rem rights (ayni haklar) such as pledges, mortgages, usufruct rights, and other encumbrances when assets are split between companies?
For lenders and investors, this question is not academic. Priority, enforcement, and collateral value can change dramatically if an encumbered asset is transferred incorrectly or if registry updates are not handled properly. For companies, misunderstandings can lead to delays, disputes with creditors, and failed transactions.
This article explains how in rem rights are treated in corporate demergers in Turkey from a practical and transaction-oriented perspective: the logic of statutory demergers, how encumbrances follow assets, where registry steps are required, and what to do to avoid priority and enforceability surprises.
1. What Is a Demerger in Turkey and Why It Matters for Property Rights?
In Turkish corporate practice, demergers are used to:
- separate operational businesses from real estate or valuable IP,
- create a clean entity for sale or investment,
- move risky liabilities away from a core business,
- reorganize group companies for efficiency or compliance.
A statutory demerger is typically carried out through a formal process involving:
- a demerger plan and reports,
- corporate approvals,
- creditor protection mechanisms,
- and registration steps at the trade registry.
The key concept is that demergers are not merely contractual. They are corporate law transformations that can transfer assets and liabilities with statutory effects. But in rem rights often live in specialized registries (land registry, pledge registries), so trade registry steps alone are not always enough for market clarity.
2. The Core Principle: Encumbrances Usually Follow the Asset
A basic property-law logic applies: an in rem right attached to an asset generally continues to burden that asset even after the asset is transferred to another company. In other words, if a real estate property is mortgaged, transferring that property in a demerger does not “clean” the mortgage away. The mortgage remains, and the new owning company takes the property subject to the mortgage.
This principle protects secured creditors: if encumbrances could be erased by restructuring, secured lending would become unreliable.
However, the practical implementation depends on:
- what type of in rem right exists,
- which registry governs the asset,
- how the demerger allocates assets,
- and whether registry updates are completed properly.
3. Different Asset Types, Different Transfer Requirements
3.1. Immovables (Real Estate) and Mortgages
Real estate is registry-centric. If an immovable subject to mortgage is transferred in a demerger:
- the mortgage typically continues to encumber the property,
- but trade registry registration of the demerger does not automatically “update” land registry records in a practical sense.
In practice, parties should ensure:
- land registry updates reflect the new owner,
- mortgage entries are correctly preserved,
- and the chain of title remains clean for third-party verification.
3.2. Movables and Pledges
Movable pledges may be governed by different publicity mechanisms depending on the instrument used (registry-based movable pledge systems, specific registries for certain assets, or possession-based pledges). In demergers:
- pledges generally continue over the pledged assets,
- but registry alignment is essential to avoid enforcement disputes and priority uncertainty.
3.3. Receivables and Assigned Rights
Receivables are not “in rem rights” in the same way as mortgages, but receivables are often subject to pledge/assignment for security. If pledged receivables are transferred:
- creditor consent and documentation alignment become essential,
- notices and operational systems must be updated,
- otherwise enforcement becomes practically difficult.
3.4. Usufruct, Easements, and Other In Rem Rights
Rights such as usufruct, easements, and annotations can affect usability and value. In demergers, these rights usually remain attached to the relevant asset. Investors should evaluate them as part of due diligence because a demerger does not eliminate such restrictions.
4. Creditor Protection and Consent: When Does the Secured Creditor Matter?
A major misconception is that a demerger is a “corporate event” that can be done without considering secured creditors. In practice, secured creditors matter because:
- their security follows the asset, but enforceability depends on clarity,
- they may have contractual covenants prohibiting restructuring without consent,
- and operational control issues (cash flow routing, account control, reporting) may be disrupted.
Therefore, many demergers require:
- lender notifications,
- covenant compliance checks,
- and sometimes formal consents or amendments to security documents.
5. Priority Risks: How Demergers Create Unexpected Ranking Disputes
Priority issues can arise if:
- registry entries are not updated to reflect the new asset owner,
- collateral descriptions become inconsistent after assets move,
- multiple assets are split across entities, but security was intended to cover a package,
- new financing is added post-demerger without mapping existing encumbrances.
A demerger can unintentionally weaken a creditor’s position if the “economic collateral base” is divided and the creditor is left with security over a less valuable portion. This is why lenders closely analyze demerger allocation tables.
6. Best Practices in Demerger Planning (For Companies, Investors, and Lenders)
6.1. Build an Encumbrance Map Before Designing the Split
- list all assets being transferred,
- identify all mortgages/pledges/easements/annotations,
- map which entity will receive each encumbered asset.
6.2. Align the Demerger Plan With Security Documentation
If security documents refer to “enterprise assets” or defined collateral pools, those definitions may need amendments after a split.
6.3. Secure Creditor Communication
- check negative pledge and restructuring covenants,
- notify lenders early,
- obtain consents where required,
- agree monitoring changes post-demerger.
6.4. Registry Updates as Closing Deliverables
Treat registry updates (land registry, pledge registries) as closing deliverables:
- obtain proof of updated entries,
- ensure continuity of encumbrances,
- confirm there is no gap that could be exploited by competing creditors.
6.5. Reassess Collateral Coverage and Valuation
After the split, ensure the secured creditor’s collateral is still adequate. If not, negotiate additional security or covenant adjustments.
Conclusion
In Turkey, in rem rights in statutory demergers are generally designed to continue: mortgages and pledges typically follow the assets they burden. However, the commercial reliability of this principle depends on disciplined execution—especially registry alignment and creditor management. Demergers can unintentionally create priority disputes and weaken collateral packages if encumbrances are not mapped and updated properly. With careful planning, transparent creditor communication, and registry-proof closing mechanics, demergers can achieve their corporate objectives without undermining security and property rights stability.
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