In commercial life, credit runs on trust—but trust is usually backed by security. In Turkey, the strongest form of security is not a promise to pay; it is a right that “sticks” to an asset and can be asserted against third parties. These rights are commonly called in rem security interests (ayni teminatlar). They are essential in bank lending, project finance, trade finance, M&A, and restructuring because they provide creditors with legal priority and enforceability.
However, “security” in Turkey is not a single instrument. Different assets require different security tools, different perfection steps, and different enforcement strategies. A pledge over shares behaves differently from a mortgage over real estate. A movable pledge covering machinery raises other issues than a receivables pledge or a commercial enterprise pledge. For investors and lenders, the key question is always practical: Which in rem security type best captures value while minimizing priority and enforceability risk?
This article provides a transaction-oriented map of the major in rem security types used in Turkish commercial practice, explaining (i) what each instrument targets, (ii) why it is used, (iii) what perfection typically looks like, and (iv) the most common risks.
1. What “In Rem Security” Means in Business Practice
An in rem security interest is a right over an asset that secures a debt and can generally be asserted against third parties. Its commercial advantages are:
- Priority: the secured creditor is typically paid ahead of unsecured creditors, subject to statutory exceptions and procedural costs.
- Enforceability: in default, the creditor can pursue the collateral or its proceeds.
- Market visibility: many in rem security interests rely on registration/publicity, reducing hidden encumbrances.
In practice, the strength of a security interest depends on three pillars:
- Validity (proper form and authority),
- Perfection (third-party effect),
- Priority (ranking against competing claims).
2. Mortgage (Real Estate Security)
When a borrower owns real estate, the most common in rem security is a mortgage. Banks favor mortgages because real estate is relatively stable, registries are well established, and enforcement pathways are familiar.
What it secures: debt obligations (loan principal, interest, costs—depending on drafting).
What it targets: immovable property (land/buildings).
Practical risks: existing mortgages, annotations, zoning/permit issues, and valuation gaps.
Why it matters: in high-value financings, mortgages often anchor the security package because they provide a “hard asset” fallback.
3. Pledges Over Movables (Machinery, Equipment, Inventory)
Movable assets form the operational backbone of many companies. Security over movables is therefore central in corporate finance.
What it targets: machinery, equipment, vehicles, inventory, fixtures.
Core challenges: movables are easy to relocate, sell, or replace—so monitoring and identification are crucial.
A practical distinction is between:
- Identified fixed movables (e.g., serial-numbered machinery), and
- Dynamic movables (inventory) that change daily.
For identified machinery, sophisticated practice uses:
- detailed schedules, serial numbers, locations,
- insurance and maintenance covenants,
- restrictions on relocation and extraordinary disposal,
- periodic inspections or audits.
For inventory, the success of security depends less on legal theory and more on controls: reporting, warehouse lists, and triggers that tighten monitoring in distress.
4. Commercial Enterprise Pledge (Enterprise-Level Security)
A commercial enterprise pledge aims to cover an operating business as a bundle—often used to capture a broader collateral pool than single-asset pledges.
Why used: to secure lenders when value is spread across operational assets.
Key practical risk: enterprise collateral is not a single asset; different components may require different perfection logic, and title/lease issues can defeat expected coverage.
In distress, enterprise pledges are tested by:
- asset identification gaps,
- competing security interests,
- ownership disputes (finance leasing, retention of title),
- and the “asset reality gap” (what is listed vs. what exists).
5. Share Pledges (LTD and A.Ş.)
A share pledge secures debt using the shareholder’s interest rather than the company’s assets directly.
Why used: control leverage, group financings, acquisition structures.
Key risk: enforceability depends heavily on corporate formality, transfer restrictions (especially in LTDs), and evidence alignment (share ledger, certificates where applicable).
In practice:
- LTD share pledges are more sensitive to transfer restrictions and close-company formalities.
- A.Ş. share pledges can be more flexible, but share type (registered/bearer, certificated/uncertificated) and record control are crucial.
Share pledges often function as negotiation leverage more than as a liquid recovery tool, especially in privately held companies.
6. Receivables as Collateral (Pledge/Assignment for Security)
Receivables are “cash flow in waiting.” They are attractive collateral, especially in trade finance and working capital facilities.
Key risk: receivables are subject to defenses—set-off, disputes, returns, performance claims, and contract restrictions on assignment.
Practical approach: define the receivables pool clearly, monitor collectability, and build operational controls for collections where feasible.
Receivables security is strongest when:
- the pool is properly defined,
- notices/acknowledgments are handled where needed,
- and the creditor has real visibility over collections.
7. Bank Accounts and Cash Control Mechanisms
Cash is the most liquid asset. Where commercially feasible, lenders seek account-based security or control mechanisms to improve recovery reliability.
Use cases: project finance, structured trade finance, distressed refinancings.
Key risk: effectiveness depends on operational feasibility and documentation discipline; without practical control, “cash security” can become theoretical.
8. Guarantees vs. In Rem Security: Why Banks Combine Both
Although guarantees are personal security (şahsi teminat) rather than in rem security, banks combine them because:
- in rem security can be disputed or insufficient,
- collateral value can drop in distress,
- and guarantees provide additional recovery channels.
A strong security package is layered: hard assets + operating assets + cash flow + corporate leverage + guarantees.
9. Common Pitfalls That Destroy Security Value
Across all security types, the same pitfalls repeat:
- perfection treated as “post-closing paperwork,”
- vague collateral descriptions,
- failure to verify title/ownership,
- ignoring existing encumbrances,
- weak monitoring (inventory and receivables),
- inconsistent registry entries vs. agreements.
Conclusion
In Turkish commercial practice, in rem security is a toolbox—not a single document. The right instrument depends on the asset, the business model, and the creditor’s recovery plan. Successful collateral design combines legal formality with operational reality: clear asset identification, proper perfection, priority safety, and ongoing monitoring. When those elements align, in rem security becomes a reliable foundation for financing and restructuring outcomes.
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