Turkey: Law Numbered 6361 On Financial Leasing, Factoring And Financing Companies

Introduction

The Financial Leasing Law, dated 10.06.1985 and numbered 3226, and the By-Law Regarding Money Lending Activities, dated 30.09.1983 and numbered 90, with its appendices and amendments are abrogated by the Law on Financial Leasing, Factoring and Financing Companies, dated 21.11.2012 and numbered 6361¹ ("Law No. 6361" or "Law").

The purpose of Law No. 6361 is to regulate the establishment and working principles of financial leasing, factoring and financing companies which operate as financial institutions and to regulate the procedures and principles regarding financial leasing, factoring and financing agreements.

By being defined as "financial institutions" by Law No. 6361, it is important to note that the aforementioned companies form an important part of the financial system; a legal basis for the establishment and operations of the companies is set up and an effective supervision and auditing system is introduced.

One of the most important changes introduced by Law No. 6361 is the establishment of the legal entity entitled the "Association of Financial Leasing, Factoring and Financing Companies" as a professional organization with the status of a public institution, and the obligation imposed on the companies to become a member of this Association. With the establishment and commencement of the operation of the Association, all companies in this sector will act in coordination and operate in compliance with the legal regulations and certain standards.

Important Provisions of Law No. 6361

Pursuant to Temporary Article 1 of Law No. 6361, the provisions of the legislation issued pursuant to the abrogated provisions and which do not conflict with Law No. 6361 will be applicable until the entry into force of the legislation to be issued pursuant to the related law. According to the same article, the legislation foreseen under Law No. 6361 shall enter into force within 1 year.

Pursuant to Temporary Article 2 of Law No. 6361 regarding the adaptation period, companies subject to this law must adapt themselves, within 3 years as of the date of publication of the law to provision No. 5(1)(e) regulating the minimum capital, and within 6 months as of the date of publication of the law to provisions No. 8(1) regarding the establishment of a branch and No. 13(2) with respect to the conditions required to be on the board of directors and general managers (chief executive officers). In the event of a force majeure, and if deemed acceptable by the Banking Regulation and Supervision Board ("BRSA" or the "Board"); these periods may be extended provided that the extensions do not exceed 1 year.

The establishment of a company in Turkey falling within the scope of the Law is permitted only with a resolution adopted with the vote of at least 5 members of the Board, provided that the conditions foreseen under the Law are met. A company to be established in Turkey shall fulfill the following;

The companies that obtain an establishment license must also receive permission to operate from the Agency. The permission to operate given by the Board shall be published in the Official Gazette.

The opening of a branch within the country or abroad is subject to the permission of the Agency. Companies cannot engage in organizational structures other than the establishment of branches, and cannot grant franchises.

The Agency shall be informed before amendments are made to the company articles of association. Unless the Agency delivers a negative opinion within 15 business days regarding amendments to the articles of association, these amendments will be included in the agenda of the general assembly meetings of the company and the Agency will be informed of the results. The current version of company articles of association should be published on the company website. The articles of association must be updated within 10 business days following the date of realization of the amendments. Changes in the company address shall be notified to the Agency within 15 business days following the date of such change.

The company board of directors cannot consist of less than 3 members, including the general manager. The general manager, or his representative in his absence, is a natural member of the board of directors. The general manager of the company must have professional experience in the area of business management or finance of at least 7 years; for the deputy general manager the requirement is at least 5 years. Additionally, they must have completed an undergraduate degree.

The supervision and auditing of the companies pursuant to the Law is conducted by the Agency. The Agency is entitled to request any and all information, even confidential information, which it deems related to the provisions of the Law from the company, the shareholders of the company, the corporations controlled by the company and their branches and from other related real persons and legal entities. In addition, the Agency may examine all of the books, records and documents, including tax related records. The companies are obliged to provide the information requested by the Agency, to keep the books, records and documents available for examination, to provide access to all the data processing system to the occupational personnel of the Agency executing on-site auditing, be in compliance with the purposes of the audit and ensure the data safety. Further, the companies are obliged to submit for examination any records in microfiche, microfilm and other similar form with respect to any books, documents and reports required to be preserved. Companies must submit all systems of storing and recording information along with the relevant codes necessary to access these records or to make these records readable.

Conclusion

Law No. 6361 defining the financial leasing, factoring and financing companies, which constitute an important part of the financial system, together and as financial institutions, is important and essential.

Footnotes

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.