With the amendment dated November 24, 2021 to the Bankruptcy and Enforcement Code No. 2004 [“BEC”] the sale of seized assets was to be conducted fully in an electronic environment. However, it was provided that the implementation of this provision would begin with the adoption of the relevant regulation.
The expected regulation was published in the Official Gazette no. 31772 on March 8, 2022, and entered into force on the same date with the title “Regulation on the Procedure of Electronic Sales Pursuant to the Bankruptcy and Enforcement Code [the “Regulation”]. The Regulation governs the procedures and principles for the auction sale of movable and immovable assets via the Electronic Sales Portal, which is integrated to the National Judicial Network Information System ["UYAP"]. As such, electronic sales of assets by an auction will now begin to be implemented within the framework of the Regulation.
Scope of the Regulation
The Regulation determines the procedures regarding the auction and electronic sale of both movable and immovable assets. It is important to note that, as per the Regulation, sale by e-auction is available not only for seized assets, but also for assets that have been decided to be sold by auction as a result of a lawsuit. For instance, lawsuits for elimination of joint ownership and estate also fall within the scope of the Regulation.
Steps to be followed in electronic sales under the Regulation are briefly as follows: preparation of the terms of reference, announcement of the auction in electronic environment, announcement in the gazette, and preparation of the auction results report. It is obligatory to use the printed papers supplied in the annexes of the Regulation during the execution of the processes relating to these transactions.
Announcement of Sale
During the preparation for sale and announcement processes, the date and time of the first and second auctions are set and announced at least 15 days before the start of the auction and remain accessible to public until the end of the auction. The parties' interests are considered when deciding on the form of the announcement of sales and whether it will be published in the gazette. If there is a discrepancy between the announcements in the gazette and the Electronic Sales Portal, the text announced in the Portal is taken into consideration.
Guarantee Amount, Deposit Procedure and Return
The participants must first deposit cash collateral in the amount of 10% [ten percent] of the estimated value of the properties subject to sale in the account of the relevant enforcement office until 23:30 on the day before the end of the auction period. It is also possible to provide collateral via a definite letter of guarantee unlimited in time.
In terms of shareholders who wish to participate in the auction in the elimination of the partnership by sale or creditors who is a party to the enforcement procedures, the collateral they should provide is calculated by deducting their rights from the total collateral amount.
The guarantees of all participants except the highest bidder will be returned after the auction ends, and the highest bidder will be the buyer. If the buyer does not pay the sale price within seven days after the announcement of the report, their provided guarantee will not be paid back, and the auction expenses are deducted from the guarantee provided. If part of the guaranteed amount remains after the deduction of auction expenses, this amount is then paid to the beneficiaries for their receivables, as determined by the BEC.
Bid Period and Submission Procedure
The participants must agree to the agreement drafted by the Republic of Turkey Ministry of Justice as a condition of participating in the auction and bidding on the Electronic Sales Portal. The bidding period in the auction is determined as seven days, and if a new bid is submitted within the last ten minutes of the given time, the auction will be extended by ten minutes for once.
Furthermore, the participants' bids cannot be less than one-thousandth of the expected value of the assets on offer, and not less than 100 Turkish Liras. Unless a greater bid is made within the auction period, the top bidder among the participants is unable to withdraw their bid and retrieve the guarantee deposited.
In accordance with the Regulation, the auction is initiated starting with %50 [fifty percent] of the estimated value of the asset subject to the auction, and the asset is awarded to the highest bidder. After the auction is finalized, the sold products are recorded in special registries on behalf of the buyer as may be needed and delivered to the buyer.
On the other hand, if the debtor pays his debt in full by the end of the auction period, the sale will be suspended, and the auction will end. If there is no buyer in the a new auction date can be requested within the period in the previous request.
When the process is completed, i.e., after sale by auction, the enforcement office will issue the auction result report on the first business day following the sale and announce it on the Electronic Sales Portal within the same day. In addition, once the the auction result report is prepared, the bidder is obliged to pay the sale price to the account of the enforcement office within seven days from the announcement of this report, even if there is a motion for annulment of the auction.
The Tariff on Sales Expenses is Determined by the Communiqué
In addition, the Communiqué on the sales expenses tariff of the sales to be conducted within the scope of the BEC also entered into force in the Official Gazette on the day the Regulation was published.
In this respect, while the sales expense for immovable properties is determined as 5,780 TL, expenses for other assets are as follows: 2,880 TL for automobiles and other freight vehicles in motor land vehicles; 3.110 TL for pickup trucks, minibuses, midibuses, and all-terrain vehicles; 3.930 TL for truck, bus, tow truck; construction equipment, trailers and 4,470 TL for tow trucks and trailers. Sales expenses for other movable properties is set at 840 TL.
By Baris Ulker, Senior Associate, and Vedat Aydin Gunduz, Legal Intern, Guleryuz & Partners