Sun, Jun
53 New Articles

Court of Cassation Decides Cooperatives Are Qualified as Merchants

Court of Cassation Decides Cooperatives Are Qualified as Merchants

  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

The Joint Chambers of Civil Court of Cassation's ["Court of Cassation"] decision dated November 12, 2021 and numbered 2020/2 E. 2021/3 K. ["Decision"], put an end to the debate regarding the nature of cooperatives. The Court of Cassation concluded that cooperatives, which include partnerships such as consumption, production, credit, and building cooperatives shall be regarded as commercial entities.

Background of the Debate

The term "venture" used in the definition of cooperatives in the Cooperatives Law dated 1969 and numbered 1163 sparked discussions about cooperatives as merchants, which have been the subject of various legislative action and Court of Cassation decisions since the 1920s. Despite attempts to resolve the disagreements by altering this term to "partnership" in 2004, different chambers of the Court of Cassation had been rendering incompatible judgments until today. This predicament emerged from the unique function of cooperatives rather than the uncertainty of legal regulations. The chambers which maintained that cooperatives did not have the title of merchant, emphasized that the term "partnership" alone did not indicate the existence of a commercial characteristic and that these unique partnerships with a social function could not be merchants by their nature, even if they were listed among commercial entities in the law.

Summary of the Decision

In its Decision, the Court of Cassation reviewed the past and present applicable legislation in order to determine the will of the legislator and made evaluations on whether cooperatives qualified as merchants.

The Decision mainly revolves around the decision dated 1945 and numbered 1944/8 E. 1945/14 K., in which the Court stated that "... cooperatives are one of the commercial companies, regardless of the title and actions of their partners, and the competent courts for the disputes that arise from them are commercial courts..." and the first paragraph of Article 124 of the Turkish Commercial Code No. 6102, where cooperatives are classified as commercial entities, which is an intended classification as suggested by the reasoning of the article.

Furthermore, provisions in the Bankruptcy and Enforcement Code No. 2004 stating that cooperatives are subject to bankruptcy and concordat, as well as provisions in the Cooperatives Law No. 1163 such as the obligation of registry to the local Trade Registry Office or the consideration of lawsuits as commercial cases, reveal the legislator's intent for cooperatives to have the title of merchant.

Within this framework, the Court of Cassation concluded that cooperatives are commercial entities that qualify as merchants regardless of managing a mercantile business, thus putting an end to the long debate.

Effect of the Decision

With the decision, which declares cooperatives to be merchants, it is clear that the provisions and consequences of being a merchant will also apply to cooperatives. As a result, it was concluded that all legislation pertaining to the title of merchant, from the obligation to act as a prudent businessman to issuing invoices apply to cooperatives, surmounting the need for specialized regulation.

By Baris Ulker, Senior Associate, and Aziz Can Cengiz, Associate, Guleryuz & Partners

Guleryuz Partners at a Glance

We are Güleryüz Partners, an Istanbul based law firm, offering high-quality legal services to domestic and multinational clients.

Our team consists of energetic young professionals who are led by talented partners with strong academic backgrounds at prestigious universities in the USA, UK, and Germany, coupled with vast market experience exceeding a decade at top tier Turkish law firms. All our associates are fluent in English and provide legal advice in additional languages such as German and French.

Our practice ranges from complex disputes to sophisticated M&A and finance transactions. We provide niche legal services in a wide range of legal areas such as litigation and dispute resolution, local and cross border M&As, banking, finance and capital markets, venture capital investments and start-ups, and compliance and corporate governance (including data privacy, anti-corruption and white-collar crime, AML, and sanctions).

We value strong communication and information flow among our departments for the perfection of our legal services. This interdepartmental coordination enables us to take a more client-centric approach and to better understand and cater for the client needs. Our business perspective goes beyond providing excellent legal advice to our clients; we also collaborate with them as their business partners and offer them the entire legal ecosystem that they can thrive their business.  

As Güleryüz Partners, we heavily invest in our pro bono projects in Turkiye and work together with institutions, foundations, and other organizations to provide legal advice to the persons in need of help, while acknowledging the high costs usually associated with high quality legal services limit the access to justice for many people.

We also pride ourselves on fostering and promoting a diverse, equitable and inclusive work environment where every individual feels valued and respected.

For further information, you may visit our website at www.guleryuz.av.tr.