Authors: Capital Markets Law Department, Prof. Dr. Ali Paslı, Atty. Mustafa Şahin

Introduction

As with other consensual pledges, creating a pledge over shares of a joint-stock company occurs through a causal obligation (borçlandırıcı işlem) followed by a disposition (tasarruf işlemi). Where shares are dematerialized and monitored by the Central Securities Depository of Turkey (Merkezi Kayıt Kuruluşu, “CSD” or “MKK”), the establishment and opposability of the pledge to third parties are governed by Article 47 of the Capital Markets Law No. 6362 (“CML”) and the Communiqué on Procedures and Principles Regarding the Book-Entry Recording of Dematerialized Capital Market Instruments (II-13.1) (the “Dematerialization Communiqué”). This article sets out, in a systematic manner, the conditions for creating a pledge over dematerialized shares and the routes to enforcement, and then explains the rationale and normative necessity underlying CML Article 47.

I.Legal Framework for Security Agreements over Capital Market Instruments - Why a CML-Specific Regime Was Needed

Pursuant to CML Article 13, capital market instruments designated by the Capital Markets Board (the “CMB”)—including publicly offered shares, mutual fund units, lease certificates, real estate certificates, and government bonds—must be recorded in book-entry form with the MKK.

While the Turkish Civil Code No. 4721 (“TCC”) lays down general rules on pledges over receivables, it is not tailored to dematerialized instruments whose paper form has been eliminated through book-entry recording. The TCC distinguishes between receivables evidenced by an instrument and those that are not, but it does not provide a pledge regime specific to uncertificated, electronic rights.
To align with international financial regulation and market practice, CML Article 47 introduced a bespoke framework for security agreements over dematerialized capital market instruments—harmonizing creation, recording, third-party effectiveness, and swift sale/set-off mechanisms upon default.

II.Creation of a Pledge over Dematerialized Capital Market Instruments

Two baseline conditions apply when pledging dematerialized shares:

1. Written Form. Under CML Article 47/1, “security agreements over capital market instruments monitored on a book-entry basis within MKK shall be executed in writing.” The provision expressly imposes a written form requirement for pledges, mortgages, and analogous security relationships over book-entry instruments.
2. MKK Recording. Article 22/1 of the Dematerialization Communiqué requires that pledges established over dematerialized instruments be notified to the MKK and recorded in the MKK system.

Operationally, the pledgor notifies the investment firm (the MKK participant) maintaining the relevant individual custody account that a pledge has been created; the participant then ensures the pledge is entered into the MKK system. The MKK entry performs a publicity function: the record date determines when the pledge becomes effective vis-à-vis third parties, and once the record is created, later acquirers of rights in the shares can no longer rely on good-faith protection against the pledge.

Consequently, a valid pledge requires (i) a written pledge agreement between pledgee and pledgor and (ii) recording of the pledge with the MKK.

III. Enforcement of the Pledge

1. General Principle and the Narrowing of the Lex Commissoria Prohibition

As a rule, enforcement of a pledge would proceed via judgment enforcement, given the classical prohibition on lex commissoria—i.e., the creditor’s automatic acquisition of ownership of the pledged movable upon default.
CML Article 47, however, provides that “security agreements over capital market instruments monitored by MKK shall be in writing. The ownership of the instruments subject to such agreements may, depending on the agreement, either be transferred to the secured party pursuant to statutory procedures or remain with the provider of security.” In doing so, Article 47 carves out a limited exception to the lex commissoria prohibition for dematerialized instruments: parties may agree on title transfer as part of the security arrangement. If the agreement is silent, ownership is deemed not to have transferred to the pledgee.

Accordingly, practice recognizes two models under Article 47: (i) a non-transfer of title pledge, and (ii) a title-transfer security arrangement.

2. Non-Transfer of Title Model

Under CML Article 47/3, if title remains with the pledgor, the dematerialized shares are monitored in the MKK records via a sub-account linked to the pledgor’s existing account, unless the parties agree otherwise. Upon termination of the pledge, the pledgee must return the secured instruments—or their equivalent—to the pledgor. This structure ensures transparent tracing of the encumbrance while keeping the pledgee’s powers of disposition limited.

3. Title-Transfer Security Model

Where title transfer is stipulated (CML Article 47/2), ownership of the secured shares passes to the pledgee upon creation of the agreement in accordance with statutory procedures, and the instruments are transferred by book entry to the pledgee’s MKK account with a “security” annotation. When the security ends, the pledgee returns ownership of the instruments (or equivalent) to the security provider in line with the agreement.

4. Sale and Set-Off upon Default or Contractual/Statutory Triggers

CML Article 47/4 enables expedited satisfaction by the secured party upon the debtor’s default—or other contractually/statutorily specified triggers—without prior notice, grace periods, court/administrative authorization, or public auction:

• If title was transferred: absent a contrary clause, the pledgee may sell the instruments at not less than market value and satisfy its claim from the proceeds, or set off the value of the instruments against the debt.
• If title remained with the pledgor: the pledgee may sell the instruments at not less than market value and satisfy its claim from the proceeds, or appropriate the instruments (i.e., take ownership) and set off their value against the debt.

To exercise these rights, the security agreement must expressly provide for such mechanisms, including a clearly articulated valuation methodology. In this way, Article 47 establishes a modern, market-compatible enforcement regime for book-entry collateral that narrows (but does not abolish) lex commissoria, enabling non-judicial and swift realization in capital markets.

Conclusion

Creating a pledge over dematerialized shares hinges on two mandatory elements: (i) a written pledge (security) agreement and (ii) MKK recording. The MKK entry secures third-party effectiveness and transparency. For enforcement, CML Article 47 departs from classical movable-pledge paradigms by offering a speedy realization toolkit: depending on whether title transfers or remains with the pledgor, the pledgee may sell at not less than market value or set off/appropriate upon default, without court involvement.

To ensure a robust and predictable collateral structure, the security agreement should unambiguously regulate title status, valuation methods, sale mechanics, and notification flows; it should also reflect equivalent-return and sub-account monitoring provisions and be coupled with an MKK process design in full compliance with the CML and the Dematerialization Communiqué. Properly structured, this framework preserves collateral value and, when needed, enables fast, court-free liquidation, thereby enhancing certainty in capital-markets transactions.