In practice, debtors sell their assets or transfer them through collusive transactions (muvazaa) by appearing to sell them, in order to prevent the attachment of their existing assets. The actions of debtors falling within the scope of crimes are not limited to these; it is frequently observed that some debtors, despite not being in debt, collude with third parties and become indebted to them—generally by signing promissory notes—and do not object to the execution proceedings initiated against them based on these fictitious debts, thereby causing the proceedings to become final. Subsequently, they exhibit attitudes and behaviors that prevent the actual creditors from collecting their receivables by having attachments placed on their assets before the actual creditors.
Regarding this matter, Article 331, Paragraph 1 of the Enforcement and Bankruptcy Law No. 2004 provides: “If, after the request for execution by way of attachment or within two years prior to this request, the debtor, with the intent to harm their creditor, decreases their assets artificially by removing their property or a part thereof from their ownership, destroying them, or diminishing their value, or by transferring them to another’s possession through actual or hidden collusion, or by acknowledging non-existent debts; they shall be sentenced to imprisonment from six months to three years and a judicial fine up to one thousand days, provided that the creditor proves they have obtained a certificate of insolvency against the debtor or could not collect their receivable.”
By prescribing imprisonment and judicial fines for such acts and behaviors of debtors under Article 331 of the Enforcement and Bankruptcy Law, the legislator aimed to protect the rights of creditors arising from enforcement law.
The fact that the debtor acted with the intent to harm their creditor is the foremost condition for the occurrence of the crime. Therefore, for a debtor to be punished under Article 331, they must act in bad faith. Furthermore, the debtor must have performed one of the following acts: removing all or part of their assets from their ownership, destroying them, diminishing their value, transferring them to someone else through actual or hidden collusion, or decreasing their assets by acknowledging non-existent debts. The debtor’s ostensible disposal of their property also constitutes a decrease in assets.
The debtor’s disposal of property at a price significantly below its actual value, its destruction, the transfer of assets to another through a collusive transaction, or increasing liabilities by creating non-existent debts will result in the decrease of assets. Pursuant to Article 37 of the Turkish Penal Code titled “Participation in a Crime,” “Each person who jointly performs the act defined in the legal definition of the crime shall be held liable as a perpetrator.” Acts such as encouraging the commission of a crime, strengthening the intent to commit a crime, promising assistance after the act, providing guidance on how the crime shall be committed, providing the tools used in the commission of the crime, or facilitating the execution by providing assistance before or during the commission of the crime are evaluated within the scope of aiding and abetting under Article 39 of the Turkish Penal Code. Although the person liable for the crime regulated in Article 331/1 of the Enforcement and Bankruptcy Law is the debtor, individuals who contribute to the commission of the crime may be punished according to the provisions of participation in a crime pursuant to the aforementioned provisions of the Turkish Penal Code.
For example, those who contribute to the debtor’s collusive transactions and help increase the debtor’s liabilities by initiating execution proceedings against the debtor through the issuance of collusive promissory notes shall be punished under the provisions of participation in a crime. If the debtor is a legal entity, since legal entities do not have criminal capacity, the liability belongs to the real persons authorized to represent and manage the legal entity pursuant to Article 345.
It should be noted that for the crime to occur, the debtor must have performed the acts decreasing their assets within a specific timeframe. This matter is expressed in the text of the article as: “After the request for execution by way of attachment or within two years prior to this request.” However, Article 347 of the Enforcement and Bankruptcy Law, titled “Statute of Limitations for Complaints,” contains the provision: “The right to complain due to the acts set forth in this Chapter shall lapse after three months from the date the act is learned and, in any case, one year from the date the act was committed.” While Article 331 considers transactions within the retroactive 2-year period as crimes, the clarification in Article 347 that the right to complain lapses within 1 year creates a contradiction between the two legal provisions.
For this reason, although it is stated in Article 331 that transactions within a retroactive 2-year period prior to the request for execution by way of attachment may be subject to a complaint, due to the limitation on the period for the right to complain, the criminal liability of the debtor may arise regarding acts committed within a maximum period of one year. No liability shall arise for the debtor regarding acts older than one year, as the right to complain will have lapsed.
Another condition is that the creditor must suffer damage. The burden of proof regarding the damage lies with the creditor. The creditor is obliged to prove this by demonstrating that they could not collect their receivable in the execution proceeding initiated against the debtor. In practice, the certificate of insolvency obtained from the execution file is used as a means of proof. There are two types of certificates of insolvency: temporary and definitive. Although not explicitly stated in the law, it is accepted in doctrine that the certificate of insolvency required by law is the definitive certificate of insolvency. To obtain a definitive certificate of insolvency from the execution file, the creditor must document that the debtor has no movable or immovable property and no rights or receivables from third parties.
Regarding this matter, you may review the precedent Court of Cassation Decision provided below.
COURT OF CASSATION 19TH PENAL CHAMBER
Case No: 2015/28241
Decision No: 2017/7974
Date: 10.10.2017
LAWSUIT: Upon the appeal of the judgment rendered by the Local Court; the file was examined according to the duration of the application, the nature of the decision, and the date of the crime, and the following was considered:
DECISION: Since there are no grounds for the rejection of the appeal request, the merits of the case were addressed.
In the examination conducted based on the minutes reflecting the trial process where the conscientious conviction was formed, the documents, and the content of the reasoning;
For the occurrence of the crime of “decreasing assets with the intent to harm the creditor” regulated in Article 331 of the Enforcement and Bankruptcy Law No. 2004 attributed to the defendant; the material and moral elements of the crime shall be formed if: “after the complainant/creditor initiates execution proceedings by way of attachment or within two years prior to the commencement of the execution proceedings, the debtor decreases their assets by destroying their property and diminishing its value, hides their property, transfers their property to another’s possession through collusion, or acknowledges non-existent debts, and performs one of these acts with the intent to harm their creditor, and if the complainant creditor proves that they have obtained a certificate of insolvency against the debtor or could not collect their receivable.”
Furthermore, for the regulation in Article 331 of the EBL to be accepted as a crime, it is also conditional upon the creditor having suffered damage due to these acts of the debtor.
Therefore, for the purpose of determining whether the transfer of the subject immovable properties to third parties was carried out with the intent to harm the creditor, the court should have: primarily obtained the immovable transfer agreements and the agreements regarding the establishment of mortgages; heard the individuals who took over said immovables as witnesses; investigated whether a payment was actually made to the defendant based on the sales prices and actual values of the transferred immovables; determined by whom the transferred immovables were used as of the date of the complaint and currently; investigated whether there is a close kinship relationship between the transferring defendant and the individuals taking over; and investigated whether the debts of the principal debtor company were paid with the proceeds of the transferred immovables as stated in the defendant’s defense. Instead, rendering an acquittal in writing based on an incomplete prosecution,
CONCLUSION: As the reasons for appeal of the complainant’s counsel are found justified in this respect as they are contrary to the Law, the JUDGMENT IS OVERTURNED pursuant to Article 321 of the Code of Criminal Procedure No. 1412, which is applicable by Article 8/1 of Law No. 5320, in accordance with the notification, and it was unanimously decided on 10.10.2017 that the file be sent to its court to continue and conclude the trial starting from the stage prior to the reversal.