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LEGAL GLOSSARY

Security

Finance, Capital Markets, Enforcement and ComplianceOther usages: assurance

Security is a personal or real assurance given to secure the performance of a debt or the compensation of a loss that may arise in the future. In personal security such as suretyship and guarantee, a third party assumes responsibility for payment; in real security such as pledge and mortgage, a specific asset is tied to the receivable as security. In litigation, security may also be required for an interim injunction, precautionary attachment or litigation costs. The concept has no single general definition in the law.

Scope

Turkish law has no single general statutory definition of security; the concept is used in different laws with different functions. The typical example of personal security is suretyship (Turkish Code of Obligations (TBK) Art. 581 et seq.); real securities are the pledge of immovable property (Turkish Civil Code (TMK) Art. 850 et seq.: mortgage, mortgage-backed debt instrument (ipotekli borç senedi), annuity deed (irat senedi)) and the pledge of movables (TMK Art. 939 et seq.). Bank letters of guarantee are deemed non-cash credit under Article 48 of the Banking Law.

In procedural law, Article 84 of the Code of Civil Procedure (HMK) provides that, in the cases listed in the law, the plaintiff must furnish security for the probable litigation costs of the opposing party; its amount and form are, as a rule, determined by the judge (Art. 87). A party requesting an interim injunction (HMK Art. 392) or precautionary attachment (Law No. 2004 on Enforcement and Bankruptcy, Art. 259) also, as a rule, furnishes security for the losses that may arise if it is found to be in the wrong; the law allows security not to be required in some cases.

Practical significance

In contracts, the type, amount, term, conditions of realization and return of the security should be clearly regulated. The validity requirements vary by type: suretyship depends on the formal requirements in the law, the pledge of immovable property on registration in the land registry, and the pledge of movables, as a rule, on the transfer of possession to the creditor. If the security required by the court is not furnished within the firm deadline, the action is dismissed on procedural grounds (HMK Art. 88); once the reason requiring the security has ceased, its return may be requested (HMK Art. 89).

Commonly confused concepts

Security is the umbrella concept; suretyship and pledge are its types. A bank letter of guarantee is confused with suretyship: a letter of guarantee is the payment undertaking assumed by the bank toward a third person at the request of its customer and in practice is mostly characterized as a guarantee agreement, whereas the liability of the surety is dependent on the principal debt. Precautionary attachment is also not security: precautionary attachment is a temporary measure aimed at protecting the receivable; the security furnished by the creditor requesting this measure, on the other hand, secures the possible loss of the debtor.

Sources and scope

The explanation is for general information; a specific case must be assessed separately.

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