Comparative Analysis of Bearer and Registered Instruments

Entrance

One of the fundamental building blocks of commercial life is the institution of negotiable instruments , which secure accounts receivable and payable relationships . The Turkish Commercial Code (TTK) regulates negotiable instruments in detail, legally protecting their elements and types. The most common types of negotiable instruments are order instruments, bearer instruments, and registered instruments .

These three types of promissory notes differ significantly in terms of determining, transferring, and proving ownership.

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I. Registered Instruments

1. Definition

Registered promissory notes are those that clearly state the name of the rightful owner. Only the person whose name is written on the note is the rightful owner.

2. Rotation Method

• Registered promissory notes the provisions on assignment of receivables (Turkish Code of Obligations, Articles 183 et seq.) .
• Both a written declaration of assignment and delivery of the deed are required for the transfer.
• The debtor must be notified of the assignment; otherwise, a debtor who makes a payment in good faith will be protected.

3. Legal Consequences

• It is the most reliable type of promissory note.
• Its circulation is more cumbersome, therefore its circulation in trade is limited.
• In Supreme Court precedents, it has been emphasized that a debtor can only be released from their debt by making a payment to a creditor to whom a duly valid assignment notice has been given.

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II. Documents Written to Order

1. Definition

In promissory notes, the rightful owner is the person whose name is written on the note or the person to whom they will endorse it.

2. Rotation Method

• The transfer endorsement and delivery .
• Endorsement is accomplished through a written statement and signature on the back of the promissory note.
• The turnover chain must not be broken.

3. Legal Consequences

• It has high circulation potential.
• It is the most commonly used type of instrument in trade (especially promissory notes and bills of exchange).
• Supreme Court 11th Civil Chamber, Case No. 2016/15274, Decision No. 2018/2246: If there is a break in the chain of endorsements, the holder is not considered authorized.

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III. Bearer Instruments

1. Definition

In bearer securities, the rightful owner is the person who actually holds the security. No specific name is written on the security.

2. Rotation Method

• Rights change hands only through the transfer of possession
• The person holding the promissory note is considered the rightful owner.

3. Legal Consequences

• It is the easiest type of promissory note to circulate.
• However, there is a high risk of it being lost or stolen.
• According to Supreme Court rulings, in bearer securities, rights are acquired solely through possession, therefore, a holder acting in good faith is protected.

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IV. Comparative Analysis

1. Ownership Rights

• Registered promissory note: The person whose name is written on the note.
• Promissory note: A note written to the person whose name is written on it, or to the person who acquires it through endorsement.
• Bearer promissory note: The person holding the note.

2. Types of Revolutions

• Registered in the name of the owner: Transfer declaration + delivery.
• Emre wrote: Revenue + delivery.
• Payable to bearer: Delivery only.

3. Negotiability

• Registered in the name of → Lowest.
• Emre wrote → Medium-high.
• Bearer payable → Highest price.

4. Legal Security

• Registered title → The most reliable (because notification of assignment is mandatory).
• Emre wrote → Security is provided through the chain of endorsements.
• Bearer bond → Trust is at its lowest level, as only possession is considered.

5. Court of Cassation Practices

• The necessity of notifying the transfer of ownership is emphasized in registered promissory notes.
• In promissory notes written to order, any break in the chain of endorsements results in a loss of rights.
• In bearer instruments, the protection of the bona fide holder is essential.

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V. Examination of Instrument Types within the Framework of the Turkish Commercial Code Provisions

1. Turkish Commercial Code Articles 645 et seq. General Provisions

• The definition of a negotiable instrument is provided.
• They are categorized into types: registered, order, and bearer promissory notes.

2. Promissory Notes Payable to Order in the Turkish Commercial Code

• Bills of exchange, promissory notes, and checks are essentially payable to order.
• However, it can be made payable to a specific person with the caveat that it is "not for official use only".

3. Bearer Instruments in the Turkish Commercial Code

• Specifically, shares can be issued to bearer.
• Bearer shares provide the right to attend company meetings and receive dividends.

4. Registered Instruments in the Turkish Commercial Code

• In joint-stock companies, registered shares are usually issued.
• Registration in the share register is mandatory.

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VI. Economic and Legal Assessment

• Registered securities offer security, while bearer securities prioritize ease of transfer.
• Promissory notes, when issued by Emre, strike a balance between transferability and security in commercial life.
• In commercial practice, promissory notes, bills of exchange, and checks are issued payable to order; while shares are mostly issued to a named person or to bearer.

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VII. Current Developments and Digitalization

• With digitalization e-check and e-bill applications are on the agenda.
• Electronic signatures enable the creation of valuable documents in digital form.
• However, depending on the type of document, how the transfer will be carried out electronically has not yet been fully established by case law.

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Conclusion

Registered, order, and bearer securitiesform the basis of the types of negotiable instruments regulated in the Turkish Commercial Code. Each carries different degrees of security, transferability, and economic function.

• Registered promissory notes → security-focused, but have limited negotiability.
• Promissory notes are central to commercial life, playing a balancing role.
• Bearer promissory notes → easiest to transfer, but higher risk of loss and misuse.

In light of the provisions of the Turkish Commercial Code and the precedents of the Supreme Court, the choice between these three types is determined by the balance between the creditor's need for protection and the ease of commercial circulation.