What is Assignment of Receivables? A Comprehensive Legal Examination
Entrance
Today, the diversification of economic relationships has led to an increase in both the quality and quantity of creditor-debtor relationships. In commercial life, the assignment of receivables, or the transfer of receivables ,holds an important place in our legal system for many reasons, such as accelerating cash flow, reducing risk, or securing financing. The Turkish Code of Obligations (TBK) regulates this institution in detail and clearly defines the rights and obligations of the parties.
This article assignment of receivables from both theoretical and practical perspectives, and a better understanding of the subject will be provided by looking at relevant court decisions and a comparative law perspective.
1. Definition and Legal Nature of Assignment of Receivables
Assignment of a receivableis the transfer of an existing claim right from the creditor to a third party. The assignment process involves the transfer of a claim right within a debt relationship, not the debt itself.
📘 Turkish Code of Obligations, Article 183:
"A creditor may assign their claim to a third party without the debtor's consent."
This regulation explicitly states that the debtor's consent is not required for the assignment of a receivable; however, a notification obligation is stipulated.
2. Conditions for Assignment of Receivables
2.1. There must be a valid and existing receivable
The transferred right must be a legally valid claim. The assignment of a claim that is likely to arise in the future or is disputed can only be done conditionally.
2.2. The Assignor Must Be Authorized
Since assignment is a transaction of disposition, the assignor must have the authority to dispose of the claim. If this authority is lacking, the assignment is invalid.
2.3. Preparation of the Assignment Agreement
Assignment occurs through a contract between the creditor and the assignee. While there is no legal requirement for it to be in written form, in practice it is recommended to do so as it facilitates proof.
2.4. Notification to the Debtor
The debtor's consent is not required, but the assignment must be notified to the debtor. Without notification, the debtor can be released from their debt by paying the former creditor.
3. Types of Assignment of Receivables
3.1. Ordinary Assignment
It is an assignment made without any security or guarantee. It is commonly used in financial transactions.
3.2. Assignment of Security
This is an assignment made to secure a debt. The assigned receivable remains with the new creditor until the debt is paid and is returned when the original debt is settled.
3.3. Transfer of Ownership with and without Consideration
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Transfer of receivables: A receivable is transferred in exchange for a consideration.
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Gratuitous transfer: The receivable is transferred without consideration. In this case, the provisions regarding donations may apply.
3.4. Secret Assignment
This is a situation where the debtor is not informed, or even the assignment is kept secret. It is used in practice by some financial institutions. However, as long as the debtor is unaware of the assignment, payments made to the original creditor are considered valid.
4. Assignment of Receivables from the Perspective of the Parties
4.1. Assignor (Former Creditor)
The debtor now loses the right to demand payment from the creditor. Through the assignment agreement, they also transfer the power to dispose of their claim.
4.2. Assignee (New Creditor)
The claim, along with the transferred amount and conditions, passes to the new creditor. Ancillary rights (interest, pledge rights, etc.) also pass with the assigned claim.
4.3. Debtor
The debtor may continue to pay the original creditor unless they are notified of the assignment. Once they are notified of the assignment, the recipient of the payment changes.
5. Provisions Regarding the Assignment of Receivables
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The creditor changes.
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Ancillary rights are transferred: Along with the assignment, securities such as pledges and guarantees also pass to the new creditor.
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Defenses and objections against the debtor are preserved: The debtor can raise against the assignee of the claim the same objections he had against the previous creditor.
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Priority in cases of double assignment: If the same receivable has been assigned to more than one person, given first to the person notified or the assignment accepted first by the debtor shall be valid.
6. Comparison of Assignment of Receivables with Other Legal Institutions
| Criterion | Assignment of Receivables | Subrogation | Bail |
|---|---|---|---|
| Change of Party | The creditor changes | The creditor changes | Constant |
| Impact on the debtor | Makes payment to the new creditor | Makes payment to the new creditor | Payment is made to the former creditor |
| Is Consent Required? | No | No | Yes |
| Legal Consequences | Assignment of receivables | Earning the receivable | Adding an additional person to the debt |
7. Where is Assignment of Receivables Used in Practice?
✅ In the Banking and Finance Sector
Selling loans to other financial institutions (e.g., transferring them to asset management companies).
✅ In Commercial Life
The transfer of receivables to factoring firms in order to expedite collection or convert them into cash between companies.
✅ In Enforcement and Bankruptcy Law
Transfer of receivables in the bankruptcy estate.
✅ In State and Public Institutions
Restructuring or transferring tax receivables to third parties.
8. Assignment of Receivables in Light of Supreme Court Decisions
The precedents set by the Supreme Court highlight several fundamental points regarding the assignment of receivables:
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Supreme Court 13th Civil Chamber, Case No. 2019/1523 E. – Decision No. 2020/3789 K.
“The ancillary rights of the assigned receivable also pass to the assignee. However, the debtor cannot be held responsible for payments made without being informed of the assignment.”
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Supreme Court 19th Civil Chamber, Case No. 2020/4512 E. – Decision No. 2021/1378 K.
"In the case of a double assignment, the assignment previously notified to the debtor shall be deemed valid."
These precedents provide guidance in practice regarding the formal requirements of assignment, notification, and the transfer of rights.
9. Important Considerations Regarding the Assignment of Receivables
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The assignment agreement must be in writing.
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The debtor must be notified formally (via notary, registered mail, etc.).
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Along with the assigned receivable, ancillary rights such as pledges, interest, and guarantees are also transferred.
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Whether the transfer of property is for consideration or not, it may have tax consequences.
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Assignment of receivables can also be carried out digitally, especially on platforms where receivables are sold and in fintech applications.
Conclusion
The assignment of receivables is one of the most important institutions of debt law, and it is an effective tool that allows creditors to transfer their rights. It provides flexibility to parties in both commercial and individual debt relationships. However, ensuring this process is carried out properly is crucial to prevent loss of rights.
Drafting a written contract, informing the debtor, and clearly defining the responsibilities of the parties will prevent potential disputes. Assignment of receivables is a fundamental topic for lawyers, both in terms of theory and practice, and every lawyer should be well-versed in this area.
Law Faculty student Feride Sıla HELVACI
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