Newsletter-21

273 LAW OF OBLIGATIONS The Rights and Liabilities of the Parties The Code introduces various rights and liabilities of the parties of the pledge agreement. Accordingly, the possessor of the moveable asset is liable to take necessary precautions to protect the value of the movable. If the possessor acts in a way so as to reduce the value of the product, the pledgee can apply to the Court and request prohibition of such actions. The pledgee is enabled to examine the moveable subject to the pledge. The pledger is obliged to compensate the loss of pledgee if the value of the moveable is reduced. Other rights and liabilities not contrary to the Code can be determined in the agreement. In the event of non-performance of the payment of the debt se- cured under the Code, three alternatives of foreclosure of the pledge are possible (i) transfer of the movable’s ownership to the first degree pledgees by applying to the Execution Office, (ii) transfer of the re- ceivables to an asset management company; and (iii) exercise of the right to lease or license the properties that cannot be subject to a trans- fer of possession. If the debt cannot be collected by the stated methods, an execution proceeding under general rules can be exercised. The Code provides sanctions to be applied on parties in some cases. For example, the pledgee shall apply for de-registration of the pledge from the registry within 3 business days upon the payment of the receivable. If the pledgee fails to do that, an administrative fine of 1/10 of the receivable shall be paid to the creditor. Additionally, if the pledger or the transferee of the movable pledge do not use the moveable pledge in line with the Code, do not transfer the ownership of the pledge even though they do not pay the debt, ruin or demolish the pledged moveable with the purpose of hurt- ing the pledgee, do not register the transfer of the moveable to the Registry, or attempt to deceive the Registry, an administrative fine of up to one-half of the debt upon the complaint of pledgee will be levied on the pledger or transferee. Conclusion The Code is regulated with the intention to provide the establish- ment of a pledge on the assets of SMEs, and to contribute to these