INTRODUCTION
The transfer of an enterprise is defined as a general concept referring to the transfer of an enterprise to third parties together with all its assets and liabilities. Accordingly, in cases where an enterprise is transferred together with all of its assets and liabilities, the transaction is, as a rule, deemed to constitute a transfer of an enterprise.
For a transaction to be considered a “transfer of an enterprise,” it is required that the transferee acquire the entirety of the enterprise, or a separable part thereof capable of independently carrying out a commercial activity, together with all rights and obligations pertaining thereto. Therefore, in cases where the transferor transfers only certain assets (such as immovable property, machinery, or other equipment) and retains the debts and liabilities related to such assets, it is accepted that the transaction constitutes a transfer of assets and shall not be deemed a transfer of an enterprise.
In this regard, although the elements constituting a transfer of a business are addressed differently in legal doctrine and case law, the principal criteria that are frequently encountered in practice and considered determinative in identifying a transfer of business are examined below under separate headings.
1. Transfer of Employment Contracts
One of the fundamental economic elements underlying a commercial enterprise is labor. The element of labor, which is essential to the existence of an enterprise, is predominantly provided through employment contracts, and the rights and obligations arising from such contracts are deemed to form part of the enterprise’s assets. For this reason, it is argued that, within the scope of the transfer of a commercial enterprise, the rights and obligations arising from employment contracts must also be transferred. Indeed, pursuant to Article 6 of the Labor Law No. 4857, it is expressly stipulated that, in the event of a transfer of a workplace, the rights and obligations arising from employment contracts shall also transfers to the transferee.
With regard to this matter, in its decision dated 15.10.2018 and numbered E. 2017/15702, K. 2018/22172, the 22nd Civil Chamber of the Court of Cassation stated as follows;
“In sectors where the workforce is of essential importance, the transfer of employees, which constitutes a significant element of the economic entity, should be regarded as a transfer of a workplace even in the absence of a transfer of tangible and intangible assets.”
It is ruled that, particularly in sectors where the workforce is of essential importance, the transfer of employees shall be deemed a transfer of an enterprise.
Nevertheless, there are also decisions of the Court of Cassation holding that the transfer of the workforce alone does not constitute a transfer of an enterprise. For instance, in its decision dated 10.05.2019 and numbered E. 2017/11601, K. 2019/8427, the 9th Civil Chamber of the Court of Cassation emphasized that the mere continuation of the same business activity would not be sufficient and stated that the transfer of a significant portion of the employees, in terms of both number and qualifications, is required.
Similarly, in doctrine, it is asserted that, for instance, in an enterprise engaged in shoe manufacturing, the transfer of the workforce alone does not qualify as a transfer of an enterprise, since the machinery, tools, raw materials, and other assets used in the production process are essential for maintaining the economic unity; accordingly, in such enterprises, the transfer of only the workforce cannot be considered a transfer of an enterprise.
Although there are differing approaches to the issue in both doctrine and case law, the transfer of employment contracts may be interpreted as a transfer of an enterprise, given that the workforce constitutes a fundamental component of the enterprise and that the continuation of the enterprise’s activities is impossible in the absence of such workforce.
2. Transfer of Licenses and Permits
Within the scope of a transfer of an enterprise, the transferee generally intends to continue the activities carried out by the enterprise. For this reason, if any permits or licenses required to be obtained from public or private authorities for the activities conducted within the enterprise exist, such permits and licenses are also made subject to the transfer transaction. Indeed, by its very nature, a transfer of an enterprise entails the transfer of the enterprise as a whole together with all its assets and liabilities, which consequently results in the transfer of the permits and licenses held by the enterprise as well.
For this reason, the transfer of permits and licenses that are necessary for the continuation of the enterprise’s activities may, in certain cases, lead to the transaction being characterized as a transfer of an enterprise. For example, in its decision numbered E. 2016/6282, K. 2019/1962 and dated 26.02.2019, the 8th Civil Chamber of the Court of Cassation held that the purchase of a business license constitutes a transfer of an enterprise, and that applying to the Ministry of Health and obtaining permission does not eliminate the character of the transaction as a transfer of an enterprise.
Similarly, in its decision numbered E. 2014/10615, K. 2016/1708 and dated 01.02.2016, the 8th Civil Chamber of the Court of Cassation indisputably accepted that the transfer of a hospital license established a transfer of an enterprise relationship between the parties.
3. Transfer of Movable Assets
Where a business or a part thereof is transferred, the physical elements serving the technical purpose of the enterprise are primarily taken into consideration, among which machinery, equipment, and vehicles are included. Accordingly, movable assets such as machinery, molds, raw materials, production tools, and means of transportation used for the performance of the activities carried out within the enterprise are generally regarded as fundamental components of a commercial enterprise and are typically transferred together with the enterprise in the event of a transfer of the enterprise.
Indeed, in its decision numbered E. 2012/11113, K. 2014/2087, the 17th Civil Chamber of the Court of Cassation held that the sale of construction machinery as well as fixtures and equipment constituted a transfer of an enterprise, and ruled that, following such sale, the purchaser would be liable for the receivables.
Furthermore, in its decision dated 02.11.2020 and numbered E. 2020/1855, K. 2020/4642, the 11th Civil Chamber of the Court of Cassation expressly ruled that where all fixtures, medical units, and employees of an enterprise are transferred, the transaction constitutes a transfer of a commercial enterprise, and that, pursuant to the Turkish Code of Obligations, the transferee is liable for the transferor’s debts in accordance with the principle of universal succession.
In its decision dated 11.06.2020 and numbered E. 2019/1864, K. 2020/1174, the 22nd Civil Chamber of the Istanbul Regional Court of Appeal stated that, in determining whether the transfer of movable assets constitutes a transfer of an enterprise, it is necessary to assess:
- Wheter the transferred assets, taken as a whole, constitute an independent line of business.;
- Whether the transferred assets are sufficient and suitable to ensure the continuation of the activities of an enterprise; and
- Whether, following the transfer, the transferor’s capacity to carry out activities in the relevant line of business has been significantly reduced.
However, it should be noted that there are also decisions of the Court of Cassation holding that the transfer of movable assets such as machinery and equipment alone does not constitute a transfer of an enterprise. For example, in its decision dated 28.01.2019 and numbered E. 2016/13231, K. 2019/374, the 10th Civil Chamber of the Court of Cassation ruled that:
“The transfer or sale of elements such as the facilities, machinery, and buildings of an enterprise, without the presence of insured employees, cannot be regarded as a transfer of an enterprise.”
The decision demonstrates that not every leasing or transfer automatically results in a transfer of an enterprise, and that the decisive factor is the preservation of the economic unity and factual continuity.
4. Transfer of Immovables
One of the most fundamental elements of a transfer of an enterprise is the transfer of the immovables in which the workplace is located. In this regard, the building of the commercial enterprise, its warehouses, retail stores, manufacturing facilities, annexes, and integral parts together constitute the enterprise as a whole, and the transfer of one or more of these elements may be regarded as a transfer of an enterprise.
In this regard, in its decision numbered E. 2021/20498, K. 2024/1667, the 4th Civil Chamber of the Court of Cassation held that the transfer of the factory building and the administrative building located on the immovable property, together with fixtures used therein—such as air-conditioning systems, kitchen units, and equipment which would damage the integrity of the premises if removed, as well as tables, chairs, partition walls, and decorative elements—constituted a transfer of a commercial enterprise within the meaning of Article 280/3 of the Execution and Bankruptcy Law, where the immovable property comprising the factory building and the land was transferred.
Additionally, in its decision dated 12 November 2020 and numbered E. 2019/1287, K. 2020/7036, the 17th Civil Chamber of the Court of Cassation held that, since the immovable property subject to the dispute was a cold storage facility, the transfer of the storage facility itself should be characterised as a transfer of a commercial enterprise.
However, both in doctrine and pursuant to the decisions of the Court of Cassation, there are also views holding that the sale, lease, or transfer of a vacant building alone cannot be regarded as a transfer of an enterprise.
Nevertheless, there may be elements which, although movable in nature, are located within the immovable property and have effectively become integral parts thereof. With regard to this issue, in its decision dated 13.07.2020 and numbered E. 2019/3010, K. 2020/1466, the 21st Civil Chamber of the Istanbul Regional Court of Appeal requested that experts be appointed to determine whether such components could be detached from the immovable property without causing damage, whether the facility would be able to operate in accordance with its intended purpose if they were removed, whether the equipment had been allocated to the factory, and whether it was indispensable for the continuation of production.
Accordingly, such movable items that cannot be separated from the immovable property, or that would cause the facility to be unable to operate in accordance with its intended purpose even if separated, may be considered integral parts of the immovable property, and the transfer of such movable items may likewise be regarded as constituting a transfer of an enterprise.
CONCLUSION
In conclusion, within the scope of the transfer of an enterprise or a separable part thereof, whether movable assets, immovable property, fixtures, and other tangible and intangible elements that ensure the continuation of the enterprise’s activities have been transferred, as well as the status of the employees, play a decisive role in characterizing the transaction as a transfer of an enterprise.
The decisions of the Court of Cassation and the Regional Courts of Appeal likewise demonstrate that the transfer of an immovable property alone or the transfer of certain movable assets may not give rise to a transfer of an enterprise if such transfer is not sufficient to ensure the integrity and continuity of the enterprise’s activities; however, however, where the essential elements enabling the continuation of the activities are transferred, the transaction is to be characterised as a transfer of business.
