Escrow Agreements in Turkey

How an escrow arrangement is used

In a commercial transaction, the parties may ask an independent holder to keep identified property until agreed conditions are met. The property may be purchase-price funds held while a claim period runs, a payment released after delivery documents are approved, or source code released if a software supplier stops providing support. These examples involve different assets and different risks, so they should not be handled with one generic form.

First identify the asset and the holder

Describe exactly what will be held: currency and amount, a specified account, share certificates or transfer documents, source-code materials, or another asset. Name the holder and explain whether it acts only on joint instructions, verifies documents, resolves factual questions or performs another role. A holder should not be given open-ended discretion that the parties have not discussed.

For money, specify the account holder, account location, permitted transfers, interest, bank charges, currency-conversion costs and who bears loss caused by a failed transfer. For non-cash assets, describe the custody method, access controls, insurance and what constitutes safe return. Confirm the holder’s legal authority and practical ability to perform the agreed function.

Draft objective release instructions

Release conditions should be capable of being checked from documents or clearly defined events. State who supplies each document, how the holder checks it, where notices are sent, how long the other party has to object and what happens if a condition is disputed. If partial release is possible, set the amount and timing. Also state the long-stop date and the process for returning property that remains after the arrangement ends.

Common transaction settings

• M&A holdback: identify which seller obligations the funds secure, how a claim is notified and substantiated, whether the parties can release undisputed amounts and when the balance is paid. An escrow does not replace due diligence or define the underlying indemnity by itself.
• Supply and construction payments: tie release to stated delivery, inspection or completion evidence, and specify what happens when documents conflict or inspection is delayed.
• Software source-code escrow: describe the code and materials to be deposited, update frequency, verification, release triggers, permitted use after release and protection of confidential information and intellectual property.

Turkish-law points to check

The Turkish Code of Obligations contains general contract rules and a separate section on safekeeping arrangements for movable property. It also distinguishes a payment made as evidence that a contract was concluded from a payment that gives a right to withdraw. Those statutory concepts are not automatically interchangeable with a negotiated escrow structure. The parties should document the actual legal relationship, the holder’s duties and the rights to the property.

Do not assume that funds are segregated from the holder’s own property, protected from the holder’s creditors, or automatically returned if the holder becomes insolvent. Confirm the account and custody structure, any applicable financial-services rules, and the position of the parties under the actual documents before transferring value.

Questions to resolve before signing

1. Can the release event be proven objectively, and can the holder decide a dispute or only follow instructions?
2. What happens if one party is silent, refuses to sign a joint instruction or disputes only part of a claim?
3. Who owns interest and bears bank, currency, tax and transfer costs?
4. Can the holder be replaced, and where is the property held during that transition?
5. Do the escrow instructions match the share purchase, supply or software agreement and its dispute clause?

For an acquisition, consider escrow alongside the legal due diligence and the purchase agreement’s warranty and indemnity terms. The Turkey due diligence checklist explains how to connect findings to transaction protections.