Can a Promissory Note Debt Be Transferred?

Promissory notes prepared in compliance with legal regulations formalize the debtor-creditor relationship. For promissory notes to be valid and ensure that neither party suffers, certain conditions must be followed. You can read more about what to consider when preparing a promissory note in our related content. But how is a promissory note endorsed? Can a non-protested promissory note be endorsed? Here are the details.

The transfer of a promissory note to another person or institution is called endorsement, and the person endorsing the note is known as the endorser. In endorsed notes, the holder of the note confirms and identifies the transfer in writing and signs it. When a note is endorsed, it must be handed over to the person to whom it is endorsed. Endorsed notes act as a form of credit collateral, allowing debtors to transfer their promissory notes as a way of settling debts. The transfer process occurs when a note is endorsed by writing on the back of the note, stating "Pay to person X," and the recipient signs it. This way, the rights of the note are transferred to another person, meaning the note is endorsed.

How Does Endorsement Work in Terms of Form?

The method described above is known as full endorsement. In contrast, a blank endorsement involves simply signing the back of the note without specifying the name of the endorsee. In this case, anyone holding the note is entitled to collect the payment. People holding a blank-endorsed note can transfer it to another person or use the full endorsement method to further endorse it.

Promissory notes made out to a specific name (nominal notes) are not payable to order and cannot be transferred via endorsement. Such notes stipulate that payment must be made to a specified individual and cannot be transferred through endorsement.

Types of Endorsement:

Endorsements can be categorized based on their purpose into assignment endorsement, collection endorsement, and pledge endorsement:

• Assignment endorsement: This refers to the transfer of all rights arising from the note. If the type of endorsement is not clearly stated as a collection or pledge endorsement, it is considered an assignment endorsement.
• Collection endorsement: This allows the holder to delegate the authority to collect the note’s payment to another person, without transferring ownership. The ownership of the note remains with the original holder, while the endorsed party has the right to collect the payment.
• Pledge endorsement: This occurs when the holder endorses the note to secure a pledge. It is typically accompanied by phrases like "value for security" or "value for pledge."

Online Endorsement with Semosis!

By becoming a member of the digital promissory note collection platform Semosis, you can endorse your promissory notes that have not yet been transferred to the bank or those created through the platform. Additionally, you can make payments for these notes anytime and anywhere without visiting a bank branch. All processes are managed online, with no room for fraud.

For more information about Semosis, Turkey’s only reliable online promissory note platform, feel free to contact us!