Turkish Concordat Law Guide
Your business isn't dead just because it's drowning in debt. Turkish Concordat Law offers a lifeline few people fully understand. This guide reveals the hidden pathways through financial distress that standard legal websites gloss over. We'll walk you through everything from freezing creditor actions during the temporary protection period to the surprising second chance available even after bankruptcy begins. I've seen businesses transform crushing debt into manageable payment plans while keeping their doors open. You'll learn the exact voting thresholds needed for secured debt restructuring, how to maintain control of essential assets, and the tax exemptions that can save you thousands during corporate restructuring. The difference between liquidation and revival often comes down to knowing these critical legal tools.
Ordinary Concordat Filing
Application Requirements
When facing financial difficulties, you're not alone. Any debtor who can't pay debts when due or faces that risk can file for concordat protection. Think of it as a financial breathing space where you can negotiate with creditors. You'll need to prepare:
A preliminary project showing how you'll pay creditors
Financial documents like balance sheets and cash flow statements
A comparative analysis showing creditors would receive more than in bankruptcy
The application fee
The right court is the commercial court where your business is registered. This process gives you a structured path forward when debts become overwhelming.
Temporary Protection Period
Once you submit complete documentation, the court immediately grants a temporary protection period – your financial shield while developing a full concordat plan. During this three-month breather (extendable by two more months if necessary), all enforcement proceedings against you freeze, giving you valuable time to reorganize. The court appoints a commissioner as your guide through this process. They'll examine your finances and help develop a viable payment plan. This temporary protection is crucial because it prevents aggressive creditors from dismantling your business before you have a chance to turn things around.
Creditor Meeting Rules
After your commissioner analyzes your finances and prepares the groundwork, they'll invite all creditors to declare their claims within 15 days of a public announcement. This moment of truth comes when the commissioner convenes a meeting where your concordat proposal faces its first real test. For success, you need majority approval from either:
Half of your creditors representing two-thirds of total debt, or
One-fourth of creditors holding three-quarters of claims
Some creditors, like family members or fully secured claimants, don't count in these calculations. This democratic process balances your needs with creditor interests, making compromise possible.
Court Approval Criteria
The court carefully weighs whether your concordat plan deserves approval, focusing on five key conditions:
Your proposal must offer creditors more than they'd receive in bankruptcy
It must be proportionate to your financial resources
You need that critical creditor majority we discussed earlier
You must secure payment guarantees for priority creditors like employees
You must deposit court costs in advance
If your plan meets these criteria, the court approves it, specifying exactly how much debt reduction you receive and your new payment schedule. This approval transforms your proposal into a legally binding roadmap for financial recovery.
Secured Debt Restructuring
Negotiation Framework
The concordat process includes a special pathway for handling secured debts – those backed by collateral like property or equipment. Your commissioner will invite all secured creditors to discuss your proposals for principal reduction, interest adjustment, or extended payment terms. These negotiations happen separately from your main concordat discussions because secured creditors have different rights and interests. By tackling secured debts effectively, you can maintain essential business assets while creating a manageable payment structure. For business owners, successfully restructuring secured debt often means keeping the critical equipment or property that forms the backbone of your operations.
Voting Thresholds
Success in secured debt restructuring requires approval from secured creditors representing at least two-thirds of your secured debt value. This supermajority threshold ensures that any restructuring plan has broad support among those who have a direct stake in your pledged assets. If you reach this threshold, the plan becomes binding on all secured creditors, creating certainty for your business moving forward. Understanding this critical voting requirement helps set realistic expectations when approaching negotiations with your secured lenders – you'll need to convince most of them that your plan offers them a better outcome than foreclosure.
Payment Plan Implementation
Once your secured debt restructuring receives approval, non-consenting secured creditors must follow the longest repayment term agreed to by the majority, with pre-default interest rates applied. The commissioner records this payment plan in their report to the court. If you fail to make payments according to this plan, affected secured creditors can petition the court to cancel their part of the agreement. This structured approach balances fairness to creditors with giving your business a viable path forward. When implementing your payment plan, maintaining clear communication with all secured creditors helps prevent misunderstandings that could jeopardize your restructuring efforts.
Post-Bankruptcy Concordat
Legal Filing Timeline
Even after bankruptcy, a second chance exists. As a bankrupt debtor, you can request concordat protection, or your creditors may initiate it. The bankruptcy administration presents this option at the second creditors' meeting or later. This post-bankruptcy concordat follows a similar process to regular concordat but with key differences. Timing matters – the request must come before substantial liquidation of assets has occurred. For businesses caught in bankruptcy proceedings, this option can be a lifeline, potentially allowing you to regain control of your company when liquidation seems inevitable.
Creditor Approval Process
In post-bankruptcy concordat, your creditors follow the same approval rules as in ordinary concordat, requiring majority support. The key difference? The bankruptcy administrator handles all the duties normally performed by a concordat commissioner. They'll organize creditor meetings, verify claims, and shepherd the process through court approval. The administrator presents your concordat proposal, highlighting how it benefits creditors compared to continued liquidation. When seeking a lawyer in Turkey for post-bankruptcy concordat, look for someone experienced in navigating the bankruptcy system who can effectively coordinate with bankruptcy administrators.
Bankruptcy Suspension Effects
When your post-bankruptcy concordat application is accepted, the court pauses the liquidation of your assets for up to six months. This crucial breathing space preserves your business while creditors consider your proposal. If creditors approve and the court confirms your concordat plan, the bankruptcy ends – your business gets a fresh start under the new payment terms. This powerful legal mechanism can literally save a business from dissolution. For entrepreneurs facing bankruptcy, understanding this option can transform what seems like the end into an opportunity for rebirth under reorganized financial terms.
Asset Abandonment Concordat
Asset Transfer Authority
Asset abandonment concordat offers a different approach – you surrender control of your assets to creditors in exchange for debt relief. This option grants creditors authority to either liquidate your assets or transfer them to third parties. A concordat liquidation officer and creditors' committee are appointed to manage the process. This arrangement typically works well when you want a clean break from the business while providing creditors with direct control over asset disposition. If you're contemplating this option, ensure your lawyer clearly explains how relinquishing asset control will affect your financial and legal position going forward.
Liquidation Committee Powers
The liquidation committee becomes your former business's new manager, with broad powers to:
Preserve and convert assets into cash
Represent the concordat estate in court
Sell assets individually or as a whole business
Operate under creditor committee supervision
Pursue legal claims against third parties on behalf of creditors
For example, they might continue a promising lawsuit the business had initiated or sell the entire company as a going concern if that generates more value. Understanding these powers helps both debtors and creditors set appropriate expectations about how the liquidation process will unfold.
Payment Priority Rules
Before distributing funds, liquidation officers prepare a distribution plan showing each creditor's share. Secured creditors receive proceeds from their collateral up to the secured amount, with any deficiency becoming an ordinary claim. All creditors can review this plan, and objections are resolved through a complaint process. For uncollected payments, the bank holds funds for five years before final distribution to remaining creditors. If you're a creditor in this process, carefully review the distribution plan and assert your rights promptly – missed deadlines could mean lost recovery opportunities.
Legal Challenge Options
After completing liquidation, the officers submit a final report for creditor committee approval and court review. You can challenge unfavorable transactions made by the debtor before concordat approval using the same rules as in bankruptcy preference actions. The crucial timing starts from the temporary protection period. This gives liquidation officers powerful tools to recover assets transferred away before the concordat process began. For instance, if a debtor sold valuable assets at artificially low prices to friends shortly before filing, these transactions could be reversed, increasing recovery for all creditors.
Corporate Restructuring Process
Eligibility Criteria
For corporations and cooperatives facing financial distress, restructuring offers a specialized pathway. Your company qualifies if it cannot pay due debts, if assets don't cover liabilities, or if these situations appear imminent. The process requires pre-negotiation with affected creditors and securing approval from the required majority before filing. This approach differs from standard concordat by requiring creditor buy-in upfront rather than after filing. For business leaders, this means you'll need to engage with key creditors early, present a compelling restructuring vision, and secure tentative support before approaching the court.
Project Content Requirements
Your restructuring project must detail:
How creditors will be treated
How contracts will be affected
The specific methods (like debt extensions, interest adjustments, or capital restructuring) you'll use to regain financial health
You'll attach comprehensive financial documentation, including detailed balance sheets and proof that creditors would fare better than in bankruptcy. The project must explain how similar creditor classes will receive equal treatment. When preparing this documentation, focus on creating a realistic, well-substantiated plan that clearly demonstrates your business's viability under the proposed terms – this increases your chances of gaining both creditor and court approval.
Court Oversight Procedures
After filing, the court schedules a hearing within 30 days and notifies all affected creditors. During this interim period, the court can appoint supervisors to monitor your business operations and implement protective measures. After examining whether you've met all requirements and whether dissenting creditors would receive at least what they'd get in bankruptcy, the court approves or rejects your plan. Once approved, the restructuring plan becomes binding on all affected creditors, overriding previous contractual terms. This court-supervised process provides structure and certainty for both you and your creditors during the challenging restructuring period.
Tax and Fee Exemptions
Approved restructuring projects enjoy significant tax advantages, including exemptions from:
Stamp duty
Fees
Banking and insurance transaction taxes
Resource utilization support fund
Forgiven debt amounts are treated as worthless receivables for creditors and waived claims for you, with favorable tax treatment. These incentives encourage restructuring over bankruptcy by reducing the financial burden of the process itself. For businesses considering restructuring, these exemptions can significantly reduce transaction costs and improve feasibility. A skilled lawyer can help maximize these benefits, ensuring you properly structure transactions to qualify for all available exemptions.
Fresh Financial Start
Turkish concordat law offers multiple paths for businesses facing financial difficulties. Whether you're seeking temporary protection, restructuring secured debt, or even recovering after bankruptcy has begun, viable options exist to help your business survive and rebuild.
At Atlas Legal Partners in Istanbul, we've guided countless foreign business owners through these complex processes. Our team understands the unique challenges foreigners face in Turkey's legal system and provides the personalized support needed during financial restructuring.
Financial hardship doesn't have to mean the end of your business journey in Turkey. What financial recovery strategy would work best for your situation, and how soon could you take the first step?
