SIGNIFICANT AMENDMENTS TO THE CONCORDATUM UNDER ENFORCEMENT AND BANKRUPTCY LAW

The Law Amending the Enforcement and Bankruptcy Law and Certain Laws numbered 7327 (“Amendment Law”) was published in the Official Gazette on 19 June 2021. The Law brought certain amendments to the provisions of the Enforcement and Bankruptcy Law (“EBL”) regarding the concordatum (in Turkish, “Konkordato”).

What changes does Amendment Law bring regarding concordatum?

The general rule is that the agreements which are essential for the continuation of the debtor’s business such as sales and facility agreements cannot be terminated or the payments therein cannot be accelerated due to the initiation of the concordatum process, even if the initiation of such is expressly regulated as an event of default or a termination ground in such agreements.

Thus, prior to Amendment Law and by virtue of Article 296 of EBL with the heading Results of Definitive Period in Terms of Agreements was as follows:

“Regardless of whether the other party of the agreement is affected or not by the concordatum project, the provisions in the agreements to which the debtor is a party and which are important for the continuation of the business, and that the debtor’s request for a concordatum will constitute a breach of the agreement will not be considered a just cause for termination or will make the debt due, in case the debtor applies for the concordatum. Even if there is no such provision in the agreement, the agreement cannot be terminated on the grounds that the debtor has applied for concordatum.

The debtor may terminate the continuous debt relationships that he is a party to and prevent the concordatum from achieving its purpose, at any time with the approval of the commissar and the approval of the court. The compensation to be paid within this framework is subject to the concordatum project. Special provisions regarding termination of service contracts are reserved.”

Amendment Law stipulates that the parties to the agreements will continue to perform their obligations arising from agreements during the temporary and definitive relief terms of concardatum.

With the Amendment Law, it has been adopted to the above provision that the agreements to which the debtor is a party and that are important for the continuation of the debtor’s business will continue to be performed. Likewise, the contractual obligations arising from the agreements that continue during the temporary and definitive relief terms (in Turkish, “geçici ve kesin mühlet”) granted within the framework of concordatum will be mutually performed by the parties. On the other hand, with this amendment, it is aimed to prevent the concordatum project from failure due to agreements execution of which are extremely burdensome (in Turkish, “aşırı külfetli”) and are impossible to perform, by regulating that these agreements can be terminated at any time, subject to the favorable opinion of the commissar and the authorization of the court.

Besides, according to Amendment Law, bankruptcy administrative officers (in Turkish, “iflas idaresi memurları”) will be selected from the list of bankruptcy administrative officers formed by the regional expert boards (in Turkish, “bilirkişilik bölge kurulları”). One of the bankruptcy administrative officers selected in this way will have to be (i) a certified public accountant (in Turkish, “yeminli mali müşavir”) or independent accountant and financial advisor (in Turkish, “serbest muhasebeci mali müşavir”) and another to be (ii) a lawyer (in Turkish, “hukukçu”).

Our Law Firm remains at your disposal for any further clarifications or assistance you may need about the subject matter.