Turkey: Overhauled Concordat Regime Opens A New Chapter For Turkish Bankruptcy Law

Bankruptcy postponement under the Turkish Bankruptcy Law was heavily criticised on the basis that it was open to manipulation. Critics also claimed the protections offered in this scope went beyond the legislators' intentions due to systematic errors which had emerged in the process.

Bankruptcy postponement was introduced to give debtors a final chance before being forced into bankruptcy, allowing them to put their business back on track without the pressure of collection proceedings. Statistically though, its success proved low as a majority of companies which postponed bankruptcy ultimately went bankrupt regardless, failing to successfully emerge from these circumstances.

These circumstances frustrated creditors because their likelihood and proportion of collection were negatively affected by this relief. Also, the mechanism was not helpful for restructuring debts given that creditors piled up, operational income diminished, assets were relatively dissipated, and this hopeless process took years. Therefore, there was a consensus that reform was needed.

The proposed solution is to overhaul the concordat mechanism, modernising this forgotten relief. Accordingly, Turkey has amended the concordat system, keeping in mind the problems which arose for bankruptcy postponement. The new concordat mechanism's success is yet to be tested. However, concerns already exist that the new concordat system is no different to the repealed bankruptcy postponement system in terms of the problems which creditors may face.

Turkey suspended the bankruptcy postponement mechanism during the recent state of emergency (as per Decree Law No. 669, dated 21 July 2016).

More recently though, Law No. 7101 entirely repealed the postponement of bankruptcy mechanism and amended the concordat provisions outlined in the Execution and Bankruptcy Law No. 2004 ("EBL"). These were published in the Official Gazette on 15 March 2018.

Turkey introduced fundamental changes for concordat procedures and principles. Concordat is a special kind of agreement which becomes binding with court approval. Both creditors or debtors can initiate the procedures. It allows debtors to pay their debts by giving them extra time to repay debts, making discounts from amounts owed, or preventing the debtor's possible bankruptcy.

The mechanism existed in Turkish law before March 2018. However, it had largely been ignored in practice for commercial reasons and due to its procedural complexity.

The concordat process has five stages:

  1. Application to concordat
  2. Temporary relief
  3. Definitive relief
  4. Creditors meeting
  5. Court's examination and approval on concordat

Since bankruptcy postponement was suspended during the state of emergency, debtors were waiting for a tool which would allow them to stop their creditors. As a result, when the new concordat system was introduced, companies which could not pay their debts lined up before the courts seeking concordat relief.


A debtor does not need to be deep in debt to apply for concordat. Rather, debtors can apply for concordat if they are (Article 285 of the EBL):

  • Unable to pay their debts at the due date.
  • In danger of failing to pay in due time.

Unlike bankruptcy postponement, debtors are not required to be insolvent to apply for concordat. Rather, debtors which have sufficient assets to meet their debts can apply for concordat if their debt discharging organisation is severely impaired.

The EBL does not impose any restriction for concordat in terms of qualifying the debtor. As a result, debtors who are not subject to bankruptcy may also request concordat. For instance, natural or legal persons who are not deemed to be "tradesmen" under the Turkish Commercial Code.

The lowered admissibility test for concordat carries the risk that the new regime could be manipulated by companies facing financial difficulties of any sort, whereby they use the concordat mechanism to freeze liabilities for up to nine months. This concerns many in business circles, who worry the new regime could cause further problems, rather than addressing those caused by bankruptcy postponement.

Further, a creditor who can file for bankruptcy of its debtors can also apply for concordat for its debtors.  


Concordat applications should be made to the commercial court of first instance. Before the amendments, enforcement courts would review concordat applications. However, since March 2018, commercial courts of first instance have become the courts responsible for reviewing concordat applications.

Enforcement courts would previously conduct short and quick trials. Regardless, it is considered that appointing the first instance commercial courts would be more pertinent for such procedures, which require a detailed examination and involve many creditors. In general, commercial courts have more technical expertise regarding corporate bodies and bankruptcy procedures. Further, commercial courts consist of three judges, while enforcement courts consist of only one judge.


Debtors must include the following documents in their concordat request (Article 286 of the EBL).

  1. Preliminary project: A project demonstrating how to carry out the concordat, how to liquidate the debts, as well as the necessary financial resources and methods.
  2. Documents showing the status of assets: All assets and liabilities, revenues, cash flow, interim balance sheets, information about the commercial books, receivable and debt status lists, all the information and documents describing the debtor's financial status.
  3. Documents showing creditors and credit status: A list of creditors, receivable amounts and concession status.
  4. Table showing the concordat's projected success: A table demonstrating the likelihood that creditors would collect more from their receivable than if the debtor went bankrupt. It should include comparison with the result which would occur under the preliminary project's proposal. This document should reflect a prospective projection of creditors' probable conditions if the project is successful.
  5. Financial analysis reports: Financial analysis reports and their sources, prepared by an independent audit firm authorised by the Capital Markets Board or the Public Oversight Accounting and Auditing Standards Authority. The reports should show that the preliminary project's proposal is highly likely to occur. This requirement does not apply to small businesses employing less than 50 employees per year and whose annual sales revenue or financial balance is less than 8 million Turkish Liras.

The debtor should prepare all of these documents, except for the financial analysis reports (prepared by independent auditors).

Financial statements must be prepared no more than 45 days before the concordat's application date.

There is no liability or penalty specifically for those who prepare the application documents, which the court bases its concordat decision on. As a result, concerns exist about the accuracy of information which may be provided to the courts.

If a creditor applies for concordat, the court grants debtors a reasonable time to submit the necessary documents (Article 287/2 of the EBL). In this case, the creditor bears the costs of preparing the documents. If the debtor fails to submit these documents in full within the given period, the court will reject the application.

Courts also request the following documents and evidence:

  1. Tax certificates.
  2. Articles of Incorporation and trade registry records.
  3. SSI notifications.
  4. Balance sheet based on the continuity of the entity and the probable sales price of assets.
  5. Lists of tangible and intangible assets, including their book values.
  6. The last five-year tax return and interim tax declaration.
  7. Decision by the board of directors, including the decision and authorisation to request concordat.
  8. Whether immovable property is registered in the debtor's name.

The cost of concordat expenses should be paid to the court when applying for concordat, amounting to circa 50,000 Turkish Liras (Communiqué on Expense Advance Tariff of Composition of the Creditors, published in Official Gazette No. 30439 on 2 June 2018). The exact amount of expenses will be calculated depending to a number of factors. For instance, the total number of creditors, total number of experts to be appointed by court etc. If this is not deposited, the concordat request will be rejected.


If the court determines the application documents are complete, it will immediately render a decision allowing three months of temporary relief (Article 287 of the EBL). This period can be extended by up to two months at the debtor or concordat trustee's request.

The EBL stresses that the temporary relief decision must be rendered "immediately". Therefore, it is considered that examination of the application documents will be procedural. The court examines concordat applications via an expedited procedure, rendering a decision within 48 hours. This causes significant concerns about applicants trying to manipulate the concordat mechanism to obtain five months' relief, even when this is underserved.

During the temporary relief period, creditors cannot initiate execution proceedings or continue execution proceedings that have already been initiated. Further, the court must take all necessary measures to protect the debtor's assets, although the EBL does not prescribe any limits on those measures.

The court will appoint a temporary trustee, who will determine whether the conditions to approve the concordat exist and determine the likely success of concordat proceedings.

The temporary relief will be announced in the Commercial Registry Gazette and on the official advertisement portal of the Press-Advertisement Agency, as well as notified to the relevant institutions and organisations.

Creditors can file their objections to the relief within seven days of the announcement.


If the court understood from the trustee's evaluations and judge's review that concordat could be successful, it will grant definite relief to the debtor for one year, which can be extended for a further six months.

While definitive relief applies:

  • No proceedings can be carried out against the debtor.
  • Execution proceedings which have already been initiated against the debtor must stop immediately.
  • Provisional seizures cannot be executed against the debtor (including public debts such as Social Security Institution receivables and tax debts).
  • Preliminary injunction cannot be executed against the debtor (including public debts such as Social Security Institution receivables and tax debts).
  • Collection proceedings based on liens can be initiated (or continue), but seizures or auctions cannot be conducted.

However, attachments can be placed based on alimony and employees' receivables.

Interests will cease running for all types of receivables from the date definitive relief is granted, except for receivables secured by pledges. However, execution proceedings, seizures and official sales can be carried out for receivables arising from transactions made with the concordat trustee's permission during the definitive relief period.

Contracts which the debtor is party to and which are instrumental for the debtor's operations cannot be terminated by the counterparty on the basis that the debtor has been declared concordat (Article 296 of the EBL). This provision protects debtors against contract terminations which could otherwise cause their financial and operational collapse.

The debtor should continue to work under the concordat trustee's supervision during the definitive relief period. In principle, this should occur without any limitations on the debtor's operations (Article 297 of the EBL). This is a development on the strict trustee limitations which existed under the bankruptcy postponement mechanism.

However, in some instances the court can impose limitations or remove the debtor's operational authority. In such case, the court can declare the debtor bankrupt if the debtor fails to comply with the trustee's warnings or instructions.

Debtors must obtain the court's permission to establish a pledge, transfer immovables, become surety, or make gratuitous disposals during the definitive relief period. Otherwise, such transactions will be deemed null and void.


The concordat trustee's primary tasks are to:

  • Contribute to completing the concordat project.
  • Oversee the debtor's activities.
  • Hold a ledger of the debtor's presence.
  • Make a valuation of the debtor's existing assets.

The concordat trustee must monitor the debtor's activities on a regular basis and intervene in transactions which are contrary to the interests of creditors. Therefore, the concordat trustee should be equipped with the capabilities and capacity of a general manager.

Creditors can file complaints to the court about decisions by the concordat trustee.


The court forms a committee of creditors (Article 289/4 of the EBL). The committee must be constituted so that creditors with different types of receivables are fairly represented. For instance, in terms of legal qualifications and creditors with pledges, if any. The committee must comprise an uneven number of creditors, maximum seven.

The EBL does not recognise the committee of creditors having authority to make binding decisions. Therefore, the necessity of this institution is open to debate. The committee can only provide its views to the concordat trustee and court, to help raise the voice and interests of creditors.

Only the committee of creditors can ask the court to replace the concordat trustee.


Creditors will be invited to notify their receivables within fifteen days of an announcement made by the concordat trustee. If a creditor fails to notify within this period, they will not be able to participate in the negotiations, nor vote in the concordat project.

The concordat trustee chairs the creditors meeting and prepares a report on the debtor's status after listening to the debtor and creditors.

The concordat project is deemed to have been accepted if it is signed by either:

  • Half of the registered creditors whose receivables exceed half of the total debt, or
  • One-quarter of the registered creditors whose receivables exceed two-thirds of the total debt.


Once the concordat project is approved at the creditors' meeting, the concordat trustee submits the project and the report to the court.

The relevant commercial court of first instance will hear any objections to the report.

The court will certify the concordant project if the following conditions are met:

  1. The amount proposed under the concordat is greater than the amount possible to be held by the creditors if the debtor goes bankrupt.
  2. The proportion of the proposed amount is proportionate to the debtor's resources (in this context, the court also takes into account whether the debtor's expected rights are to be considered and if so, how much).
  3. The prescribed majority of creditors have accepted the concordat project.
  4. Debts owed to privileged creditors and debts entered with the concordat trustee's permission have been collateralised (unless the creditor expressly agrees otherwise).

The court decides on a payment plan to determine the extent to which creditors waive their receivables and pay the debtor's debts within the framework of the calendar outlined in the concordat decision.

If the debtor fails to fulfil its obligations under the concordat project, each creditor can apply to the court to invalidate the concordat, while maintaining its status recognised in the concordat decision. If a creditor invalidates the concordat for its receivables, it can initiate new enforcement proceedings to collect these receivables.

The court will review the concordat project and creditor objections. It can refuse the concordat request, demanding amendments on the concordat project, or even bankruptcy, if it finds that the application does not meet the relevant conditions.


The reintroduced concordat mechanism is the result of frustrations about bankruptcy postponement and the need for a better performing system. Bankruptcy postponement was causing unfair consequences and was open to manipulation, which caused much uncertainty in Turkey.

The new concordat regime is faster, with a shorter evaluation process. It provides more limited protection compared to bankruptcy postponement. However, the current concordat regime has its own flaws.

Concordat applications have created a domino effect. SMEs are negatively affected when big players seek concordat protection, thus avoiding their payment liabilities. Disputes lawyers are now working on temporary relief requirements with accounting experts on both sides of the table, as case files have yet to arrive to the stage of definitive relief in practice.

The courts' approach is not yet fully established. The fact that there is no substantive review in granting temporary relief for up to five months is a real concern. Further, the lack of transparency and accountability in respect of reports and balance sheet provided to courts give rise to reliability issues. 

Certain courts are quite conservative in issuing temporary relief, while others issue it without making any analysis over the requirements, particularly the accuracy of the concordat project and balance sheets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions