PAYMENT PLAN UNDER CONCORDAT PROCESS (DECEMBER 2019)

Due to the recent economic fluctuations and financial uncertainties, every day many companies are being added to the companies declaring concordat. Changes in the exchange rates have caused a great recession in the markets and many companies are on the verge of bankruptcy for this reason. With the amendments made in the Enforcement and Bankruptcy Law, the way for citizens, as well as companies that have difficulties in paying their debts, has been opened, and the concordat institution became more interesting.

Concordat becomes binding with the confirmation decision of the court. If the concordat cannot be confirmed, the court rejects the concordat request. The important issue in this context is the Creditor’s Meeting. The concordat should be accepted by majority of the creditors by the following ratios at the creditors’ meeting.

  • The half of registered Creditors and the half of the credit amounts
  • The ¼ of registered Creditors and the 2/3 of credit amounts

In the light of above explanation, regardless of payment plan, the application of concordat will be confirmed, and this cannot be prevented. In such a case all the creditors shall be obliged to comply with the payment schedule.

If such quorum number cannot be achieved, the court will automatically decide for bankruptcy if there is one of the reasons for direct bankruptcy. In this case bankruptcy provisions will be applicable, and all the assets of the debtor will be transferred to the bankruptcy desk and there will be no right of disposition on the assets of the debtor. The main reason for direct bankruptcy is being under debt.  It should be noted that; collecting the receivables as a result of the declaration of bankruptcy may take place after the due date specified in the concordat project. Creditors with privileged receivables at the bankruptcy desk will be given priority and ordinary receivables shall be paid after all privileged receivables.

On the other hand law protects the creditors. Article 308/e of the Execution and Bankruptcy Law is as follows: “any creditor may terminate the concordat by applying to the competent court if such creditor could not collect his credits duly agreed under payment plan.” Pursuant to this provision, the new rights arise in favor of the creditor in the concordat project, and the previously existing debts will remain valid. Also, in such a case, the decision taken from the court will ensure that the concordat provisions are not applicable for the debtor company, and as a natural consequence, enforcement proceedings can be continued without interruption. The mentioned situation will be possible as a result of the partial termination of the concordat. If the concordat is completely dissolved, the court will decide for bankruptcy and the bankruptcy provisions will apply.