Introduction

This study was prepared by examining the analytical responses of judicial decisions presented regarding the operation and stages of the concordat process. Shaped within the framework of the Enforcement and Bankruptcy Law (EBL), concordat is a legal institution that allows honest debtors who are unable to pay their debts when due or are at risk of being unable to pay them, to restructure their debts by agreement with their creditors under court supervision. Judicial decisions reveal that this process consists of clear, sequential stages such as application, temporary respite (moratorium), creditors’ meeting, approval, and post-approval supervision. The main purpose of the process is to ensure that the debtor can continue their commercial activities while also allowing creditors to achieve a more advantageous collection compared to bankruptcy liquidation.

1. Application and Moratorium Stage in Concordat

The concordat process, according to the Enforcement and Bankruptcy Law, begins with the application to the court by “any debtor who cannot pay their debts when due or is at risk of not being able to pay them when due.” To this application by the debtor, it is mandatory to attach a “preliminary concordat project” showing the rate or term in which they will pay their debts, along with documents indicating their financial status.

When the court is convinced that the documents are complete, it immediately grants a three-month temporary reprieve , and this period can be extended by a maximum of two months . At this stage, one or more concordat commissioners are appointed to oversee the debtor’s activities and evaluate the project’s likelihood of success. During the temporary reprieve, the debtor is protected against claims by creditors. Indeed, a Council of State decision emphasized the provision that “…no enforcement proceedings can be initiated against the debtor during the reprieve period, and any previously initiated proceedings shall be suspended…”

In line with the report to be submitted by the commissioner, the court grants the debtor “a 1-year definitive reprieve” if it is understood that the concordat is likely to succeed. This period can also be extended by up to six months in difficult circumstances. If the project is not deemed to have a chance of success, the court may revoke the temporary reprieve, reject the request, and decide on the debtor’s bankruptcy.

2. Commissioner’s Actions and Creditors’ Meeting in Concordat

The role of the concordat commissioner is central during the definitive respite period. The commissioner invites creditors to declare their claims, supervises the debtor’s financial situation, prepares reports, and organizes the creditors’ meeting, which is one of the most critical steps in the process. At this meeting, the concordat project presented by the debtor is negotiated and voted on by the creditors.

A qualified majority is required by law for the project to be deemed accepted. As reiterated in many court decisions, this majority requirement is as follows: “A concordat project is deemed accepted if it is signed by a majority exceeding a) half of the recorded creditors and claims, or b) one-quarter of the recorded creditors and two-thirds of the claims.” Failure to secure this majority is one of the most fundamental obstacles to the approval of the project and leads to the rejection of the request.

3. Concordat Approval Proceedings and Decision

The project accepted by the creditors is submitted to the court along with the commissioner’s reasoned report, and the approval proceedings phase begins. As stated in a Regional Court of Justice decision, this phase “is not a substantive law proceeding, but rather an approval process with its unique characteristics.” The court, acting on its own initiative (ex officio investigation principle), reviews whether the process has been conducted in accordance with the law and whether the cumulative approval conditions specified in Article 305 of the EBL have been met.

The fundamental approval conditions highlighted in court decisions are as follows:

The proposed amount must be greater than the probable amount creditors would receive in the event of the debtor’s bankruptcy.

The proposed amount must be proportionate to the debtor’s resources.

The project must have been accepted by the majority stipulated in the law.

Full payment of preferential claims and provision of security to cover the debtor’s concordat expenses.

If the court is convinced that all these conditions are met, it approves the concordat. Otherwise, it rejects the concordat request and may rule for the direct bankruptcy of the debtor if the debtor is subject to bankruptcy and the conditions for bankruptcy are met.

4. Post-Approval Concordat Process and Supervision

A concordat becomes binding with the approval decision. In a decision by a Civil Court of First Instance, this situation was defined as: “A concordat is a living process that begins with the granting of a temporary respite and continues until the approved concordat project is implemented and installment payments are completed…” After the approval decision, a supervisory trustee is appointed to oversee the implementation of the project. At this stage, certain rights also arise for creditors. For instance, a judicial remedy has been indicated for creditors whose claims are not accepted by the debtor: “Creditors whose claims have been objected to can file a lawsuit within one month from the date of the announcement of the approval decision.”

Furthermore, if the debtor fails to comply with the approved project, i.e., does not make payments, creditors have the right to request the termination of the concordat. As stated in a decision, “Any creditor against whom performance is not made according to the concordat project… may cause the concordat to be terminated concerning themselves.”

5. A Special Case: In-Bankruptcy Concordat

Court decisions state that there is also a possibility of concordat for debtors who have been declared bankrupt. This process involves significant differences from a normal concordat. The request is made by the bankrupt debtor or one of their creditors. No concordat commissioner is appointed during the process; this duty is undertaken by the bankruptcy administration. There are no protection periods such as temporary or definitive respite. The proposal is voted on at the second creditors’ meeting, and if accepted, it is submitted to the court for approval. Upon the court’s approval decision becoming final, “the bankruptcy administration requests the court that declared the bankruptcy to lift the bankruptcy” and the debtor is released from bankruptcy status.

Conclusion

When court decisions are examined holistically, it is seen that the concordat process has a phased structure, subject to strict procedural rules and judicial oversight, aiming to provide an opportunity for the debtor to improve their financial situation while also protecting the rights of creditors. The process operates through; providing protection to the debtor with temporary and definitive respite, demonstrating transparent management under the commissioner’s supervision, involving the will of the creditors through the creditors’ meeting, and ultimately, the court’s approval decision after reviewing the legal requirements. Post-approval oversight and termination mechanisms, on the other hand, ensure the project’s viability. In-bankruptcy concordat, on the other hand, stands out as a special way that offers an alternative to bankruptcy liquidation, enabling the debtor to be reintegrated into economic life. A publication suggestion.

Why is Expert Concordat Lawyer Support Necessary?

The concordat process consists of interconnected, highly technical stages from a legal and financial perspective, such as application, temporary grace period, definitive grace period, commissioner supervision, creditors’ meeting, approval proceedings, and post-approval oversight. A small mistake made at any stage can lead to serious consequences, including the rejection of the project or even the direct bankruptcy of the debtor. Therefore, the concordat process is a special procedure that must be conducted by an expert and experienced concordat lawyer in the field.

An expert concordat lawyer ensures that the preliminary concordat project is prepared in accordance with all elements required by law, that financial statements are presented accurately and up-to-date, that commissioner reports are properly guided, and that strategic planning is carried out to secure the majority of creditors. Furthermore, it is not possible to correctly reflect criteria such as “proportionality with resources,” “advantage over bankruptcy,” “principle of equality,” and “likelihood of success,” which courts meticulously examine during the approval proceedings, in the project content without professional legal knowledge.

This process requires advanced expertise from both a legal and financial perspective, making it difficult to proceed without errors. 2M Hukuk Law Office provides professional legal support in concordat applications, requests for respite, and approval processes in the Istanbul, Tuzla, Pendik, Kartal, Maltepe, Şekerpınar, Darıca, Çayırova, Dilovası, Gebze, and Tepeören regions. The office significantly increases the success rate of concordat by providing comprehensive consultancy to businesses at all stages, from the preparation of documents required as a condition of litigation to the structuring of the concordat project, from compliance with audit reports to the conduct of the approval lawsuit.