Introduction
This study analyzes the conditions for the approval of a concordat, based on first instance and regional court decisions, as well as Supreme Court precedents. The analyzed decisions indicate that the approval of a concordat is strictly bound by the conditions stipulated in Article 305 of the Enforcement and Bankruptcy Law (EBL) No. 2004. According to judicial decisions, these conditions are cumulative, and all of them must be met simultaneously. Courts are obliged to investigate the existence of these public order-related conditions ex officio (on their own initiative), and although commissioner reports are guiding in this process, the court is not bound by these reports. The creditors’ acceptance of the project does not, by itself, constitute a sufficient reason for approval; the court must additionally review all statutory conditions.
1. Nature of Concordat Approval Conditions and the Court’s Role
Court decisions clearly demonstrate the cumulative nature of the conditions for approval and the court’s supervisory authority in this matter. The absence of any one condition is sufficient for the rejection of the approval request, even if all other conditions are met. In a decision by the Istanbul 1st Commercial Court of First Instance, this situation was stated as, “For the approval of a concordat, all conditions for the approval of the concordat as stipulated in Article 305 of the EBL must be fulfilled. Therefore, if it is understood that one of the legal conditions is not met, the request for the approval of the concordat may be rejected without the need for individual decisions on all approval conditions.”
The role of the court is not limited by the will of the creditors. As stated by the Antalya Regional Court of Justice, “The acceptance of a concordat by the creditors alone will not lead to its approval. The court will only approve the concordat if the conditions stipulated in Article 305 are met.” In this context, as emphasized in a decision by the 6th Civil Chamber of the Court of Cassation, the court is obliged to investigate these public order-related conditions ex officio, thereby establishing a balance between the debtor, creditors, and public interest.
2. Evaluation of Substantive and Procedural Conditions for Concordat Approval
Required Majority for Project Acceptance (EBL Article 305/c): One of the most frequent reasons for rejection in decisions is the failure to secure the majority specified in Article 302 of the EBL. According to the rule quoted in the decision of the Adana Regional Court of Justice, a two-alternative majority is required for the acceptance of the project:”A concordat project is deemed accepted if it is signed by a majority exceeding a) half of the registered creditors and their claims, or b) one-fourth of the registered creditors and two-thirds of their claims.” Failure to meet these ratios means that the conditions for approval have not been met and leads to the direct rejection of the request (Bakırköy 2nd Civil Court of Commerce, 2023/713).
Proportionality with Resources and Balance of Interests (EBL Article 305/b): This condition ensures that the project is realistic and implementable. A decision by the Bursa Regional Court of Justice demonstrates the importance of this principle. The court ruled that a company that is not insolvent and has the ability to pay, offering to pay its debts interest-free over a long period, is contrary to the proportionality with resources condition:”Accepting a non-insolvent company’s request for interest-free payment, i.e., a discount concordat, constitutes a violation of the condition stated in Article 305/1-b of the EBL, which requires the proposal to be proportionate to the debtor’s resources.” Similarly, the 6th Civil Chamber of the Court of Cassation also stated that projects that disrupt the balance of interests against creditors due to the length of the payment period should be rejected.
Payment of Fees and Expenses (EBL art. 305/e): This condition, although a procedural requirement, is an absolute prerequisite for approval. In several first-instance court decisions examined (Istanbul 1st Commercial Court of First Instance, 2018/999 and 2022/424), the debtor’s failure to pay the approval fee and litigation expenses, despite the definitive deadlines given, was considered a sole reason for the rejection of the concordat request.
Status of Privileged Claims (EBL art. 305/d): The full payment or securing of privileged claims, especially employee claims, is a critical condition. In a decision by the Ankara Regional Court of Justice, this point was clearly stated as: “The non-payment of employee claims is also a stand-alone reason for the rejection of the concordat approval request.”
3. Other Principles Highlighted in Judicial Decisions for the Approval of Concordat
Likelihood of Project Success: Although not explicitly listed as an approval condition in the law, courts consider the future success of the project as an important criterion. In a decision by the Antalya 3rd Commercial Court of First Instance, this principle was emphasized as follows:”The most important condition for granting a moratorium in concordat and for the approval of the concordat is the likelihood of the concordat being successful and the debtor’s proposal being proportionate to the debtor’s resources.”
Honesty and Good Faith: Although the “honesty” requirement has been removed from the legal regulation, courts continue to consider the debtor’s conduct and good faith. According to a decision by the Izmir Regional Court of Justice, malicious acts that create inequality among creditors or aim to conceal assets may constitute an impediment to confirmation. Similarly, the Izmir 2nd Commercial Court of First Instance stated that the debtor’s conduct and good faith during the stay period should also be evaluated by the court.
Conclusion
When the examined judicial decisions are evaluated comprehensively, it is understood that the confirmation of concordat cannot be reduced to a simple creditor approval; rather, it is a process involving multifaceted and meticulous scrutiny by the court. Courts ex officio investigate whether the five fundamental conditions listed in Article 305 of the EBL (advantage over bankruptcy, proportionality with resources, creditor majority, guarantee of privileged claims, payment of fees) have been cumulatively met. In addition to these substantive and procedural conditions, principles such as the likelihood of the project’s success, the debtor’s good faith, and the balance of interests between the parties also play a decisive role in the confirmation decision. The absence of any of these conditions results in the rejection of the concordat request and, if the debtor is subject to bankruptcy, a decision for their bankruptcy. A paper suggestion.
Why is Expert Concordat Lawyer Support Necessary?
The concordat approval process is not merely a payment arrangement made between the debtor and the creditor; it is a process that proceeds under the court’s ex officio investigation obligation and requires high technical expertise from both legal and financial perspectives. Elements such as the complete fulfillment of the cumulative approval conditions in Article 305 of the EBL (Enforcement and Bankruptcy Law), the project being realistic and proportionate to available resources, the correct calculation of the creditor majority, the securing of privileged claims, and proving the likelihood of the project’s success require professional preparation. Therefore, the involvement of an expert concordat lawyer in the process is a critical necessity that directly affects the probability of approval.
Incorrectly prepared financial statements, missing documents, improperly structured comparative tables, inconsistencies in the audit report, or payment plans that violate the principle of equality can lead to the rejection of concordat requests at the initial stage. An expert concordat lawyer ensures the preparation of a project that complies with court criteria; they professionally manage communication with the commissioner, expert witness processes, and all strategic guidance of the file. Thus, both the debtor’s good faith and the realism of the project are more effectively demonstrated.
Since this process requires technical expertise from both legal and financial perspectives, proceeding without error is difficult. 2M Hukuk Law Office provides professional support for concordat applications, moratorium, and approval processes in Istanbul, Tuzla, Pendik, Kartal, Maltepe, Gebze, Darıca, Çayırova, Şekerpınar, and Tepeören; and increases the chance of concordat success by providing reliable legal consultancy to businesses at all stages, including document preparation, project structuring, audit report compliance, and court process management.
