Introduction

This study analyzes the views in the literature and the legal requirements regarding the approval of concordat. Approval, which is the final and most crucial stage of the concordat process, refers to the court’s confirmation of the project accepted by the creditors, making it binding for all creditors. The general consensus in the literature is that for an approval decision to be rendered, the conditions specified in Article 305 of the Enforcement and Bankruptcy Law (EBL) must be cumulatively met. However, legal doctrine and Supreme Court decisions also acknowledge the existence of certain additional conditions that are not explicitly enumerated in the law but arise from the essence of the institution itself. The court’s role in this process is not merely to approve the will of the majority of creditors, but also to *ex officio* supervise the project’s compliance with legal requirements, its fairness, and its potential for success.

Conditions for the Approval of Concordat

Sources in literature primarily examine the conditions for the approval of concordat under two main headings: conditions explicitly regulated in Article 305 of the ELA and conditions that, although not explicitly stated in the law, arise from the spirit of the concordat institution and general legal principles.

1. Conditions Regulated in Article 305 of the Enforcement and Bankruptcy Law

Article 305 of the ELA provides for the approval of concordat, requiring “five conditions that must all be met together.” These conditions are cumulative, and the absence of even one of them leads to the rejection of the approval request.

The Proposed Amount Must Exceed the Probable Amount Creditors Would Receive in Case of the Debtor’s Bankruptcy: This condition ensures that the concordat is more advantageous for creditors than bankruptcy. In this regard, it is stipulated as a condition for approval that the proposed amount must be understood to exceed the probable amount each creditor would receive in case of the debtor’s bankruptcy. This condition, newly introduced for ordinary concordat and already existing in concordat by abandonment of assets, does not require the debtor to actually be subject to bankruptcy but hypothetically aims to determine the amount of the share creditors would receive if the debtor were to go bankrupt.

The Proposed Amount Must Be Proportional to the Debtor’s Resources: This condition aims to establish a reasonable balance between the debtor’s financial situation and the proposal made. Approval of a proposal that exceeds the debtor’s payment capacity or falls significantly below their resources is not possible.

Acceptance of the Concordat Project by the Majority Stipulated in Article 302 of the EBL: For the concordat project to be approved, it must first be accepted by the creditors’ meeting with the quorum required by law. Contrary to the current regulation, the acceptance of the concordat project by the majority stipulated in the Law is explicitly considered one of the conditions for the approval of the concordat.

Ensuring Full Payment of Privileged Debts and Performance of Debts Arising During the Moratorium: As a rule, a concordat affects ordinary creditors. Therefore, it is mandatory to provide sufficient security that privileged debts and debts arising during the moratorium with the commissioner’s approval will be paid in full. The purpose of stipulating this condition is to enable the concordat to be fulfilled according to the approved conditions, thereby preventing the debtor from making commitments they cannot fulfill, and also to provide a payment guarantee to certain creditors.

Deposit of Necessary Expenses and Fees with the Court Treasury: The advance payment of costs related to the approval proceedings and the concordat approval fee by the debtor is a condition for approval.

2. Conditions Outside Article 305 of the EBL and Arising from the Essence of the Institution

Literature accepts that, apart from those enumerated in Article 305 of the EBL, there are other conditions for approval stemming from the fundamental logic of the concordat institution and general legal principles. Although the conditions required for the approval of the concordat are listed in five paragraphs in Article 305, the conditions for the approval of the concordat are not limited to those listed in these paragraphs. There are also conditions for approval that can be deduced from other provisions relating to the concordat and from the essence of the concordat institution.

The Debtor Being Honest: Although not explicitly stated as a condition for approval in the law, the principle of honesty forms the basis of the concordat institution. The Supreme Court, in its recent decisions, by stating “A concordat is a form of enforcement in which an honest debtor’s ordinary claims within a certain timeframe are settled with the approval of the competent authority and the acceptance of the majority of creditors,” indicates that concordat is an institution established for honest debtors.” The court should evaluate the debtor’s activities and intentions during the grace period within this framework.

Possibility of Concordat Reaching Success: It is accepted that this condition, which is required for a definitive grace period to be granted, should also be sought in the final stage of the process, which is approval. There is no legal benefit in approving a project that has no chance of success. Ahmet Karakaya (2022) states in this regard, “It is clear that this condition, which is necessary for a definitive grace period, should also be taken into consideration at the approval stage, which is the final stage of the concordat. For there is no benefit in approving a concordat that does not seem possible to succeed.”

The court’s role in the concordat approval process is critically important. The court is obliged to investigate ex officio the existence of the conditions for approval, as these conditions relate to public order. In this process, the reasoned report prepared by the concordat commissioner serves as important evidence, but the court is not bound by this report. The court renders its decision after hearing the commissioner and evaluating any objections, if any.

The cumulative nature of the conditions means that the court must reject the approval request if even one of them is missing. In the event that the approval request is rejected, if the debtor is subject to bankruptcy proceedings and one of the direct grounds for bankruptcy exists, the court may rule for the debtor’s bankruptcy.

The court also has discretionary power. For example, if it finds the project insufficient, it may request the necessary corrections to be made ex officio or upon request. This situation indicates that the court is not merely an approving authority, but also plays an active role in making the project fair and viable.

Conclusion

In light of the sources in the literature, the approval of a concordat is a comprehensive judicial review process that signifies much more than the simple approval of a project accepted by creditors. This review includes, in addition to the five cumulative conditions listed in Article 305 of the E.B.L. (Enforcement and Bankruptcy Law), principles inherent in the institution such as the debtor’s honesty and the project’s potential for success. The court, taking into account the commissioner’s report, the will of the creditors, and any objections, investigates ex officio whether all these conditions have been met. While an approval decision is rendered if all conditions are present, the absence of even one can lead to the rejection of the request and, for debtors subject to bankruptcy, result in bankruptcy. This process aims, in accordance with the purpose of the concordat institution, to enable honest debtors to rectify their financial situations while ensuring that creditors’ rights are protected more advantageously than in bankruptcy. A writing suggestion.

Why is Expert Concordat Lawyer Support Necessary?

The concordat approval process is an extremely complex process with intertwined technical, financial, and legal aspects. Failure to fully meet the approval conditions can lead to the rejection of the entire process and the debtor’s direct bankruptcy. Therefore, expert concordat lawyer support that will accurately analyze the debtor’s financial structure, strengthen the project’s legal basis, and provide effective representation before the court is of vital importance.

2M Law Office offers professional consultancy services for businesses operating in the Istanbul, Tuzla, Pendik, Kartal, Maltepe, Gebze, and Tepeören regions, covering concordat application, moratorium, commissioner, and approval processes. Our experienced team aims to protect creditors’ interests while enabling honest debtors to continue their commercial activities.