Introduction
This study analyzes the elements that must be included in the “Preliminary Concordat Project” that debtors applying for concordat are obliged to submit to the court, and the “Reasonable Assurance Audit Report” regarding the feasibility of this project, within the framework of Article 286 of the Enforcement and Bankruptcy Law (EBL) and in light of judicial decisions. The examined decisions reveal that these documents are indispensable “conditions for action” for the essence of the concordat application and must meet certain standards in terms of both form and content. The study details the mandatory contents of these two fundamental documents, their audit standards, and the deficiencies considered by courts as grounds for procedural rejection.
As a result of examining judicial decisions, the fundamental elements required for the preliminary concordat project and the reasonable assurance audit report are summarized as follows:
Mandatory Elements of the Preliminary Concordat Project:
Payment Proposal: It must clearly state at what rate (discount) or over what period the debtor will pay their debts, and at what rate creditors will waive their claims.
Financial Resource Plan: How the necessary financial resources for payments will be provided (sale of existing assets, capital increase, obtaining credit, or other methods) must be explained with concrete data.
Financial Statements and Lists: Up-to-date documents showing the debtor’s asset situation (latest balance sheet, income statement, cash flow statement, interim balance sheets), and lists showing creditors, claim amounts, and privilege statuses must be submitted completely.
Comparative Table: It is mandatory to comparatively show the amount creditors would receive if the concordat project is accepted versus the probable amount they would receive if the debtor goes bankrupt.
Qualities of an Audit Report Providing Reasonable Assurance:
Authorized Body: The report must be prepared by an independent audit firm authorized by the Public Oversight, Accounting and Auditing Standards Authority (KGK). Reports prepared by independent accountants or financial advisors are considered invalid.
Applicable Standards: The audit must be conducted in accordance with the Turkish Auditing Standards (TDS). Decisions specifically refer to Independent Audit Standard (BDS) 805, Assurance Engagements Standard (GDS) 3000, and GDS 3400.
Primary Purpose and Statement: The most critical element of the report is that it clearly and explicitly states in the conclusion section that it provides “reasonable assurance” that the proposal contained in the preliminary concordat project will be realized. Reports that issue a qualified opinion or do not provide this assurance are considered insufficient.
Bases and Evidence: The report must not rely on abstract statements but on sufficient and appropriate audit evidence collected during the audit (ledger entries, reconciliations, valuation reports, etc.), and these supporting documents must be submitted to the court.
1. Content of the Preliminary Concordat Project and Qualifications Required by Courts
Judicial decisions emphasize that the preliminary concordat project must be a concrete, implementable, and verifiable roadmap demonstrating the debtor’s intention to improve their financial situation. The fundamental elements stipulated in Article 286/1-a of the Enforcement and Bankruptcy Law (İİK) are meticulously examined by the courts.
As stated in the decision of the 17th Civil Chamber of the Izmir Regional Court of Justice, numbered 2021/914 E., the project must include; “elements indicating the rate or term at which the debtor will pay their debts, the extent to which creditors will waive their claims in this regard, whether the debtor will sell their existing assets to make payments, and how the necessary financial resources will be provided through capital increase, credit acquisition, or another method for the debtor to continue operations and make payments to creditors” are mandatory.
Courts do not consider it sufficient for the project to merely list these elements; they also require the project to be internally consistent. In the decision of Bakırköy 3rd Civil Court of Commerce, numbered 2021/720 E., the contradiction between the commitment to capital increase and the data in the cash flow statement was considered a deficiency requiring revision of the project. Similarly, in the decision of Bakırköy 1st Civil Court of Commerce, numbered 2025/278 E., the consolidated project prepared for multiple companies was criticized for not including separate targets and measures for each company. It was emphasized in the decision of Antalya Regional Court of Justice, 16th Civil Chamber, numbered 2024/659 E., that projects submitted by guarantors should also contain their own specific targets and measures, independent of the principal debtor.
2. Standards and Importance of the Reasonable Assurance Audit Report
The reasonable assurance report, which became mandatory with the amendment made by Law No. 7155 in Article 286/1-e of the EBL (Enforcement and Bankruptcy Law), has become one of the most important documents in the concordat process. This report confirms to the court that the project is not a fanciful plan, that it has been audited by an independent party, and that there is a possibility of its realization.
The scope of the audit has been clarified in accordance with the Regulation provisions referenced in the decision of the 13th Chamber of the Council of State, numbered 2020/1497 E.: “Documents showing the debtor’s asset situation, together with the creditor and claims list, are audited in accordance with Independent Audit Standard 805; the concordat preliminary project and the comparison table are audited in accordance with Assurance Engagement Standard 3000 and Assurance Engagement Standard 3400.” Compliance with these standards is essential for the validity of the report.
Courts strictly scrutinize both the formal elements and the substantive content of the report. It is an absolute requirement that the report be prepared by an independent audit firm authorized by KGK. In the decision of Izmir 3rd Civil Court of Commerce numbered 2025/110 E., it was ruled that the precondition for the lawsuit was not met on the grounds that the report prepared by the Independent Auditor Certified Public Accountant did not comply with legal standards.
The most critical aspect of the report is that it provides “reasonable assurance.” In the decision of Istanbul 1st Civil Court of Commerce numbered 2019/42 E., the audit firm’s issuance of a “qualified opinion” due to reasons such as its inability to obtain verification letters was interpreted as a failure to provide reasonable assurance, and the request was rejected. Furthermore, it is mandatory for the report to be supported by underlying documents. In the decision of Bakırköy 3rd Civil Court of Commerce numbered 2019/35 E., the fact that “the underlying documents for the audit report were not appended to the report by the independent audit firm“ was accepted as an indication of the report’s inadequacy.
Conclusion
In light of judicial decisions, it is clear that the preliminary project and audit report to be submitted for a concordat request to succeed must fully comply with the form and content requirements specified in Article 286 of the EBL (Execution and Bankruptcy Law). The preliminary concordat project must be a detailed business plan that presents the debtor’s financial improvement plan with concrete, realistic, and consistent data. The reasonable assurance audit report, on the other hand, must be an objective document confirming the feasibility of this project by an institution authorized by the KGK (Public Oversight, Accounting and Auditing Standards Authority), within the framework of specified auditing standards and based on sufficient evidence. Courts consider even the slightest procedural or substantive deficiency in these documents sufficient grounds for rejecting the request due to “lack of a condition precedent for a lawsuit.” Therefore, it is critically important for debtors and their legal representatives preparing for the concordat process to exercise maximum diligence when preparing these two documents. An article suggestion.
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