Introduction
This report examines which claims are preferential from a company declaring concordat and their collection processes, in light of the analyses of presented court decisions. The analyzed decisions reveal the practical implications of Articles 206, 305, and 308 of the Enforcement and Bankruptcy Law (EBL). Key findings indicate that preferential claims are largely exempt from the binding provisions of the concordat process and that creditors have special safeguards protecting their rights.
Key Findings
- Scope of Preferential Claims: In judicial decisions, claims considered preferential in the concordat process are grouped into three main categories:
- Claims under EBL Article 206/1: This category includes claims arising from employment relationships for employees, including severance and notice pay accrued within one year prior to the declaration of bankruptcy, as well as alimony claims arising from family law.
- Secured Claims: The portion of claims secured by a pledge on property owned by the debtor, corresponding to the value of the pledge, is preferential and not subject to concordat provisions.
- Public Claims: Public claims such as tax and Social Security Institution (SGK) premium debts under Law No. 6183 on the Procedure for the Collection of Public Claims are outside the binding nature of concordat.
- Method of Collection for Preferential Claims: Preferential creditors collect their claims without being affected by the deductions (discounts) or maturities stipulated in the concordat project, unlike ordinary creditors. The collection process is based on the following key mechanisms:
- Full Payment or Collateral Requirement: For the concordat to be approved by the court, pursuant to Article 305/1-d of the EBL, it is mandatory that privileged claims within the scope of Article 206/1 of the EBL are fully paid or secured by sufficient collateral, unless the creditor explicitly waives them.
- Exemption from Concordat Provisions: Pursuant to Article 308/c of the EBL, the approved concordat project is not binding for privileged claims, the portion of secured claims that covers the value of the pledge, and public receivables within the scope of Law No. 6183.
- Protection of Collection and Seizure Rights: Seizures imposed in enforcement proceedings initiated for privileged claims before the concordat grace period do not lapse with the approval of the concordat (EBL Art. 308/ç). These creditors can continue to use legal collection methods.
Review and Evaluation
1. Definition and Legal Basis of Privileged Claims
The decisions reviewed consistently refer to Articles 206 and 308 of the EBL when defining privileged claims. These claims are listed in detail in a decision by the Constitutional Court:
“Claims of workers, including notice and severance pay, accrued within one year prior to the opening of bankruptcy, based on the employment relationship…, debts of employers to aid funds for workers…, and… all kinds of alimony claims arising from family law.” (Constitutional Court, 2021/82)
Regional Court of Appeals decisions have expanded this definition to exclude secured claims and public receivables from the binding effect of the concordat. As emphasized by the Sakarya Regional Court of Appeals, SGK (Social Security Institution) receivables are not affected by the concordat as they are subject to a special law:
“The receivables of the SGK Presidency are pursued and collected not under the Enforcement and Bankruptcy Law, but under Law No. 6183 on the Procedure for the Collection of Public Receivables. Since receivables subject to this Law are outside the scope of the concordat provision, it is concluded that SGK receivables are not affected by the concordat.” (Sakarya Regional Court of Justice 7th Civil Chamber, 2021/1652)
This situation shows that the legislator has specifically protected certain types of receivables (worker, alimony, public) due to their social and economic importance.
2. Guarantees and Methods in the Collection Process
The most fundamental guarantee protecting the rights of privileged creditors is among the conditions for the approval of a concordat. As reiterated in many decisions, Article 305/1-d of the EBL is the key point of this process:
“The full payment of the receivables of privileged creditors specified in the first paragraph of Article 206, and the performance of debts contracted with the permission of the commissioner during the moratorium, must be secured by sufficient collateral, unless the creditor explicitly waives it” (Istanbul Regional Court of Justice 45th Civil Chamber, 2021/986)
Failure to fulfill this condition is a sufficient reason for the rejection of the concordat request. Indeed, Kayseri 1st Commercial Court of First Instance rejected the concordat request after the plaintiff company failed to deposit the necessary collateral for privileged labor receivables (2019/166). In contrast, in the decision of Bakırköy 2nd Commercial Court of First Instance, it is observed that an amount over 1.4 Million TL was blocked as collateral for privileged receivables (2018/390).
After the approval of the concordat, the situation of privileged creditors is secured by Article 308/c of the EBL. As stated by the General Assembly of Civil Chambers of the Court of Cassation, these receivables are completely exempt from the concordat project:
“Claims falling into this category are absolutely unaffected by the concordat and must be paid in full. Because the Law stipulates that the concordat can be concluded between the debtor and creditors whose claims are not preferential, and it has exempted preferential creditors from the concordat.” (Court of Cassation General Assembly of Civil Chambers, 2023/591)
This exemption leads to practical consequences such as the protection of preferential creditors’ attachments (Konya Regional Court of Justice 6th Civil Chamber, 2020/691) and the ability of secured creditors to continue enforcement proceedings through the sale of the collateral. However, in some decisions, it has also been stated that the sale of pledged assets may be postponed for up to one year to ensure the continuity of the business (Antalya Regional Court of Justice 11th Civil Chamber, 2021/1306).
Conclusion
When judicial decisions are evaluated holistically, it is observed that the position of preferential creditors is strongly protected by law during the concordat process. Employee and alimony claims under Enforcement and Bankruptcy Law (İİK) Article 206/1, secured claims, and public claims under Law No. 6183 have been excluded from the binding provisions of the concordat project. The collection of these claims is secured by the condition of “full payment or sufficient collateral” for the approval of the concordat, and creditors’ existing enforcement rights are largely protected even after approval. Therefore, preferential creditors have the right to collect their claims on a priority basis, unaffected by the restructuring conditions applicable to ordinary creditors.
