The Law No. 7101 on the Amendments to the Code of Enforcement and
Bankruptcy and Some Laws (the “Law”)
was adopted by the General Assembly of Turkish Grand National Assembly on 28.02.2018
and was published in the Official Gazette on 15.03.2018. The Law amends several
laws, particularly the Code of Enforcement and Bankruptcy, Notification Law,
Law on Fees, Code of Civil Procedure, International Arbitration Law and Turkish
Commercial Code. According to the amendments brought by the Law:
I.
Amendments to the Code of Enforcement and Bankruptcy
Abolishment of Bankruptcy Protection and New Rules on Concordatum
Procedure
As known, application for bankruptcy protection was suspended with the
Decree Law No. 669, issued within the scope of the State of Emergency. The Law
abolishes bankruptcy protection, in its entirety. As an alternative to this
procedure, the Law provides the opportunity to request concordatum to those
debtors who would like to avoid bankruptcy.
As a matter of fact, the concordatum procedure had already been
regulated under the Code of Enforcement and Bankruptcy No. 2004; however, the
Law brings important amendments to the said provisions.
When to Apply for Concordatum
Pursuant to the new rules, any debtor who cannot pay their matured debts
or have the risk of defaulting on payment may apply to the Commercial Court of
First Instance and request concordatum. Similarly, any creditor who is eligible
to request the bankruptcy of a debtor may also request a decision of
concordatum for that debtor from the court.
The concordatum may also be requested, for only once, during the
bankruptcy process should the debtor had been declared bankrupt.
The Concordatum Period
If the court determines that the request/application for concordatum has
the necessary supporting documents and information, the court will firstly
grant a temporary period and appoint a concordatum trustee. The temporary
period is 3 (three) months and it may be extended for a maximum of 2 (two) months.
During the temporary period, the court will grant its decision regarding
the definitive period. The definitive period is the actual 1 year concordatum period,
which will only be granted to the debtor provided that the court believes that
the concordatum will be successful. The definitive period may be extended for
maximum 6 (six) more months.
Status of Creditors and the Receivables
During the definitive period, no enforcement proceeding may be initiated
against the debtor, including the proceedings initiated as per the Law No. 6183
on Procedures for Collection of Public Receivables, the enforcement proceedings
which had been previously initiated will be suspended and no preliminary
injunction/attachment may be applied. As regards the receivables secured with
pledge, no confiscation by enforcement office or sales transaction may be
performed for pledged goods during this period. The contracts which the debtor
is a party to shall be in force during the definitive period and they shall not
be terminated because of the concordatum. Unless otherwise agreed in the
concordatum project, no interest will be accrued for the receivables, except
for the ones secured with pledge.
Following the decision for temporary and definitive period, unless
otherwise allowed by the court, the debtor shall not establish pledge, provide
surety , transfer or enjoy the immovable and the permanent equipment of the
business, or engage in gratuitous transactions. Otherwise, the transactions
will be deemed void.
The concordatum trustee shall supervise all transactions of the debtor
and shall submit interim reports to the court.
An important amendment brought by the Law is that, a board of creditors
may be established, provided that the board does not exceed 7 (seven)
creditors. The board of creditors may supervise the activities of the concordatum
trustee and may present opinions to the court, if necessary.
The concordatum trustee shall perform an inspection on the assets of the
debtor and a concordatum project shall be prepared. The project shall be
submitted to the creditors for approval. While the required majority was
previously 1/2 (half) of the recorded creditors and 2/3 (two thirds) of the total
receivables of the debtor; the Law now provides that the majority shall be (i)
1/2 (half) of the recorded creditors, (ii) 1/4 (one fourth) of the recorded
receivables and (iii) 2/3 (two thirds) of the total receivables of the debtor.
The creditors who do not consent to the concordatum will have the
opportunity to seek the liability of the parties who are jointly liable with
the debtor.
It is not allowed to appeal against the temporary or definitive
concordatum decisions. However, the decisions regarding the approval of
concordatum may be appealed.
Receivables Secured with Pledge
The Law brings a new provision regarding the negotiation with the creditors whose receivables are secured with
pledge and restructuring of the debts. Within this scope, the debtor may,
provided that it is stated in the initial project, request restructuring of
their debts, which have been secured with pledge.
II.
Amendment to the Law No. 6183 on Procedures for
Collection of Public Receivables
As per the amendment provided in the Law, the public receivables arising
from the rights in rem of the assets,
such as the custom duty or tax on building and land, shall be collected only after
the receivables secured with pledge. In other words, the receivables secured
with pledge will be collected first, prior to the public receivables.
III.
Amendment to the Law No. 7201 on Notification
While the Notification Law previously governed that the joint-stock
companies, limited liability companies and the limited partnerships divided
into shares shall use electronic notification, the Law extended the obligation of
using electronic notification to more entities, including attorneys, public notaries, mediators and
experts.
The electronic notification procedures will be operated through the
National Electronic Notification System which had been established and operated
by the Post and Telegraph Organization JSC.
The new regulation shall be effective as of 01.01.2019.
IV.
Amendment to the Turkish Commercial Code No. 6102
For the purpose of rapidity and effectiveness of the litigation process,
the commercial disputes the value of which do not exceed TRY 100,000 shall be
carried out as per the simplified procedure governed under the Code on Civil
Procedure No. 6100.
V.
Amendment to the Law No. 4686 on International
Arbitration
As per the new rules, the lawsuits for setting aside of arbitral awards
may be filed before the the Court of Second Instance. If assistance of the
court would be needed during the arbitral process, then the civil courts of
first instance or the commercial courts of first instance will be competent,
depending on the essence of the dispute.
VI.
Amendment to the Code on Civil Procedure No. 6100
According to the new rules, for the purpose of rapidity and
effectiveness of the litigation process, in those cases where the simplified rules of procedure are applicable, the court appointed experts shall file
their reports with the court within 2 (two) months after their appointment,
instead of 3 (three) months.