What Is a Concordat in Turkey and How to Apply? Provisional and Final Moratorium

Concordat is a legal process in which a debtor in financial difficulty restructures its debts with the approval of a specified majority of creditors and a court decision, allowing the business to continue operating.

The Purpose of Concordat

Under Article 285 et seq. of Enforcement and Bankruptcy Law No. 2004 (İİK), concordat is a process by which a debtor unable to pay its debts on time, or at risk of being unable to do so, avoids bankruptcy by agreeing a repayment plan with its creditors. This process allows the debtor to preserve its economic existence, while also allowing creditors to recover a higher proportion of their claims than they would through bankruptcy.

Documents Required for the Application

A concordat application requires a petition to the court setting out the debtor's financial situation, together with a list of debts and creditors, a balance sheet, an income-expense statement, a draft concordat project showing how the debts will be repaid, and other documents explaining the financial situation.

The Provisional Moratorium Stage

If the court, on its initial review, finds the conditions are met, it grants the debtor a three-month provisional moratorium and appoints a concordat commissioner to oversee the process; the court may extend this period by a further two months if it considers it necessary. During the provisional moratorium, attachment and similar enforcement proceedings against the debtor are suspended.

The Final Moratorium Stage

Based on the report prepared by the commissioner, if the court finds there is a reasonable prospect of the concordat succeeding, it grants a one-year final moratorium; this period may be extended by a further six months where necessary. During the final moratorium, the debtor, under the commissioner's supervision, works to agree a repayment plan with its creditors.

Confirmation of the Concordat

A concordat project approved by the statutory majority of creditors is reviewed and confirmed by the court; a confirmed concordat binds all creditors and allows the debtor to continue operating. If the concordat is not confirmed, the debtor's bankruptcy may be ordered.

Practical Recommendations

A business experiencing financial difficulty should consider a concordat application before the payment difficulty deepens; an application file that is complete and contains a realistic repayment plan is decisive for the court granting favourable provisional and final moratorium decisions.

This article is for informational purposes only and does not constitute legal advice. Please contact our team regarding your specific situation.