Concordat, is regulated in the Law No. 7101 as an institution which can be referred by a debtor who failed to pay its debts which already became due or under the risk of failing to pay its debts at their due date, in order to clear all his debts or to avoid a possible bankruptcy by giving maturity and/or deduction. Even though concordat is mostly seen as a debt settlement institution, it is stated that concordat does not only function as a debt settlement but also performs the "rehabilitation institution function" which provides the restructuring of the enterprise and is the most important improvement and restructuring tool regulated in the Enforcement and Bankruptcy Law.

One of the purposes of the concordat institution is to re-establish the enterprise as a solid structure by managing the debtor's assets. In order to achieve this goal, banning the creditors from initiating execution proceedings is imperative. The most important result of giving a "temporary respite" decision is the commencement of the prohibition of enforcement proceedings against the debtor with this decision. Pursuant to that, no enforcement proceedings or prosecutions can be made against the debtor within this temporary respite, including those in accordance with the Law No. 6183 on the Procedure for the Collection of Public Receivables, and also, the previously initiated proceedings would be suspendend.(EBL Art. 294/I)

Receivables within the scope of the prohibition are as follows: receivables arising before the temporary respite, public receivables and receivables arising without the approval of the commissioner within the temporary respite. It is regulated in EBL 308/c that, a concordat which is binding is compulsory for the receivables arose before the temporary respite decision and receivables arising without the approval of the commissioner after the temporary respite decision.

The legislator has accepted some receivables that need to be specially protected with social considerations as privileged receivables during the distribution of money; there is no obstacle for the creditors in the first rank among these privileged creditors, to commence and finalize execution proceedings within the temporary respite.

The exceptions to the prohibition of execution proceedings are mainly regulated in the second line of EBL Art. 294, and the third and fourth lines of EBL Art. 208. Accordingly and first of all, it has been stipulated that pursuing the privileged receivables written in the first line of Article 206 within the concordat deadline can be done through sequestration.

The receivables written in the first line of Art. 206 of EBL are as follows:

  • Workers' receivables, including the notice and severance payments accrued within one year prior to the opening of the bankruptcy, based on the business relationship, and the notice and severance payments they deserve upon the termination of the business relationship due to bankruptcy,
  • Employers' debts to facilities or associations that have occurred for the purpose of establishing or maintaining aid funds or other aid organizations for workers and have acquired legal personality,
  • All kinds of alimony receivables arising from family law that needs to be paid in cash and have accrued in the last year before the bankruptcy was opened.

The legislator did not include these receivables under the prohibition of follow-up in order to ensure that the wage and alimony creditors receive the money they need to maintain their lives regularly. These creditors can follow their receivables through the sequestration process within the temporary respite.

Another exception to the prohibition is debts arising with the approval of the commissioner. This situation has been expressed in the first line of Art 308/c/4 as follows: "Debts, including the loans granted by credit institutions, concluded with the permission of the commissioner are not subject to ordinary concordat conditions; and will be deemed as desk debt through the abandonment of assets in concordat or in a subsequent bankruptcy ".

It was emphasized that when the commissioner approves the legal proceedings, the establishment of contracts is significantly encouraged, as the obligations of the debtor would be deemed as a desk debt in a possible bankruptcy. In this context, there is no prohibition of enforcement proceedings in terms of receivables that occur with the approval of the commissioner within the concordat period, and preservation and sales transactions can be made in the execution proceedings initiated for these receivables; at the same time, these receivables will be counted as desk debt in the bankruptcy process that may occur later.

In terms of housing and workplaces, it is necessary to make a distinction according to whether the rent debt arose before or after the concordat request is made when determining whether a follow-up can be made against the tenant due to the rent. Because, as a rule, only receivables arising before the concordat request is subject to the concordat. In this respect, the prohibition will apply to the tenant for receivables arising before the aforementioned date; on the other hand, proceedings can be made against the tenant for the receivables arising after the concordat request.

Another important exception to the prohibition is follow-up through foreclosure of the pledged property. Pledge rights are limited real rights that give the owner the right to directly and primarily to receive its own receivables through the sale of the pledged item or right, if the receivable is not paid. The creditors, whose receivables are secured with the pledge they will take during the concordat period, can initiate procedures by converting the pledge to money or continue the proceedings that have been initiated. However, due to these proceedings, conservation measures cannot be taken and pledged goods cannot be sold (Art 295 of EBL).

As a rule, the concordat period and the prohibition does not affect the joint debtors and guarantors. Since the prohibition of follow-up does not cover joint debtors and guarantors, proceedings can be made about those responsible for the debt. If the debtor is given a concordat period, since the application can be made to the ordinary guarantor directly (Art. 585 of TCO), proceedings can be started against the ordinary guarantor. In this case, the ordinary guarantor cannot put forward the plea to apply to the main debtor first. When the provisions on bail are evaluated collectively, it would not be wrong to say that giving a concordat deadline to the debtor has consequences against the guarantor.

CONCLUSION

The main rule is that no enforcement proceedings can be made against the debtor after the concordat request is accepted. However, the legislator made an exception to this rule and determined some types of receivables that are not affected by the concordat decision and are not subject to the prohibition of proceedings. Execution proceedings can be carried out on the privileged receivables written in the first line of Article 206 of the EBL, the receivables that occur with the approval of the commissioner within the concordat period, and the rent receivables arising after the concordat decision. In addition, the pledge creditor may initiate proceedings against the debtor by converting the pledge to money or continue the proceedings that have been initiated. Finally, it should be noted that; since the concordat decision on the principal debtor and the prohibition of proceedings does not include the joint debtors and guarantors, enforcement proceedings can be made for those who are responsible for the debt together.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.