WHAT IS THE ORDINARY CONCORDAT? WHAT ARE THE MEETING OF CREDITORS’ QUORUMS?
The Meaning of Ordinary Concordat
Ordinary concordat is a forced agreement that an honest debtor makes with a certain majority of the creditors and is valid with the approval of the authorized Commercial Court. With this remedy, the creditors either waive a certain part of their receivables against the debtor or allow their receivables to be paid by the debtor within a certain period beyond the due date. In a short definition, it means paying the debts in accordance with the terms of the approved payment plan.
Based on this definition, this legal remedy actually means that giving the debtor a respite from the law. Indeed, together with this institution, the debtors get the chance to both pay their receivables and dispose of bankruptcy by realizing the project they prepared with the consent of the creditors, together with a commissioner appointed by the court, without any executive pressure. That’s why most companies apply for this legal remedy, especially during periods when economic difficulties arise and debtors are unable to pay their debts.
This can be done by all debtors, whether or not they are subject to bankruptcy. It should also be noted that only non-malicious debtors can benefit from this legal institution due to reasons beyond their control (disaster, economic crisis, etc.). In other words, any debtor -whether it is bankrupt or not- is not always able to apply to this institution simply because he cannot pay his debts.
What are the types?
There are three types of ordinary concordat. According to the agreement made with his creditors, the debtor can pay his debts in installments in the form of deductibles. Secondly, the creditors may consent to waive their receivables and the debtor can pay the rest. Lastly, payment schedules in the form of a mix of these two are also very possible.
How Does the Process Work?
There is a three-sided relationship in the concordat process: the debtor himself, a commissioner appointed by the court, and a board of creditors composed of several creditors representing the creditors. As can be seen, a triple pillar has been formed in this institution and the process has been audited by many hands.
In summary, within the certain deadlines given by the court and under the supervision of the commissioner, the debtor tries to create a proposal that he can pay his debts and that the creditors can accept, which is called the concordat proposal. With this proposal, the debtor will try to convince the creditors that they can take their receivables. In this way, creditors will accept the proposal if they are convinced that at the end of the proposal period, they will receive more than they might receive as a result of bankruptcy or a different enforcement action. In a way, this will be a “win-win” relationship for both the debtor and the creditors.
What are the Stages of the Process?
It is a process that takes about a year or a year and a half (it may take less).
This petition is requested from the Commercial Court of First Instance in the place where the activity center is located for debtors subject to bankruptcy, while it is requested from the Commercial Court of First Instance in the settlement for debtors who are not subject to bankruptcy.
If attention is paid, this petition is not forwarded to the creditors. The requesting authorities are the definitively authorized Commercial Courts of First Instance.
Debtors who are unable to pay their debts on due date or who are in danger of not being able to pay their debts when due may request it.
Temporary Respite Decision
With this request, a temporary respite decision is made automatically, within which no enforcement action can be carried out against the debtor. With this decision, one (or two/three) temporary concordat commissioners will be appointed to the debtor in order to closely examine whether the concordat will be successful. The duration of this deadline is three months, but it can be extended for a maximum of two months with a request made by the debtor or the commissioner.
As regulated in Article 288 of the Execution and Bankruptcy Code, the temporary respite gives rise to all the consequences of the definite respite. During this period, the enforcement proceedings that started before the respite do not continue or any enforcement proceedings against the debtor can not be initiated within this period. This is the point that makes this remedy the most attractive for debtors.
In addition, no interim injunction or foreclosure decision can be taken during this period. The statute of limitations and forfeiture periods will also not operate within this period.
Based on this request, the creditors have the right to object to this decision within seven days. If there is such an objection, the Court may decide to reject the concordat request. If the court rejects this request, the debtor will have the right to appeal this decision within ten days.
Definite Respite Decision
As a result of its evaluations; the court, which determines that it is possible for the concordat to be successful, gives a one-year decision of definite respite to the debtor and also decides that the temporary commissioner or commissioners to continue their duty as a rule. (BEC Art. 289/III).
By the court, together with the definite respite decision or within the definite respite; a “board of creditors” is formed, provided that there are no more than seven creditors, no fee is appreciated and there is an odd number of them. The definite respite determined by the court as one year can be extended by the court up to six months in difficult cases.
Within this period, the above-mentioned results will be valid here.
After the definitive respite decision; the concordat proposal is prepared, the debtor’s property is kept, the value of the goods under seizure is appraised, the creditors are invited to declare their receivables.
Negotiation of Concordat Proposal (Meeting of Creditors)
It’s explained in detail below.
According to quorum results of the meeting of creditors, the concordat proposal is either approved or not. However, there is a point that should not be forgotten here that the approval or rejection of the proposal will be made by the Commercial Court of First Instance.
In case the proposal is approved, a calendar is created in accordance with that proposal and it is decided to what extent the creditors give up their receivables and according to which calendar the debtor will be responsible for his debts. A trustee [judicial factor] control mechanism may also be required to oversee the operation of the proposal while making the approval decision.
If the concordat is not approved, the court decides to reject the concordat request. In this case the debtor is one of the persons subject to bankruptcy and there is one of the direct reasons for bankruptcy, the court decides on bankruptcy ex officio.
What is the Meeting of Creditors? What is the Quorum for the Approval of the Proposal?
The debtor has to prepare a certain proposal and convince the creditors for this project within the maximum periods, which is a manifestation of the functionality of the concordat. At this point, the “meeting of creditors” constitutes the most important pillar of this process.
In general, the meeting of creditors consists of the concordat commissioner appointed by the court and the debtor to prepare the concordat project within the maximum time given and present it to the creditors at a meeting formed by the creditors. In this meeting, the debtor presents the concordat proposal, which was prepared under the supervision of the commissioner and within the given deadlines, to the creditors and tries to get this proposal approved by them. If the decision quorum is passed in the voting, that proposal will be approved.
If in the voting;
a) half of registered creditors and receivables or (½+½),
b) one-fourth of registered creditors and two-thirds of receivables (¼+⅔),
provided, the concordat proposal will be accepted.
In terms of voting rights, the legislator has made a distinction on creditors registered on the basis of creditors, which means that creditors are invited to declare their receivables within a certain period of time as of the announcement to be made by the commissioner (art. 299). Since the announcement by the creditors of their receivables plays an important role in shaping the concordat proposal, making certain preparations before the announcement prevents the creditors from losing their rights.
As a result; concordat is a process that an honest debtor prepares and manages to pay his receivables to the creditors because he is in debt, and it is a legal remedy that ends with the presentation of the proposal he has prepared with the aim of convincing the creditors at the creditors meeting and convincing them.
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Staj. Av. Ömer Faruk KILIÇ
Av. Harun Ümit Eren
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