Debt restructuring through consensus in Turkey, governed by the EBC (Enforcement and Bankruptcy Code), is a method seldom employed.
In this intricate process, financially beleaguered companies extend an invitation to their creditors, urging them to settle matters through a meticulously crafted ‘restructuring plan.’ The caveat: this plan must secure the consent of a simple majority of creditors, collectively holding at least two-thirds of the outstanding debts. Once greenlit by the creditors, the plan faces the critical hurdle of approval by the commercial court.
This approach is available to Turkish joint stock companies, limited companies, certain commandite companies, and cooperatives under specific conditions.
These conditions encompass cases where: (i) these entities are incapable of meeting their financial obligations on schedule, (ii) their assets and receivables fall short of covering their outstanding debts, or (iii) they are teetering on the brink of encountering one of these dire scenarios.
The debtor initiates the process by proposing a comprehensive restructuring plan to the affected creditors, who subsequently exercise their voting rights to either endorse or reject the plan’s terms and conditions. If the plan garners approval, the debtor proceeds to seek the final imprimatur of the relevant commercial court. The commercial court, in turn, must render a decision regarding the restructuring plan within 30 days of receiving the application.
The debt restructuring plan in Turkey springs into effect as soon as the court’s decision is delivered. Crucially, the terms and conditions outlined in the plan supersede any prior agreements with the affected creditors. Moreover, provisions within the debtor’s existing agreements that mandate restructuring through consensus in cases of default or contract breaches, or that could potentially amend or nullify the restructuring plan, become null and void automatically.
It’s important to note that, as a general rule, the approval of the restructuring plan does not automatically alter the powers vested in the company. However, the court retains the discretion to curtail these powers if the restructuring plan explicitly envisions such limitations.
Azkan Group can support you in your Employer of Record (EOR) and payroll requests (also called Umbrella Company) in Turkey. We can manage your HR requests even if you don’t have a legal entity in Turkey.