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Determination of the Creditors and the Context of the Restructuring Project in Turkish Restructuring Law
Published online by Cambridge University Press: 06 March 2019
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The enforcement and bankruptcy system in Turkey is principally regulated by the Code of Enforcement and Bankruptcy (CEB), Act Number 2004, which came into force on 4 September 1932. This Code mainly originates from the Swiss Federal Law on Debt Collection and Bankruptcy. During 2003 and 2004, several amendments were made to the CEB by Law Number 4949 and by Law Number 5092.
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References
1 Code of Enforcement and Bankruptcy, Law No. 2004.: R.G. [Official Gazette], 19 Sept. 1932, No. 2128, enacted: 19 June 1932 [hereinafter “CEB”].Google Scholar
2 See CEB arts. 285–308 for “basic concordat” which is called as “composition” as well. Concordat is an enforcement institution that is adopted to protect the debtors who are in unavoidably bad financial states and to maintain equality between the creditors of such a debtor. A debtor in such a case makes an agreement with the majority of its creditors. According to this agreement, the nonprivileged creditors renounce a certain percentage of their claims. The debtor pays its debts with its current assets in the ratio accepted by the creditors and the remaining portion of its debts is discharged. According to this, concordat is such a compulsory agreement that the debtor makes with the majority which exceeds the absolute majority of its creditors and the two thirds majority of its claims. The nonprivileged creditors renounce a specific percentage of their claims and the debtor discharges from all of its debts by paying the percentage of them accepted in the agreement. The agreement takes effect with the confirmation of the Commercial Court. There are some types of concordat which are regulated in the CEB. See Baki Kuru, Ramazan Arslan, & Ejder Yilmaz, İcra ve İflas Hukuku 695–698 (2005).Google Scholar
3 See CEB art. 309 of the CEB for “concordat after bankruptcy.”Google Scholar
4 See CEB arts. 309/a-309/I “composition with the creditors for the transfer of assets.”Google Scholar
5 See CEB arts. 179-179/b for “adjournment of bankruptcy.”Google Scholar
6 See CEB arts. 309/m-309/ü for “restructuring.”Google Scholar
7 See CEB arts. 317-329/a for “extension of maturity in extraordinary circumstances.”Google Scholar
8 Law Amending the Execution and Bankruptcy Code, Law No.: 5092 R.G., 12 Feb. 2004, No. 25380, enacted 12 Feb. 2004.Google Scholar
9 Hereinafter “RR.”Google Scholar
10 Efe Dırenisa, Corporate Reorganization In Turkish Law Compared With The United States Chapter 11, 2 J. Yeditepe U. Fac. L. 166–168 (2005).Google Scholar
11 The legal qualification of the restructuring institution is controversial in Turkish legal doctrine. According to the minority view, this way is a kind of concordat. According to the prevailing view, the restructuring institution is different from concordat in many ways. The most important difference is that while in concordat the basis is the restructuring of the debts of the debtor company, by taking precautions like changing the amounts of payment or maturities of the debts, these techniques can also be used in restructuring by conciliation as well, the main goal in restructuring is not the restructuring of the debts, but the restructuring of the firm, structurally and financially. See Sema Taşpinar Ayvaz, İcra-Iflıs Hukukunda Yeniden Yapilandirma 293 (2005); Hakan Pekcanitez, OǦuz Atalay, Meral Sungurtekin, & Muhammet Özekes, İcra Ve İflǎs Hukuku 431–432 (2007); Erol Ulusoy, Ticaret Hukuku Açısından Uzlaşma Yolu ile Borçların Yeniden Yapılandirlması, in İçin ArmaǦan 554 (Yavuz Alangoya ed., 2007).Google Scholar
12 Baki Kuru, İcra Ve İflǎs Hukuku El Kitabi 1351 (2004); Taşpinar Ayvaz, supra note 11, at 303.Google Scholar
13 CEB art. 309/m/II.Google Scholar
14 CEB art. 309/r/I.Google Scholar
15 Alper Efe Erten, Mali Durumu Bozulan Sermaye Şirketlerinin Uzlaşma Yoluyla Yeniden Yapilandirilmasi 66–67 (2006).Google Scholar
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18 Hülya Yarici, Sermaye Şirketleri Ve Kooperatiflerin Uzlaşma Yoluyla Yeniden Yapilandirilmasi 54 (2007).Google Scholar
19 Taşpinar Ayvaz, supra note 11, at 306. Compare Hakan Pekcanıitez, Yeniden Yapılandırma Projesinin Tasdiki ve Uygulanması, in: İcra ve İflas Kanundaki DeǦişiklikler Çerçevesinde Sermaye Şirketleri ve Kooperatiflerin Borçlarinin Yeniden Yapilandirilmasi Semineri 36 (2004).Google Scholar
20 Yarici, supra note 18, at 55.Google Scholar
21 Id. at 55.Google Scholar
22 CEB art. 309/p/I.Google Scholar
23 Taşpinar Ayvaz, supra note 11, at 307.Google Scholar
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25 With the regulation of the CEB Article 309/n/II regarding Turkish Law, the institution of classification of claims is based on the institution of classification of claims in the American method of restructuring. Pursuant to the Bankruptcy Code [herinafter BC] § 1122, it is possible to put a claim into a specific category if the claims in the category are substantially similar to one another. Like the CEB, the BC also does not define the concept of “substantially similar.” See Erten, supra note 15, at 68. It can be generally said that in the American restructuring method, the similar rights are allowed to be classified into many categories on the condition that the classification is just. See Stefan Riesenfeld, Das amerikanische Sanierungsverfahren –Ein rechtsvergleichender Überblick, 1 Konkurs, Treuhand- und Schiedsgerichtswesen, at 94–95 (1983). American jurists understand “being just” usually as the sharing of the burdens and the benefits of the restructuring scheme between the creditors properly. See Axel Flessner, Sanierung und Reorganisation 94 (1982).Google Scholar
26 Sümer Altay, KONKORDATO VE YENİDEN YAPILANDIRMA HUKUKU 1283 (2005).Google Scholar
27 Taşpinar Ayvaz, supra note 11, at 308; Yarici, supra note 18, at 57.Google Scholar
28 For example, secured creditors, unsecured creditors, and privileged creditors will constitute different categories. Moreover, if there is a difference between the securities, these secured claims may be classified between each other, too. See Abdulkadir Böke, Sermaye Şirketleri ve Kooperatiflerin Uzlaşma Yoluyla Yeniden Yapılandirlması, 1 J. Yeditepe Univ. Fac. L. 231 (2005). It is also accepted in American restructuring law that creditors with similar rights can be classified into different categories on the condition that the classification is rational and just. See Jay Lawrance Westbrook, Amerika Birleşik Devletleri'nde 11'inci Bölüm Yeniden Örgütlenme Usulü, in: Türk, İngiliz ve ABD Hukukunda İşletmelerin Ödeme GüçlüǦü Sorunlari ve Banka İlişkileri Sempozyumu 285 (Çev. Ali Cem Budak ed., 1993).Google Scholar
29 Erten, supra note 15, at 71.Google Scholar
30 CEB art. 309/p/I. If the court is convinced that the debtor has applied for restructuring in good faith, it decides to confirm, otherwise to reject the application not later than 30 days.Google Scholar
31 RR art. 18, subsection II.Google Scholar
32 Pursuant to the German Insolvency Code § 222(2), the classes should be formed justly. The criteria that will be used in classification should be indicated in the scheme.Google Scholar
33 Erten, supra note 15, at 71.Google Scholar
34 See Eberhard Braun & Wilhelm Uhlenbruck, Unternehmensinsolvenz: Grundlagen, Gestaltungsmöglichkeiten, Sanierung Mit Der Insolvezordnung 592–598 (1997).Google Scholar
35 11 U.S.C. § 1123(a)(4)Google Scholar
36 The method of restructuring differs from concordat with this point. See OǦuz Atalay, Yeniden Yapılandırma Projesinin Tasdiki ve Uygulanması, in: İcra İflǎs Kanunundaki DeǦişiklikler Çerçevesinde Sermaye Şirketleri ve Kooperatiflerin Borçlarinin Yeniden Yapilandirilmasi 23 (2004).Google Scholar
37 Erten, supra note 15, at 72.Google Scholar
38 Ludwig Häsemeyer, Insolvenzrecht 764 (2007).Google Scholar
39 Id. at 764; Dirk Herzig, Das Insolvenzplanverfahren 26 (2001).Google Scholar
40 These are the minimum elements of the project, therefore it is possible to deal with matters other than these in the project. However, even if the project is approved, in accordance with CEB> Article 309(p) it must be examined during the confirmation hearing whether the project includes those matters or not. See Erten, supra note 15, at 75. It is commonly accepted in American law that the following matters should take place in the restructuring project: 1) Abatement in a certain rate in the amount of the debts, 2) the proposal of company's certificates of stock to the creditors in return of debts, 3) extension of maturity of debts or non-payment of some debts, 4) financial regulations made with creditors of loan. See Jay Lawrance Westbrook, ABD Şirket Kurtarma Usulü Kanunu-Şirketlerin “Going Concern” Olarak Alacakhlara Karşı Korunması, in: Türk, İngiliz ve ABD Hukukunda İşletmelerin Ödeme GüçlüǦü Sorunlari ve Banka İlişkileri Sempozyumu 19 (Çev. Ali Cem Budak ed., 1994). In American law in order to be confirmed, the restructuring scheme must pass the “best interest of creditors test,” unless the contrary is agreed unanimously. See Mustafa Özbek, Amerika Birleşik Devletleri iflas Hukuku Sisteminde Alacaklılara ve Borçlulara Ait Haklar, 12 Türkiye Barolar BirliǦi Dergisi 43 (2002).+Article+309(p)+it+must+be+examined+during+the+confirmation+hearing+whether+the+project+includes+those+matters+or+not.+See+Erten,+supra+note+15,+at+75.+It+is+commonly+accepted+in+American+law+that+the+following+matters+should+take+place+in+the+restructuring+project:+1)+Abatement+in+a+certain+rate+in+the+amount+of+the+debts,+2)+the+proposal+of+company's+certificates+of+stock+to+the+creditors+in+return+of+debts,+3)+extension+of+maturity+of+debts+or+non-payment+of+some+debts,+4)+financial+regulations+made+with+creditors+of+loan.+See+Jay+Lawrance+Westbrook,+ABD+Şirket+Kurtarma+Usulü+Kanunu-Şirketlerin+“Going+Concern”+Olarak+Alacakhlara+Karşı+Korunması,+in:+Türk,+İngiliz+ve+ABD+Hukukunda+İşletmelerin+Ödeme+GüçlüǦü+Sorunlari+ve+Banka+İlişkileri+Sempozyumu+19+(Çev.+Ali+Cem+Budak+ed.,+1994).+In+American+law+in+order+to+be+confirmed,+the+restructuring+scheme+must+pass+the+“best+interest+of+creditors+test,”+unless+the+contrary+is+agreed+unanimously.+See+Mustafa+Özbek,+Amerika+Birleşik+Devletleri+iflas+Hukuku+Sisteminde+Alacaklılara+ve+Borçlulara+Ait+Haklar,+12+Türkiye+Barolar+BirliǦi+Dergisi+43+(2002).>Google Scholar
41 In German law it is accepted that it is compulsory to show the criteria in the restructuring scheme which are used to classify the creditors with similar legal status. See Wilhelm Uhlenbruck, Insolvenzordnung Kommentar 2589 (2003).Google Scholar
42 Maintenance of the debtor company and its enterprise and to overcome the liquidity handicaps will be possible only by specific creditors renouncing some parts of their claims. See Herzig, supra note 39, at 81; Erten, supra note 15, at 75.Google Scholar
43 Taşpinar Ayvaz, supra note 11, at 306.Google Scholar
44 Erten, supra note 15, at 76.Google Scholar
45 The restructuring scheme may contain financial and structural methods and precautions such as changes in financial and business structure, sale of assets, cancellation of debts, and so on. See Dırenisa, supra note, at 182; Article 309(n)(I/5) and Article 309(ö)(IV–V) of the CEB.Google Scholar
46 Atalay, supra note 36, at 23–24; Yarici, supra note 18, at 53.Google Scholar
47 Taşpinar Ayvaz, supra note 11, at 303.Google Scholar
48 Id. at 307.Google Scholar
49 Id. at 315.Google Scholar
50 Altay, supra note 26, at 1285.Google Scholar
51 CEB art.309/p/II.Google Scholar
52 CEB art. 309/t/I; CEB Art. 309/p/II.Google Scholar
53 Atlay, supra note 26, at 1285.Google Scholar
54 Taşpinar Ayvaz, supra note 11, at 315.Google Scholar
55 See CEB art. 309/n/I/5. See discussion infra, Part V “Precautions To Ensure The Feasibility Of The Scheme.”Google Scholar
56 Erten, supra note 15, at 77.Google Scholar
57 In the German insolvency method, the authority of representation of the debtor's assets and power of disposition on the debtor's assets is vested to the insolvency administrator as a rule. The German Insolvency Code acts from the thought that the debtor who could not avoid the state of insolvency is not the proper person to administrate the assets that are subject to its insolvency. However, in accordance with the German Insolvency Code §270, the debtor is allowed to represent and administrate its own assets under specific circumstances. See Erten, supra note 15, at 77 (n. 11). In this respect Turkish law is similar to American law, in which an insolvency administrator is not appointed as a rule. Yet in American law the debtor has the power of disposition and keeps his right to speak about the progress of the procedure. See Reinhard Bork, Der Insolvenzplan, 4 Zeitschrift für Zivilprozessrecht 480–481 (1996); U.S. Courts, Chapter 11: Reorganization Under the Bankruptcy Code, http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter11.html#debtor (last visited 24 Feb. 2010).Google Scholar
58 But in American law, the procedure of reorganization does not affect the debtor's power of disposition. A debtor in possession can make any act of promise within the limits of the customary commercial activity and can dispose of the assets of the company. See Hanife DoǦrusöz, Amerikan Hukukunda Ödeme Güçlüğü İçindeki Şirketlerin Yeniden Yapılandırılması, 1 J. Yeditepe Univ. Fac. L. 216 (2005). However it has to obtain the court's allowance for the transactions other than customary commercial activity. See Ali Cem Budak, Amerika Birleşik Devletleri Hukukunda Şirket Kurtarma, in: Türk, İngiliz ve ABD Hukukunda İşletmelerin Ödeme GüçlüǦü Sorunlari ve Banka İlişkileri Sempozyumu 354 (1994).Google Scholar
59 CEB art. 191.Google Scholar
60 Erten, supra note 15, at 77; CEB arts. 287, 290.Google Scholar
61 Böke, supra note 28, at 238.Google Scholar
62 Taşpinar Ayvaz, supra note 11, at 315.Google Scholar
63 The court, at the demand of the debtor or one of the creditors, immediately takes measures directed at the protection of the debtor's assets which it sees necessary with respect to the debtor's activities for the period until the final decision is rendered on the application.Google Scholar
64 Yarici, supra note 18, at 59. In fact, according to the reorganization provisions of the American Bankruptcy Law, especially undue contracts and the contracts with perdurable performances are separated as profitable and unprofitable contracts from the debtor's perspective, and an action is defined according to this. In this way, by supporting the authority to benefit from profitable contracts and by invalidating the unprofitable contracts, the authority of bringing the debts arising from these contracts in the degree of an ordinary bankruptcy claim is given to the debtor. See Westbrook, supra note 28, at 279–283.Google Scholar
65 Häsemeyer, supra note 38, at 790; Ayvaz, supra note 11, at 316; Erten, supra note 15, at 79.Google Scholar
66 Altay, supra note 26, at 1286.Google Scholar
67 Yarıcı, supra note 18, at 62.Google Scholar
68 Taşpinar Ayvaz, supra note 11, at 316; Erten, supra note 15, at 79.Google Scholar
69 Häsemeyer, supra note 38, at 790.Google Scholar
70 Taşpinar Ayvaz, supra note 11, at 316; Erten, supra note 15, at 79.Google Scholar
71 Taşpinar Ayvaz, supra note 11, 317.Google Scholar
72 Erten, supra note 15, at 80 (n. 125).Google Scholar
73 Id. at 81.Google Scholar
74 Böke, supra note 28, at 229–230; Taşpinar Ayvaz, supra note 11, at 317.Google Scholar
75 Ali Cem Budak, Ödeme Güçlügü İçindeki İşletmelerin Rehabilitasyonu ile İlgili Usullerin Amacı IşiǦında İcra ve İflas Kanunu'ndaki 5092 sayılı Kanun DeǦişikliǦi, in: İstanbul Barosu Meslek İçi EǦitim Seminerleri 8 (2004).Google Scholar
76 Erten, supra note 15, at 81.Google Scholar
77 Yarici, supra note 18, at 64; Taşpinar Ayvaz, supra note 11, at 318; Erten, supra note 15, at 82.Google Scholar
78 Taşpinar Ayvaz, supra note 11, at 318; Erten, supra note 15, at 82.Google Scholar
79 Altay, supra note 26, at 1285.Google Scholar
80 CEB art. 309/t/I.Google Scholar
81 Taşpinar Ayvaz, supra note 11, at 315; Yarici, supra note 18, at 61.Google Scholar
82 Erten, supra note 15, at 82.Google Scholar
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