Concordat is a debt restructuring mechanism under Turkish Enforcement and Bankruptcy Law that allows a financially distressed debtor to reach a binding agreement with creditors — avoiding bankruptcy while satisfying claims under a court-approved repayment plan. For businesses facing serious cash-flow problems, it is often the most viable alternative to insolvency.
What Is Concordat?
Concordat is a court-supervised process in which a debtor proposes a payment plan to creditors. If the plan meets the statutory approval threshold, it becomes binding on all unsecured creditors — including those who voted against it. A court-appointed trustee oversees the process throughout.
Types of Concordat
Ordinary concordat is available to any debtor — individual or corporate — who is insolvent or at serious risk of insolvency but has a viable business capable of repaying debts under a restructured plan.
Concordat by postponement of bankruptcy applies when a company has already entered insolvency proceedings and seeks to reorganise before the court formally declares bankruptcy. It is a more urgent variant with tighter procedural requirements.
Who Can Apply?
Any debtor who can demonstrate:
- Genuine financial distress (over-indebtedness or imminent insolvency)
- A realistic repayment plan backed by preliminary evidence
- That creditors can recover more through concordat than through bankruptcy liquidation
Traders and commercial companies are the most common applicants, but natural persons with debts can also apply under certain conditions.
How the Process Works
- Application to the commercial court — The debtor files a petition with supporting financial documentation and a proposed repayment plan.
- Provisional trustee appointment — The court appoints a trustee to assess feasibility and imposes a temporary stay on enforcement proceedings.
- Creditor meeting — Creditors review the plan and vote. Approval requires a qualified majority by both headcount and debt value.
- Court confirmation — If the statutory threshold is met and the court confirms the plan, it becomes binding on all unsecured creditors.
- Repayment period — The debtor repays under trustee supervision. Failure to comply may lead to annulment of the concordat and the opening of bankruptcy proceedings.
Key Practical Points
- During the provisional concordat period, enforcement proceedings and individual debt collection actions are generally suspended — giving the debtor room to negotiate.
- The trustee supervises debtor management and reports to the court at each stage.
- Secured creditors (mortgage holders, pledge holders) retain their security rights and are not bound in the same way as unsecured creditors.
- Concordat restructures the timing and amount of payments; it does not discharge debts outright.
When Is Legal Support Needed?
Concordat proceedings involve complex financial documentation, statutory deadlines, and court-supervised negotiations. Legal and financial counsel is essential from the outset — particularly when preparing the repayment plan, responding to creditor objections, or addressing trustee concerns. An incomplete application is almost always rejected.
Conclusion
Concordat offers a structured path out of financial difficulty without the finality of bankruptcy. When applied correctly, it protects jobs, preserves business value, and allows creditors to recover more than they would in liquidation. Given the procedural complexity, early legal advice significantly improves the chances of a successful outcome.
Frequently Asked Questions
Can an individual (non-trader) apply for concordat? Natural persons who are not registered traders may apply for concordat in certain circumstances. The court will evaluate whether the application meets the statutory conditions on a case-by-case basis.
What happens to ongoing enforcement proceedings when concordat is filed? Upon acceptance of the application, the court typically imposes a provisional stay suspending existing enforcement actions. This protection gives the debtor breathing room during negotiations with creditors.
Does concordat affect all creditors equally? Secured creditors (those holding mortgages or pledges) retain their security rights and are not fully bound by the concordat plan. Unsecured creditors are bound once the court confirms the plan, regardless of how they voted.
How long does the concordat process take? The provisional period is typically up to three months, extendable by the court. The full procedure — including creditor meetings and court confirmation — can take several additional months depending on complexity.
What happens if the debtor fails to follow the concordat plan? If the debtor fails to make payments according to the confirmed plan, the court may annul the concordat upon a creditor’s application and open bankruptcy proceedings.