Important changes to the law on enforcement and bankruptcy


Recent development

The law amending the law on execution and bankruptcy and certain laws n ° 7327 (“Law“) was published in the Turkish Official Gazette on June 19, 2021. Significant changes have been made to the Enforcement and Bankruptcy Law (“EBL ”) by law, which includes, among other things, regulations on the composition process.

What’s up?

The most important changes made by law to the BBL are as follows:

  • Businesses that have commercial and economic integrity, or which, if sold as a whole, are expected to generate higher income, will be sold as a whole.

With the amendment of article 241/3 of the EBL, “Liquidation of assets”, it is regulated that, in cases falling within the scope of the article, the companies will be sold as a whole and the provisions regarding the liquidation of real estate will be applied to the sale transaction. In addition, if the sale cannot take place as a whole, the rights and assets will be sold separately.

  • The sale of the pledged property will be authorized if it is not intended to be used within the framework of the composition project, or its value will decrease or its conservation will be costly.

With the amendment of article 295 of the EBL, “Consequences of the definitive term for pledge creditors”, certain exceptions have been made to the rule according to which the pledged asset may be subject to enforcement proceedings but cannot be sold during the final and temporary terms of the compounding process. Under the terms of this addendum, the pledged asset may also be sold during the final and temporary maturities if it is not intended to be used as part of the composition project, or its value will decrease or its conservation will be costly. At the end of the sale, a payment will be made to the pledgee on the turnover up to the pledged amount.

  • It is clearly regulated that the parties to the agreements will continue to perform their obligations under the agreements during the temporary and final terms.

With the amendment of article 296 of the EBL, “Consequences of the final term of agreements”, it has been settled that the contractual obligations arising from the agreements which continue during the temporary and final terms will be mutually executed by the parties. In accordance with this amendment, it was adopted that agreements to which the debtor is a party and which are important for the continuation of the debtor’s business will continue to be executed. In addition, unlike the previous version of the article, according to the addendum, the debtor can terminate the agreements with the approval of the commissioner and the leave of the court if the execution of the agreement is “extremely binding”. Therefore, the scope of agreements that can be terminated is reduced.

  • The transfer of movable property important for the pursuit of the business is one of the operations that cannot be carried out by the debtor from the decision on the provisional term.

With the amendment of article 297/2 of the EBL, “Consequences of the final term for debtors”, it was settled that from the court decision on the temporary term, without the court’s authorization, the debtor cannot transfer or restrict his rights to movable property that is important for the pursuit of the activity. Prior to the amendment, this restriction only applied to buildings and the continued establishment of the business. In addition, it was regulated with the amendment that the court is required to obtain the authorization of the creditors’ council instead of its opinion and, therefore, the execution of transactions no longer depends solely on the discretion of the court. .

  • Debts concluded after the decision on the provisional term with the authorization of the auditor may be the subject of a compulsory execution procedure even during the composition procedure if the default conditions are met and these debts will be paid in priority. .

With the amendment of the fourth paragraph of article 308 / c of the LBE “Composition provisions”, debts concluded after the decision on the provisional duration with the authorization of the auditor, including loans granted by credit institutions , will not be subject to the composition provisions in the ordinary composition. These receivables may be the subject of legal proceedings even during the final or provisional deadlines if the default conditions are met and will be paid immediately after the payment of the pledged receivables and before the other receivables. As there was no clear regulation on this in the previous version of the article, there were different applications in practice. With this amendment, this issue has been clearly settled.

Conclusion

The law made significant changes to the provisions of the EBL on the composition process. In our opinion, with these changes, uncertain practices regarding the composition process have been clarified and important steps have been taken to protect the interests of creditors and debtors requesting composition.

The content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may be termed a “lawyer advertisement” requiring notice in some jurisdictions. Past results do not guarantee similar results. For more information, please visit: www.bakermckenzie.com/en/disclaimers.


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