Some amendments have been made in various articles of the Bankruptcy and Enforcement Law (“Law”) by the Law on the Amendment of the Bankruptcy and Enforcement Law and Some Laws published in the Official Gazette dated 19 June 2021 and numbered 31516. In addition to the amendments regarding the operations of the bankruptcy offices, some new provisions concerning definite period of the concordat were introduced to the Law. In this alert, the amendments regarding the consequences of the definite period in terms of contracts and debtors are examined.
First of all, as per the amendments made, it is stipulated that regardless of counter party of the contract being affected by the concordat project, continuation of the contracts to which the debtor is a party and that are important for continuation of the operation of the business is essential. Furthermore, a provision that the performances arising from the contracts which continue during the provisional and definite periods shall be mutually fulfilled has also been added to the Law. Additionally, before the amendments made, the approval of commissioners and the approval of the courts were sufficient for the termination of the ongoing debt relations that hinder the purpose of the concordat. However, with the amendments, it is set forth that only very burdensome debt relations can be terminated with both the approval of the commissioner and the decision of the court.
Secondly, amendments are made in article 297 of the Law regarding consequences of definite period in terms of debtor. Previously, it was prohibited by the Law for the debtor to establish a pledge, be a surety, to transfer and encumber the permanent installations of an enterprise. Dispositions without consideration, transferring and encumbering the immovable and movables that are important for the continuation of the enterprise are now added to the transactions that the debtor cannot conduct without a court decision following the decision giving a period.
It is also worth to mention that pursuant to third paragraph of Article 297 of the Law, in case that the debtor breaches the relevant article and the court deems necessary, the power of disposition on the debtor’s property may be revoked or the concordat may be rejected. Furthermore, the court must obtain the opinion of the commissioner and the consent of the board of creditors before deciding on these prohibited transactions. However, prior to the amendments, opinions of both the commissioner and board of creditors were sufficient for the court to render its decision.
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