Main Effects of the Moratorium
Enforcement proceedings
- General framework
- Apart from the exceptions in the law, no enforcement can be made and enforcement already started comes to a halt
- Need for special review
- Origin of the claim, privilege, public nature and type of enforcement
Enforcement against a pledge
- General framework
- Enforcement may be started or continue; restrictions on safekeeping and sale may apply
- Need for special review
- Value of the pledge, use of the asset in the plan and the court’s decision
Interest
- General framework
- Unless the confirmed plan provides otherwise, interest on claims not secured by a pledge may stop from the date of the final moratorium
- Need for special review
- Provision of the plan, value of the pledge and nature of the claim
Contracts
- General framework
- Termination and acceleration clauses based on the filing or the moratorium may be restricted
- Need for special review
- Nature of the contract, necessity of continuing and Enforcement and Bankruptcy Law (İİK) Art. 296
Set-off and offsetting
- General framework
- The special conditions of the Enforcement and Bankruptcy Law apply
- Need for special review
- Date the claims arose, their connection and notification
Sureties and joint debtors
- General framework
- The protection of the debtor does not extend automatically to third parties
- Need for special review
- Contract, plan, creditor action and recourse
Public claims
- General framework
- Not subject to the same regime as commercial claims
- Need for special review
- Law No. 6183, special restructuring and personal liability
Employee claims
- General framework
- There may be provisions on privilege and exclusion from the plan
- Need for special review
- Type and period of the claim and the ranking under İİK Art. 206
This table is general guidance. The concrete result is determined by the content of the moratorium and confirmation decision, the provisions of the plan, the basis of the claim and the current legislation.
Legal Work That Can Be Carried Out on This Subject
Map of Creditors, Pledges, Suretyships and Guarantees
Banks, financial leasing, factoring, suppliers, employees, public bodies, shareholders, related parties and claims in dispute are grouped separately. Mortgages, pledges over a commercial enterprise, pledges over movables, account pledges, assignments, suretyships, guarantees, guarantees on a bill (aval) and joint liability relationships are examined.
We determine which debt the security secures, and within what limit it secures the principal, the interest and the accessory claims. The restructuring of the debtor is not confused with the position of the surety, the guarantor on a bill, the third-party pledgor and the joint debtors.
Critical Supplier and Customer Contracts
The contracts that are critical for the continuation of production or service, supply dependency, advance payments, retention of title, set-off, termination, acceleration and security provisions are examined.
The effect under İİK Art. 296 of clauses that provide for the end of a contract because of the composition filing or the moratorium is assessed in the concrete contract. The continuation of the contract is negotiated together with the payment and delivery terms.
Provisional Moratorium and First Measures
When the court finds that the İİK Art. 286 documents are complete, it considers the provisional moratorium and the necessary protective measures; it appoints a provisional commissioner. The provisional moratorium is three months and, under the conditions in the law, may be extended by two months at most.
The announcement of the decision, notifications to the relevant institutions, and its application to enforcement files, bank accounts, checks, employees and critical suppliers are monitored. The provisional moratorium does not mean that all the consequences of the final moratorium have been permanently obtained or that the plan has been accepted.
Effect of the Moratorium on Enforcement and Claims
During the moratorium, the ban on enforcement, the halting of enforcement already started, the position of limitation and preclusive periods, and the limits of enforcement through precautionary injunctions and attachments and the realization of pledges are examined according to the nature of the claim.
The special provisions are taken into account for the first-rank privileged claims under İİK Art. 206, secured claims and the public claims under Law No. 6183. A general, single result such as “enforcement stopped” is not produced for every file.
Company Management and Transaction Permits During the Moratorium
Although the debtor can, as a rule, remain at the head of its business, it is under the supervision of the court and the commissioner. The court may make certain transactions subject to the commissioner’s permission or may restrict the power of management.
For transactions such as creating a pledge, giving a suretyship, transferring real estate or the permanent installations of the business, and gratuitous dispositions, the limits of İİK Art. 297 are examined. Ordinary operations are separated from extraordinary transactions that reduce the assets; no transaction is made before a permission and recording process is in place.
Managing the Process with the Composition Commissioner
Internal persons responsible are designated for providing the commissioner with timely, accurate and verifiable information and for reporting deviations in operations, cash flow, payments, collections, contracts and the plan.
The commissioner’s duty of supervision and reporting does not remove the responsibility of the debtor’s board of directors or the need for an independent legal opinion. Information requests and transaction permits are managed in writing, traceably and within time.
Review of the Final Moratorium and Implementation
The court may grant a one-year final moratorium after assessing whether the composition can succeed. In special cases that present difficulty, an extension of up to six months may be considered, at the request of the commissioner or the debtor, under the conditions in the law.
During the final moratorium, the performance of the plan, talks with creditors, registrations and objections, cash flow and the continuity of operations are monitored. The period is used not only to buy time but to build an offer that can be confirmed and to show that it is workable.
Creditors’ Committee
Taking into account the number of creditors, the types of claims and the pledge position, we examine how the creditors’ committee is formed, the balance of representation, its meetings, and its duties of information and advice.
The committee does not replace the commissioner and does not manage the company. The information to be submitted to the committee is prepared clearly enough for the committee to perform its duty, without spreading trade secrets and personal data unnecessarily.
Read the Effect of the Moratorium by Type of Debt
Under İİK Art. 294, enforcement proceedings under Law No. 6183 are also included in the general ban on enforcement; by contrast, the binding of a public claim by a confirmed plan is a different matter. The exception for enforcement by attachment for the first-rank claims under İİK Art. 206 is assessed separately.
Is the sale of pledged assets always prohibited?
Enforcement against a pledge may start or continue. In addition to the restrictions on safekeeping and sale, the exception is also examined under which the court may permit a sale under the conditions of İİK Art. 295, such as the asset not being used in the plan, loss of value or costly safekeeping.
Date distinction for set-off
In the reference made by İİK Art. 294 to Art. 200–201, the announcement date of the provisional moratorium is important. The dates of the decision, the announcement and the notification are not treated as the same. Mutual records, the origin of the claim and the assignment are documented separately; notifying only the net balance is not sufficient in every case.
New debts and transaction permits
For debts incurred after the provisional moratorium with the commissioner’s permission, İİK Art. 308/c introduces a special arrangement; the consequences, including the possibility of enforcement during the moratorium in the event of default, are assessed. For transactions under İİK Art. 297, the court’s permission is required; the commissioner’s opinion and the consent of the creditors’ committee are required before the decision. The conditions of excessive burden and of obstructing the purpose of the composition when terminating a continuing contract, and the exception for service contracts, are also taken into account separately.
Supplementary Questions
What is the difference between the provisional moratorium and the final moratorium?
The provisional moratorium is the first protection period in which the likelihood of success of the composition is examined after the filing documents have been submitted. The final moratorium is the period, following the court’s favorable assessment of the likelihood of success, in which the determination of the claims, negotiation, voting and preparation for confirmation are carried out.
Are employee claims affected by the plan?
There are special rules for the privileged claims in the first rank of İİK Art. 206. Whether the claim is wages, severance pay, notice pay, leave or another right, its date of origin and the privilege conditions must be examined concretely.
Does a composition remove liability for checks?
No. The legal and criminal consequences of a check are assessed separately with regard to the drawer, the company’s authorized signatory, presentation, funds, the moratorium and the payment plan. A composition filing does not by itself end all the consequences of a check.
Can the company terminate a continuing obligation that is burdensome for it?
The termination, with the commissioner’s opinion and the court’s approval, of continuing obligations that prevent the composition from achieving its purpose may be considered. Special provisions on the termination of service contracts are reserved.