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Legal Concepts of Restructuring in Turkey

Legal Concepts of Restructuring in Turkey

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The slowdown in global growth and the Turkish economy as well as the depreciation in the Turkish lira in 2018 created financial instability and payment difficulties for companies, in particular regarding foreign currency debts.

Most companies hit technical bankruptcy thresholds and the previously-common postponement of bankruptcy, which saved companies from ultimately becoming bankrupt, was abolished in March 2018.  So what legal concepts are left to companies needing to restructure their debts? 

Restructuring Mechanisms Introduced in Turkish Legislation

1. Concordato

Amendments were made to the concordato regime in early 2018, and postponement of bankruptcy was abolished. Following these amendments, concordato became the most popular restructuring mechanism, and more than 1500 concordato applications were filed in 2018.

Concordato allows debtors who are in liquidity shortage to pay their debts by extending the due dates or reducing the debt amounts to evade a potential bankruptcy. This mechanism gives the debtor the opportunity to propose a project to restructure its debts to be approved by the court, and gives time to the debtor to realize this project by temporarily stopping possible enforcement proceedings by the creditors.  

Debtors should apply to the court with a preliminary concordato proposal along with necessary documents to obtain a temporary period of three months to assess the project, which can be extended for a maximum period of an additional two months. At the end of this period, if the court is satisfied with the plan and reaches the conclusion that the concordato project will be successful, then the court can authorize a one-year fixed period (which can be extended for a maximum period of an addiitonal six months) during which the concordato project should be negotiated with and approved by creditors. The approval of the project requires the vote of (i) half of the registered creditors and receivables or (ii) one fourth of the registered creditors and two thirds of the receivables. The concordato project should be approved by the court as well. 

2. Amicable Restructuring

Amicable restructuring requires that some or all of the creditors who will be affected agree to an “out of court” debt restructuring plan. The affected creditors are defined as creditors whose receivables, rights, or interests will be restructured. If the out of court restructuring plan is approved by at least half of the creditors and the voting creditors holding at least two-thirds of the entire receivables, then the restructuring agreement is submitted to the court for approval. The ability to include various creditors and different auditing options during the restructuring provides flexibility to create an effective plan. Please note that any creditors who are outside the scope of the amicable restructuring are free to continue to exercise all of their creditor rights, except that if such an amicable restructuring qualifies as a default under the contracts executed between those creditors and the company, such default provisions are not applied.

3. Financial Restructuring under Banking Regulation and Supervision Authority Legislation

Regulations issued by Turkey’s Banking Regulation and Supervision Authority and the Restructuring Framework Agreement signed and put into force by the credit-finance organizations in September 2018 provide another extrajudicial mechanism for restructuring of those payment obligations to credit institutions which cannot be honored due to a temporary imbalance of income and expenses. Debtors who owe more than TRY 100 million to credit institutions will be eligible to benefit from this Agreement.

The restructuring methods which may be deployed are flexible and include extending maturity, providing additional facilities, refinancings, reduction or waiver of receivables, etc. Credit institutions may also demand that debtors take specific actions including capital increase, public offering, and discontinuation of activities which are not related to the debtor’s main activity.

If the restructuring agreement is signed by credit institutions consisting of a two-thirds majority of the total debts, then the restructuring agreement becomes binding on all other creditors. However, to be able to sign the restructuring agreement, creditors should expect that the debtors would regain the ability to repay the debts after the restructuring. The debtor and its shareholders are required to make certain undertakings and commitments to ensure that the such ability is preserved. 


For companies in financial instability, multiple restructuring mechanisms are made available under Turkish law. In practice, companies may also simply negotiate the restructuring of their debts or finance documents with their creditors. Restructuring of debts is expected to be a fundamental highlight of 2019 as well.

By Begum Durukan Ozaydin, Founding Partner, Durukan + Partners.

This Article was originally published in Issue 6.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.