What Is Concordat?
What Is Concordat?
A concordat is a court-approved debt restructuring agreement between a debtor who is unable to pay debts when due—or is at risk of insolvency—and their creditors. Through this system, debts are reorganized according to a specific repayment plan, allowing the debtor to continue business operations under legal protection.
Legally, a concordat serves as an alternative safeguard against bankruptcy. Although it is sometimes informally referred to as a “negotiated bankruptcy,” its primary purpose is not liquidation but rather preventing bankruptcy and ensuring the continuation of the company’s economic existence.
Historically, the term “concordat” was used to describe formal agreements between the Papacy and states. Today, it is recognized as a commercial and legal debt restructuring mechanism.
Main Objectives of Concordat
- To prevent the debtor’s bankruptcy
- To enable the business to continue its commercial activities
- To allow creditors to collect their receivables within a structured repayment plan
- To provide payment relief through partial debt forgiveness or extended maturities
How Does the Concordat Process Work?
The concordat process is a court-supervised procedure consisting of several stages.
1. Concordat Application
The debtor company or cooperative applies to the Commercial Court of First Instance with the required documents. Upon application, enforcement proceedings and seizure actions are temporarily suspended.
2. Temporary Respite
If the court finds the application appropriate, it grants a three-month temporary period and appoints a concordat commissioner. During this time, the debtor’s financial situation is thoroughly examined.
3. Definitive Respite
If deemed suitable, the court grants a one-year definitive period, which may be extended by an additional six months if necessary. During this phase, the restructuring plan is finalized.
4. Creditors’ Approval
The proposed repayment plan is submitted to creditors. For approval, at least two-thirds of the creditors must consent.
5. Court Approval
The plan accepted by the creditors is presented to the court. If the court finds the plan feasible and determines that the debtor has acted in good faith, the concordat is approved.
6. Completion of the Process
If the debtor complies with the agreed terms, the process concludes successfully. If the plan is violated, the concordat may be revoked and bankruptcy proceedings may begin.
What Are the Requirements for Applying for Concordat?
Certain essential conditions must be met in order to apply for concordat:
1. Inability to Pay Debts or Risk of Insolvency
The debtor must be unable to pay debts when due or be under serious risk of insolvency.
2. Good Faith
The court evaluates whether the debtor has acted honestly and genuinely intends to repay debts.
3. Concordat Project
A detailed repayment plan specifying the payment ratio and schedule must be prepared.
4. Financial Documents
Financial statements such as the balance sheet, income statement, list of creditors, debt breakdown, and cash flow projections must be submitted to the court.
5. Request for Temporary Respite
A three-month temporary protection period is generally requested at the time of application.
6. Appointment of a Concordat Commissioner
The court appoints a commissioner to supervise the process and prepare reports.
7. Creditors’ Board Approval
The plan must be accepted by at least two-thirds of the creditors.
8. Court Decision
Once approved by the court, the concordat officially enters into force.
Which Companies Declare Concordat? How Can It Be Learned?
Companies that declare concordat are businesses unable to meet their financial obligations or facing serious financial distress. In Türkiye, companies from various sectors may apply for concordat protection.
Information about such companies can be obtained from the following sources:
- Turkish Trade Registry Gazette
Concordat announcements are published here. They can also be accessed via the official announcement portal (ilan.gov.tr). - Court Decisions
Relevant Commercial Court decisions are announced through official channels. - Official Ministries
Publications from institutions such as the Ministry of Industry and Technology and the former Ministry of Economy may include sectoral information. - Financial Publications and Sector Reports
Economic journals, analytical reports, and financial news platforms closely monitor concordat processes. - Law and Consulting Firms
Professional advisory firms provide updated information and consultancy services regarding concordat proceedings.
