August 2, 2016
Ban on Postponement of Bankruptcy petitions during state of emergency
The state of emergency in Turkey came into effect following the Turkish Grand National Assembly’s approval, published in Turkey’s official gazette on 21/07/2016.
During a state of emergency, the Council of Ministers is entitled to issue executive orders (kanun hükmünde kararname) limiting certain rights and freedoms in order to reestablish public security and order, as well as to take certain extraordinary measures listed under the State Emergency Law Numbered 2935.
The Council of Ministers has issued two executive orders, Executive Order Numbered 667 and Executive Order Numbered 668, respectively on 23/07/2016 and 27/07/2016 which are limited to restoring public security and do not include economic measures so far.
On 31/07/2016 a new Executive Order Numbered 669 (“EO669”) has been published in official gazette which includes a prohibition for postponement of bankruptcy petitions during the state of emergency period according to article 4 of EO669.
“Postponement of Bankruptcy
ARTICLE 4 – (1) A petition for postponement of bankruptcy in accordance with article 179 of Execution and Bankruptcy Law Numbered 2004 and Dated 09/06/1932 shall not be filed by capital companies and cooperatives during the state of emergency period. Such demands shall be rejected by courts.”
Postponement of Bankruptcy is a reorganization tool which is being used by over-indebted capital companies and cooperatives whose assets do not meet its liabilities. Companies in this scope provide an improvement project and demand protection of the company before the court. In case of an approval of demand by the court, no proceeding can be initiated against the company and any initiated proceeding will stay during the postponement period. (Please consider the exception for the receivables of employees and debts secured by a pledge or mortgage) The postponement period is 1 year and can be extended to 4 years.
This ban on postponement of bankruptcy will only be effective for the petitions filed during the state of emergency period. Thus any petition filed before 21/07/2016 should not be affected by EO669 and the stipulated regulation should not be interpreted as affecting all bankruptcy postponement petitions filed and awaiting before the courts.