Arrangement with Creditors (chapter 11) : What It Is and What It Is Not

A arrangement with creditors-themed panel chaired by the Dean of AU School of Law, Prof. Dr. İsmail Kayar was held on Wednesday at Altınbaş University Gayrettepe Campus. As far as I could understand from the discussions that took place over the course of the panel, firms still do not have a clear vision about what actions that should be taken regarding bankruptcy protection. I have been told that different courts in different cities make quite various interpretations of the processes of the arrangement with creditors. I was appalled at some of the examples, recent incidents legal experts told us during the panel.

Latest statements by the Minister of Trade as well as negative news on the total number of firms that made arrangement with creditors have caused raised eyebrows. Panellists agreed with the Minister, indicating that the total number of firms that made arrangement with creditors is not as high as people think. They also added that the number was going up because of the “bankruptcy suspension”, currently known as arrangement with creditors, procedures which have been suspended by Emergency Declarations after July 15. Even some of the panellists said, “We should be thankful there are only a handful of firms that are making debt repayment arrangements with their creditors, especially now when Turkey is facing a severe financial bottleneck.

At another meeting I attended in the afternoon, I found out about the firms who did not try to work out an agreement with their creditors, yet have serious repayment problems. The fact that the process for the arrangement for creditors will become more difficult than ever with the introduction of a new bill to the Parliament clearly shows that more and more firms will shut down before even finding the chance to file for bankruptcy protection. From a realistic point of view, I should say that things might get even more complicated with the introduction of new laws considering the presence of problematic cases that cannot even be solved with the existing laws.

“Let’s avoid making honest mistakes while attempting to make things right…”

I also need to mention that some of the panellists were upset that the newly introduced bill does not include any solution to eliminate the problems occurred with the previously passed law. For instance, in the event that a firm files for temporary bankruptcy protection in order to apply for arrangement with creditors, and the bankruptcy decision is made final, the sale of the firm’s immovable properties is subject to court ruling. What if a firm that made arrangement with creditors operates in real estate industry? Normally, firm should sell its immovable properties to pay off its debt, but the laws remain pretty ineffective in such cases.

Another thing that struck me as odd is that Istanbul Courts demand that an asset valuation shall be carried out within a limited period of time, before the final decision for arrangement is made while Ankara Courts rule that the same procedure shall be carried out once the final decision for an arrangement is made. As matter of fact, although Istanbul Courts show the right approach to the matter, I find it quite strange that rulings are made based on different approaches and they vary by city.

Experts who participated in the panel said that a new law on financial restructuring will soon enter into force. I knew about the regulation on financial restructuring but I had no idea whether a new bill was about to proposed to the Parliament.

I think these public panels held by Altınbaş University every Wednesday at Gayrettepe Campus play a crucial role in the making of an enlightened society. The first Wednesday of the month is dedicated to Art and Design, the second Wednesday to Law while we offer you Politics and Diplomacy, and Economics panels on the third and final Wednesday of the month.

Professors Mahfi Eğilmez, Işın Çelebi and I are conducting highly pleasant economics sessions on every 4th Wednesday of the month. Anyone eager to learn and talk about economics will be warmly welcomed!