When a company in Turkey is under heavy debt pressure but still has a viable core business, bankruptcy is not always the best (or only) outcome. Concordat in Turkey (konkordato) is a court-supervised restructuring mechanism designed to give the debtor time and legal protection to negotiate a payment plan with creditors. For many businesses, concordat is the difference between survival and forced liquidation—if used early and prepared properly.
This guide explains the concordat procedure in Turkey in a practical way: what concordat is, when it makes sense, the typical steps, the biggest risks, and what management should do to maximize the chances of success.
1) What Is Concordat in Turkey?
A concordat (konkordato) is a legal restructuring framework where the debtor proposes a plan to pay creditors under new terms (such as installments, reduced amounts, or extended maturity) and seeks court protection during the negotiation and approval process.
In practice, concordat aims to:
- prevent chaotic enforcement actions while a plan is built,
- stabilize cashflow,
- preserve business operations,
- create an organized creditor settlement framework.
Key point: Concordat is not a “free pause.” It is a structured process with reporting obligations and credibility requirements.
2) When Does Concordat Make Sense?
Concordat is usually considered when:
- the company is temporarily illiquid but operationally viable,
- creditor enforcement threatens to shut down operations,
- a realistic restructuring plan exists (not just hope),
- management can provide transparent financial reporting.
Concordat is often not suitable when:
- the business model is no longer viable,
- there is no credible plan or forecast,
- records are weak and financial transparency is impossible,
- value has been moved out of the company (credibility loss).
3) Concordat vs Bankruptcy in Turkey (Practical Distinction)
- Concordat is designed for survival through restructuring.
- Bankruptcy is more aligned with liquidation logic when survival is no longer realistic.
If there is still value to preserve—customers, contracts, workforce, production capability—concordat can protect that value while debts are reorganized.
4) The Typical Concordat Process in Turkey (High-Level)
While each case differs, concordat generally follows these practical phases:
Step 1: Preparation (The Most Important Phase)
Before filing, the company must prepare:
- a realistic restructuring proposal,
- financial statements and cashflow projections,
- a creditor map (who is owed what),
- operational plan showing viability.
Practical note: Most failed concordats fail because preparation is weak.
Step 2: Application and Temporary Protection Period
Once filed, the process may move into a protection stage that aims to stabilize the company while evaluation begins. During this stage:
- enforcement pressure is reduced,
- financial transparency becomes critical,
- the company’s actions are scrutinized closely.
Step 3: Review, Supervision, and Creditor Engagement
The company’s situation is examined and the plan is evaluated. The debtor must show:
- credibility of financial data,
- feasibility of the payment plan,
- operational ability to continue.
Creditor communication is strategic here: creditors must believe the plan is better than liquidation outcomes.
Step 4: Voting/Approval Dynamics (Where Applicable)
Creditors are engaged in the approval logic of the plan. The debtor must build enough support that creditors see concordat as the best recovery path.
Step 5: Implementation and Compliance
After approval, the company must follow the plan strictly:
- make payments as promised,
- keep reporting discipline,
- avoid actions that undermine creditor trust.
Concordat is successful only if it is executed like a controlled restructuring project.
5) The Biggest Risks in Concordat (What Usually Goes Wrong)
A) Unrealistic Cashflow Forecasts
Over-optimistic projections destroy credibility. Creditors and supervisors quickly detect “hope-based” plans.
B) Weak Records and Informal Accounting
If invoices, contracts, and records are messy, transparency fails, and the process becomes unstable.
C) Creditor Distrust Due to Past Behavior
If creditors suspect:
- preferential payments,
- asset stripping,
- related-party value transfer,
they often resist the plan aggressively.
D) Operational Collapse During the Process
Some companies lose customers and suppliers during concordat because counterparties fear non-payment. Managing communication and supply chain stability is critical.
6) Best Practices to Increase Concordat Success Chances
- prepare a conservative cashflow plan (stress-tested)
- map creditors precisely and engage key creditors early
- stop value leakage and related-party transactions
- build “crisis governance” (approval and payment controls)
- maintain strict tax/SGK discipline during the process
- document every major decision and payment logic
Concordat success is largely about discipline and credibility.
7) What Directors/Managers Should Do During Concordat
Management should:
- switch to formal decision-making and documentation,
- implement payment approval controls,
- avoid preferential payments to insiders,
- keep transparent reporting,
- maintain evidence trails for all actions.
A concordat process increases scrutiny. The cleaner your governance, the stronger your position.
FAQ
How long does concordat take in Turkey?
It depends on complexity, creditor structure, and plan feasibility. Cases with clean records and credible forecasts progress faster than cases with poor documentation.
Does concordat stop enforcement actions?
Concordat is designed to provide legal protection that reduces enforcement pressure while the plan is evaluated and negotiated, subject to process rules and court decisions.
Is concordat suitable for foreign-owned companies?
Yes, foreign-owned companies can use concordat if they operate in Turkey and meet the procedural and credibility requirements.
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