The Situation of Execution Proceedings Without Judgement In The Period of Concordat 18 December 2018
As is known, the amendments made by the “The Law Amending the Execution and Bankruptcy Law and Other Certain Laws” no.7101 published in the Official Gazette and entered into force in 28.02.2018 are mostly related with concordat. As a result of new regulations, postponement of bankruptcy was abrogated and concordat was remained in force as an only and final cure to be proceeded by debtor before bankruptcy in the law of reconstruction (or rehabilitation).
The amendments made by the Law no. 7101 have turned concordat into an alternative execution procedure that envisages the negotiation between debtor and creditor under the Court’s supervision in order to reconstruct the debtor’s financial situation. As a result of failure in the “postponement of bankruptcy” institution the legislator formed concordat with the number of regulations in order to reconstruct the debtor’s financial situation in the framework of good faith and to ensure creditors to collect their credits. Furthermore, a number of provisional measures have been brought for protecting debtor’s financial situation. This situation can be exemplified as follows:
- Debtor’s power of disposition is not abolished
- Remedies cannot be resorted except exceptional cases during the process of concordat.
- Decisions on provisional measures and provisional seizure are not applicable during the process of concordat.
One of measures brought for protecting debtor is the prohibition regarding the initiation of execution proceeding against the debtor. As stated in Article 294/1 of the Execution and Bankruptcy Law (“the Law”) with the heading of “Consequences of Definitive Period for Creditors” the execution proceedings including that is originated from Law on Procedure of Collection of Public Credits, shall not be initiated against the debtor and previously initiated execution proceedings will be suspended during the period of concordat. Since Article 288 of the Law regulates that consequences of definitive period are applicable in terms of provisionary period, the execution proceedings shall not be initiated and previously initiated execution proceedings will be suspended both in provisionary period and definitive period.
Therefore, legislator aims to protect assets of debtor for the success of concordat project and to prevent the decrease of the debtor’s assets by the initiation of the execution proceedings during concordat period and/or maintaining execution proceedings that have previously initiated. However many problems have been experienced on this matter since the amendment on concordat is so new and the uniformity in the practice have not been established yet. In particularly, most of problems in this matter are related to status of existing execution proceedings, also there are doubts about whether the provisions of the law and judgements will be sufficient on this matter.
As mentioned above, execution proceeding may not be initiated during concordat period, previously initiated execution proceedings will be suspended. This issue is clearly stated in Article 2974 of the Law. However, it is not so easy to say that this clearness is the same for the delivery, announcement and consequences for the creditors of decision on provisionary period.
After Article 288/1 of the Law stated that consequences of definitive period are also applicable to provisionary period, second paragraph regulates that “Decision on provisionary period shall be announced in the trade registry gazette and official announcement portal of the Press- Announcement Agency and this decision shall be immediately reported to land registry directorate, commercial registry directorate, tax office, custom and tax offices, the Bank Association of Turkey, Participation Banks Association of Turkey, local chambers of commerce, chambers of industry, stock exchanges, Capital Market Board of Turkey and other required institutions.”
Aforementioned provision aims to notify the third persons, especially creditors of debtor subjected to the concordat project, regarding the decision on concordat periods. In practice, it is debatable that what extent this goal has been achieved. Although, the decisions of provisionary or definitive period are become effective from the date of given, creditors could obtain period decisions only from official announcement portal of the Press-Announcement Agency, announcement made by trade registry of commerce or announcements that are made to other institutions. Moreover, in practice these announcements are published with delay. Also, the process between the date of announcement and date of decision causes a lot of problems since the creditors and third persons have no news about the period decisions but the decisions are effective during this period.
Although some solutions such as notification of judgements to creditors are thought as an alternative, this alternatives have not been preferred with purpose of not burdening expense of notification for all creditors to debtors who have already been in economic difficulties and ensuring that debtor does not avoid from already costly concordat institution.
However, in question situation causes problems for creditors who commence execution proceedings for collecting his credits without knowing the decision on concordat in the process between the date of the court order and the date of announcement. Where the execution proceedings are commenced by creditors in this period, debtors cease the execution proceedings by presenting decision on concordat period. Also, relevant proceedings are requested to be canceled before the Execution Courts by applying means of complaint against the directorate of execution’s actions. These requests are generally accepted and the execution proceedings are rendered invalid by the courts. However, this situation creates problem regarding the expenses of execution proceedings made by both creditors and debtors.
The biggest dilemma shows itself in here. While execution proceedings that is commenced after the decision on period delivered by commercial court of first instance in compliance with the concordat file, are need to be voided under the Article 294 of the Law, the good faith of creditor who does not know or are not be able to know this decision, are not protected in accordance with this provision. As a result, it is seen that the effect of the announcement obligation on the creditors regulated by same provision is decreased.
In case the debtor applies to way of complaint before the Execution Court, litigation expense might be born and this situation might create extra burden on creditor.
Besides, there is an ambiguity on that what will be consequences of advance fees that are collected from creditors as per Article 29 of Act of Fees no.492, whereas the relevant provision regulates that amount of advance fees would be decreased from fees that are paid in the end of the execution process, where the creditor is forced to apply for court, the advance fee would be returned, there is no provision to regulate that advance fees will be returned in case of annulment of execution proceedings. It is possible that this situation creates problems especially in execution proceedings that are commenced for large sum of money since the advance fee is proportional.
From our standpoint, taking the base of the announcement date in terms of the results of decisions on period especially for execution proceedings seems to be more beneficial for protecting the balance of interest of both the creditor and the debtor. In this way, concordat project can be facilitated to succeed by suspension of the execution proceedings against debtor in this process while the good faith of creditor is protected.
In conclusion, while the debtor, who has economic difficulties, has intention to reconstruct own economic status by applying for concordat; expecting the debtor sustains execution proceedings against him is incompatible with the realities. Likewise, it is not consistent with law of rehabilitation that creditor initiate execution proceeding against debtor for credits which are already registered in concordat file by abandoning possibility of negotiation with the debtor. At this point the legislator has preferred to protect the debtor and enacted relevant prohibitions on execution proceedings.
Nevertheless, it is obvious that there are set of malfunctions in this procedure. In particular, condition of execution proceeding which are initiated in period between date of decision on period and date of announcement are required to be decided in compliance with the equity. At this point, since it is required to establish the balance of interest between the creditor and debtor, both court and the legislators need to iron out the kinks for the success of the concordat and prevention of the forfeit of creditors in this process.
Türkçe Versiyonu İçin
http://www.kasaroglu.av.tr/tr/Konkordato-Muhleti-Icerisinde-Ilamsiz-Icra-Takiplerinin-Akibeti
