The primary objective of concordat proceedings is to restructure the debtor’s financial position and allow the continuation of business activities. Filing for a concordat does not automatically terminate an existing contract. However, maintaining a contract may not always serve the best interests of the parties. In such cases, the debtor may unilaterally terminate ongoing contractual obligations that obstruct the objective of the concordat and impose excessive burdens. Unilateral termination is only permitted where the obligation is continuous and impedes the concordat’s purpose. Contracts that do not meet these criteria cannot be terminated solely based on the concordat request.
If the debtor terminates a burdensome contract, the creditor’s intention to maintain the contract cannot prevent the termination. In such cases, any damages suffered by the creditor due to the termination may be included in the concordat project. This ensures the creditor’s interests are not disproportionately harmed by the debtor’s termination of the contract.
Although a creditor cannot terminate the contract solely due to the debtor entering into concordat proceedings, they retain the right to terminate the contract for just cause based on breaches under the Turkish Code of Obligations or the contract itself. If such termination occurs, the creditor may register for the liquid part of their claim within the concordat project. As is known, only liquid claims are accepted for registration in concordat proceedings, and claims requiring specific performance or non-performance are excluded from the concordat project. There is no legal mechanism that allows creditors with non-liquid claims to recover their receivables under the concordat framework. However, in practice, some preventive legal methods may allow inclusion of such claims in the concordat project for the benefit of the creditor.
First, it is necessary to distinguish between cases where a contractually stipulated performance has a predetermined liquid value and those where it does not. If the value of a contractual performance was defined as a liquid claim before the concordat declaration, the debtor remains liable for that claim, and it may be registered in the concordat project.
If the contract does not set a liquid equivalent for the performance obligation, the claim must be converted into a liquid form. One must accept that where the creditor has a just cause for terminating the contract, the amounts paid up until the termination can be considered liquid. However, damages arising from delayed performance, such as liabilities toward third parties or additional costs due to performance by another party, may not be easily quantifiable as liquid claims. In the absence of mutual agreement on a liquid amount, the debtor may dispute the claim, resulting in a contested receivable. In such a case, the creditor must file a lawsuit to have the disputed claim registered in the concordat project.
Additionally, preventive measures may be taken to resolve the process more efficiently. The first and most effective approach is to define, at the time of signing the principal contract, the conditions under which the performance obligation would be converted into a liquid claim in the event of a concordat filing or termination-related damages. In contracts lacking such provisions, an annex protocol may be signed between the creditor and debtor after the concordat filing, which would mitigate potential risks regarding the liquid nature of the claim and the performance obligation. While the concordat commissioner is not legally required to approve every contract signed by the debtor, in practice, approval of such supplementary protocols by the commissioner may serve as a deterrent for future disputes.
In conclusion, although the law does not specifically regulate the rights of a creditor without a liquid claim during concordat proceedings, the inclusion of a liquid equivalent of the performance obligation in the contract allows for its inclusion in the concordat project. Conversely, if no such liquid equivalent is predetermined, the only practical solution for including such a claim in the concordat project is for the debtor and creditor to mutually agree upon and document a liquid equivalent through a protocol.
Selin Su , Managing Associate
Ebrar Turan, Associate
Berfin Sarıhan, Trainee Lawyer