Concordats may prevent bankruptcies in Turkey: Experts
Engin Esen - ISTANBUL
“Having the debt payments delayed, individuals and institutions focus on their main operations and they increase income by accelerating production,” lawyer Sevda Şahin İhsanoğlu has told Hürriyet Daily News.
The number of companies seeking legal protection from creditors has hit 846 since the Concordat Law replacing the regulation for suspension of bankruptcy took effect in March, Turkish Trade Minister Ruhsar Pekcan said on Dec. 13.
But some experts put the number of struggling companies higher with regards to ongoing decision-making processes of courts.
“We have seen that 1,028 companies have applied for declaration of concordat in eight months. As of today, 257 of them were concluded, with many of them being rejected,” Alper Bulur, a lecturer at Hacettepe Law Faculty, said on Nov. 26.
İhsanoğlu also stressed that only equity companies apparently insolvent were able to apply for the suspension of bankruptcy, whereas every company, business firm or even individual have the right to apply for concordat. Thus, the declaration of concordat may provide the last exit before crossing the bridge to bankruptcy.
“For a debtor, being put under an armor of concordat does not mean an escape solely. These businesses should be provided special credit lines with lower interest rates by financial institutions for a successful process,” she said, also suggesting tax cuts and incentives for protection against exchange rate turmoil.
“A concordat project should be prepared in accordance with economic, financial and other objective criteria. The progress in the project should be executed under supervision of a concordat commissioner and reported to the court on a monthly basis,” İhsanoğlu added.
But the number of concordat declarations can be misleading, economy analyst Ahmet Yeşilada warned in an article on Dec. 19.
“Every company applying for concordat is under debt stress. Some concordat applications have been rejected by courts, deciding on bankruptcy instead,” he said, pointing that many other executives reach out to banks to restructure loan repayments.