Definition and Purpose of Concordat
Concordat is regulated under Articles 285 and 309 of the Enforcement and Bankruptcy Law. The definition of concordat is not explicitly provided in the Enforcement and Bankruptcy Law. In the concordat doctrine; concordat is the liquidation of debtors' debts by agreement with their creditors within the conditions stipulated in the law (Art. 285-309/I). A payment plan proposed by any debtor or creditors who may request the debtor's bankruptcy is defined as a collective enforcement mechanism, softer compared to bankruptcy, aimed at the equal satisfaction of creditors, realized through acceptance by a qualified majority of creditors subject to the concordat and approval by the court, with the purpose of ensuring that creditors receive a more efficient share than in bankruptcy, enabling the continuation of the debtor's business and the preservation of employment opportunities, while allowing the debtor to be discharged from part of their debts or restructure the terms of payment. As can be understood from the definitions given in the doctrine, the purpose of concordat is to ensure the continuation of the business activity of the debtor whose financial balance is impaired and to ensure that the creditors receive more receivables than the amount of receivables they will receive in case of the debtor's bankruptcy. At the same time, it provides employment due to the continuation of the business activity and thus serves the public interest.
Perpetual Debt Contracts
In terms of time, debt contracts are classified in the doctrine as contracts with immediate performance, contracts with continuous performance and contracts with periodic performance. We will limit ourselves to examining continuous performance contracts, which are the subject of this article. Continuous performance contracts are contracts that require the parties to fulfill their performance obligations on a continuous basis. In continuous performance contracts, the performance is subject to a period of time. The 8th Civil Chamber of the Court of Cassation also mentioned this issue in one of its decisions: "In addition, since the performance of the care debtor in the contract of maintenance until death is subject to a period of time, it is a contract that creates a perpetual debt". Perpetual debt contracts are, as a rule, terminated by termination. Termination is a legal transaction that has prospective consequences. Examples of perpetual debt contracts include subscription agreements, energy supply agreements and lease agreements.
Termination of the Perpetual Debt Contract by the Creditor during the Concordat Process
According to Article 296 of the Bankruptcy and Execution Law, "The continuation of contracts to which the debtor is a party and which are significant for the continuation of its business operations is essential, regardless of whether the counterparty to the contract is affected by the concordat project. Provisions in such contracts stipulating that the debtor's application for concordat constitutes a breach of contract, justifies termination, or accelerates the maturity of the debt shall not be enforced if the debtor applies for concordat. Even if no such provision exists in the contract, the contract cannot be terminated solely on the grounds that the debtor has applied for concordat." Provisions in these agreements stipulating that the debtor's request for concordat will constitute a breach of contract, be considered as a just cause for termination or make the debt due shall not be applied in the event that the debtor applies for concordat. Even if there is no such provision in the contract, the contract cannot be terminated on the grounds that the debtor has applied for concordat. As can be seen in the provision of the law, the request for concordat by one of the parties does not give the other party to the contract the right to terminate the contract for just cause, and even if there are provisions to this effect in the contract, such provisions are null and void. Introduced in 2018, the purpose of this regulation is to ensure that the debtor continues its activities during the respite period, recovers its deteriorated financial balance and pays its debts in accordance with the concordat project. However, within the grace period, contracts may be terminated automatically due to the expiration of the contract period, the contract may be terminated for the other party due to the occurrence of justified grounds for termination, or it may be terminated by agreement of the parties.
Termination of the Perpetual Debt Contract by the Debtor during the Concordat Process
The amendment to the Swiss bankruptcy and enforcement law dated January 1, 2014 stipulates that "The debtor may at any time terminate perpetual debt contracts that prevent the realization of the purpose of the concordat with the permission of the commissioner, provided that the debtor pays the other party the compensation arising from the termination. The compensation claim asserted by the other party due to termination will be considered as a receivable subordinate to the concordat project. Special provisions regarding the termination of employment contracts are reserved." Parallel to Article 297/a, with the amendment made in our Enforcement and Bankruptcy Law Law on 28.02.2018, Article 296 was amended as follows: "The debtor may terminate the excessively burdensome permanent debt relations to which he is a party and which prevent the concordat from achieving its purpose, with the consent of the commissioner and the permission of the court, at any time. The compensation to be paid within this framework shall be subordinate to the concordat project. Special provisions regarding the termination of service contracts are reserved With this regulation added to the Enforcement and Bankruptcy Law, an extraordinary termination right is granted to the person within the concordat grace period. The extraordinary right of termination set forth in the provision of the Law may only be exercised in excessively burdensome perpetualdebt relations that prevent the concordat from achieving its purpose. The purpose of the concordat, as mentioned above, is for the debtor to continue its business activities and thus to pay debts to creditors according to the concordat project. For example, if the factory where the business activities are carried out is rented and the rent imposes a burden on the debtor in a way that prevents the success of the project, the contract may be terminated. However, if the rent is high but not at a level that prevents the project from being successful, and if the moving costs of the business and the rent for the new location are high, the termination should not be granted. According to Article 296/f. 2 of the Bankruptcy and Enforcement Law, in the event of termination of the contract, all damages incurred by the other party must be compensated by the terminator. The compensation receivable arising from the termination of the contract shall be subordinate to the concordat project. It is stated that the extraordinary termination right recognized in the provision of the law shall not be applied in service contracts. Service contracts are employment contracts between the employer and the employee.
OUTCOME
Article 296/2 of our Bankruptcy and Enforcement Law, which was introduced with the amendment made on 28.01.2024, is a very positive provision for the success of the concordat. While the existence of provisions in the contracts of the person who will apply for concordat that the contract will be terminated in case of application for concordat is preventing the applicant from applying for concordat, the regulation has paved the way for the applicant to apply for concordat. By ensuring the continuity of the contracts, the business will be able to continue its activities and thus generate income and pay its debts in accordance with the concordat project. At the same time, it is provided that the contracts that create burdens that prevent the success of the concordat can be terminated with the appropriate opinion of the commissioner and the permission of the court.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
