Restructuring and insolvency law in Turkey

1. What is the primary legislation governing insolvency and restructuring proceedings in your jurisdiction?

Insolvency and restructuring proceedings are mainly governed by the Turkish Enforcement and Bankruptcy Law No. 2004 (“EBL”) and the Turkish Commercial Law No. 6102 (“TCC”). 

2. How are insolvency proceedings or restructuring proceedings initiated?


Insolvency proceedings are initiated by the filing of a petition for insolvency by the debtor or a creditor with a competent commercial court of first instance. A creditor may file an insolvency petition before an insolvency office following a failed debt recovery procedure relating to the insolvency, or certain conditions laid down in Article 177 of the EBL are met.


Restructuring proceedings are initiated as follows:

Composition (concordato)

A debtor who cannot pay or is at risk of not being able to pay its debts on time may file a petition for composition (concordato) to free itself from possible bankruptcy by submitting to the Commercial Court, at the time of the petition, certain documents to prove its insolvency and the prospects of success of the composition project.


Restructuring by settlement may be initiated by an application by the distressed trader to a competent commercial court of first instance together with a pre-negotiated restructuring project which should have been approved beforehand by a simple majority of the number of creditors concerned by the project and whose claims represent at least two thirds of the debts of the company concerned by the restructuring.

In principle, a debtor can be subject to bankruptcy proceedings for non-performance of its monetary debts (either ordinary or linked to negotiable securities) in the context of bankruptcy proceedings initiated by a creditor. However, there are also specific conditions which are set out below:

  • When a stock company has more liabilities than assets
  • If half of a debtor’s assets have been seized, the remaining assets are not sufficient to cover other debts, and
  • When a debtor applies for bankruptcy by informing the court of its inability to pay its debts.

4. Which different types of restructuring / insolvency proceedings exist and what are their characteristics?


There are no different types of insolvency proceedings.


Composition (condordat) 

A restructuring method for any debtor who is unable or unlikely to be able to pay its debts when due. In this respect, the condordat procedure offers this debtor the possibility to pay its debts or avoid possible bankruptcy by extending the deadline or waiving it under Article 285 of the EBL. The EBL also regulates the possibility of post-bankruptcy concordat and concordat by way of abandonment of assets


A restructuring method for stock companies and cooperatives that are unable to pay their debts when due or whose claims are insufficient to cover their debts, or where there are indications that the company concerned is subject to one of the conditions set out in Article 309/m of the EBL.

5. Are there several types of creditors and what is the effect of a difference?


During the payment phase of insolvency proceedings, creditors will be paid according to the rank listed below, unless their loans are secured by a pledge:

First stage:

  • employee severance and redundancy payments were due 1 year before the opening of the insolvency proceedings
  • demands of institutions established to set up pension funds (and the like) for the benefit of employees
  • maintenance payments were due 1 year before the opening of the insolvency proceedings

Second stage:

  • claims originated from a trust relationship

Third stage:

  • claims that are designated by law as privileged

Fourth stage: 

  • other requirements than those listed above. 


The same order also applies to composition proceedings. 

6. Is there any obligation to initiate restructuring / insolvency proceedings? For whom does this obligation exist and under what conditions? What are the consequences if this obligation is violated?

The TCC provides for two phases for the Board of Directors: 

  • if half of the total capital of the company and the statutory reserved capital as shown in the latest annual balance sheet is unfunded, the Board of Directors shall immediately convene a General Meeting and propose reform measures for the company that would cover the losses incurred in the short term and ensure the sustainability of the company; and
  • if there are indications that the company is indebted, the Board of Directors prepares an interim balance sheet of active assets on the sustainability of the company and their possible sale prices. If the interim balance sheet shows that the productive assets of the company are insufficient to cover the claims of the company’s creditors, the Board of Directors submits a legal notice to a commercial court of first instance in whose district the company’s head office is located and files for bankruptcy of the company.    

If the directors fail to take the necessary measures, they may be involved in not only civil liability but also criminal liability. Accordingly, under Article 345/a of the EBL, executives (including directors) who are empowered to manage and represent the company may, at the request of one of the company’s creditors, serve a prison sentence of 10 days to 3 months if they fail to apply for bankruptcy of the company even though the relevant conditions are met.

7. What are the main duties of the representative bodies in connection with restructuring / insolvency proceedings?

The Board of Directors is obliged to take the necessary measures to ensure the continuity of the company and its activities within the framework of the ‘duty of care’ and ‘loyalty’ established by the TCC. Accordingly, the directors should exercise all due diligence in order to cope with the relevant financial setbacks and to safeguard the financial position of the company. Directors are expected to develop reformatory solutions in accordance with the principle of ‘good faith’.

When insolvency proceedings are opened, the representative bodies of a legal entity involved in insolvency proceedings lose their power to bind and represent the company. Such representative bodies are, however, involved in reorganisation proceedings.

9. What are the main duties of shareholders in connection with restructuring / insolvency proceedings?

A shareholder has no direct obligations in relation to restructuring/insolvency proceedings. However, the principle of limited liability can be disregarded in certain situations where the principle is abused (‘piercing the corporate veil’). 

10. Are the shareholders of a company involved in restructuring / insolvency proceedings?


The shareholders of a company may participate in insolvency proceedings as creditors, but not as decision-makers. 


Shareholders are involved in restructuring proceedings to approve or reject the plans for the restructuring proceeding prepared by the Board of Directors. 

11. Is a solvent liquidation of the company an alternative to regular insolvency proceedings?

Unless it is absolutely necessary to apply for insolvency proceedings (e.g. in case of over-indebtedness), the general meeting of a company may decide to liquidate the company instead of initiating insolvency proceedings. 

The institution of composition (concordat) is widely used in Turkey as a last resort to avoid insolvency before and after the opening of bankruptcy proceedings.

13. What is the average success rate after completed restructuring / insolvency proceedings?

There is no publicly available information on the success rate of completed insolvency/restructuring proceedings, but success rates are higher in composition proceedings. 

Picture of Döne Yalçın
Döne Yalçın
Managing Partner Turkey
Arcan Kemahlı
Senior Associate