What are the requirements for liquidation procedures? Are any organizations expressly excluded from such operations?
Under the Turkish law, a bankruptcy judgment can only be made against merchants or individuals subject to merchant provisions. The following are subject to bankruptcy under Article 18 of the Commercial Code:
- collective companies;
- commandite companies;
- joint stock companies;
- commandite companies with share capital;
- limited liability companies;
- foundations and associations operating a commercial enterprise in order to achieve their goal
- institutions and corporations established by the state, a special provincial administration, municipality, village or other public legal entity, for the purpose of being managed or commercially operated in accordance with the private law provisions pursuant to their own laws of establishment
What are the key methods used to liquidate an insolvent corporation under your jurisdiction, and what are each main features and requisites? Are there any variations between voluntary liquidation and compulsory liquidation?
Bankruptcy is the main way to liquidate an insolvent business. Voluntary and involuntary liquidations have similar implications. A business may also be liquidated in structure proceedings with property allocation. A business may also be liquidated in structure proceedings with property allocation.
How are winding-up procedures formally authorised?
Specialized commercial courts make bankruptcy rulings. The beginning of liquidation is specified in the date and hour judgment. The bankruptcy court notifies the order. The bankruptcy office immediately notifies land registry, trade registry, customs and postal offices, Turkey's Banks Association, regional chambers of commerce, business chambers, stock exchanges, the Capital Market Board and other appropriate authorities.
The bankruptcy office also publishes the decision in:
- a national newspaper with circulation in excess of 60,000
- a local newspaper at the debtor’s centre of main interest
- a trade registry gazette
How do liquidation practices affect existing contracts?
In general, contracts are not terminated immediately after one party's bankruptcy. The law states that one party's bankruptcy shall cancel the following extraordinary agreements:
- usufructuary lease agreements
- attorney agreements
- commission agreements
- agency agreements
- life annuity agreements
- ordinary partnership agreements
- current account agreements
For other contracts, beginning bankruptcy liquidation can have significant effects apart from termination, and this should be measured in terms of each agreement. For example, under the Bond Code, if a party goes bankrupt, the other party must refrain from performing its obligations until its performance is secured. Therefore, if a bankruptcy administration does not provide protection, the other party can terminate the agreement. Insolvency administrations are entitled to continue the agreements in favor of bankruptcy estates, but they are not obliged to do so.
What is the standard timeline for liquidation procedures?
The Compliance and Bankruptcy Law allows a six-month period to complete liquidation procedures. Nevertheless, compliance court may expand this. In practice, liquidation processes can be lengthy, and annual liquidation periods are extended.
Role of liquidator
How is the liquidator appointed and the extent of his / her powers and responsibilities?
Liquidation is usually performed if the debtor's assets exceed liquidation costs. Ordinary liquidation is managed by the bankruptcy administration, consisting of three persons appointed by the enforcement court from six nominees nominated by each creditor at the first meeting of creditors. The bankruptcy administration's powers and obligations are limited to those specified in law enforcement and bankruptcy. In this way, the directors ' authority and responsibility for unstated matters remains under the Compliance and Bankruptcy Act. Bankruptcy administration would require lenders to sell the property individually by arbitration rather than sale.
What is the scope of court intervention in liquidation procedures?
The courts are interested in nominating bankruptcy administrators, hearing concerns about bankruptcy administration activities, closing liquidation and hearing appeals to terminate bankruptcy decisions.
What is the nature of lenders ' intervention in liquidation processes, and what measures are they prohibited to take against the insolvent company during the proceedings?
Creditors can not launch new debtor proceedings during bankruptcy liquidation. The secured creditors, however, could continue selling the pledged assets.As per the law, creditors are entitled to:
- nominate the bankruptcy administration
- authorise the bankruptcy administration to sell by way of negotiation
- decide on the composition offer of the bankrupt and suspend the liquidation
- decide on the continuation of litigations
- object to the rankings determined by the bankruptcy administration
- make complaints regarding the transactions of the bankruptcy administration
Creditors can also continue the settlement process not pursued by bankruptcy administration.
Director and shareholder involvement
Where interested are directors and investors in liquidation procedures?
The debtor's directors and investors must disclose the debtor's assets to the bankruptcy office and comply with its demands. Directors and investors ' authority and obligations extend only for matters over which bankruptcy administration has no control or obligation. Shareholders can also demand the rescission of the bankruptcy judgment while paying debts.