With the announcement of The Banks Association of Turkey (“TBB”) dated 14.10.2019, it is stated that a Restructure Framework Agreement has been issued in order to benefit the Financial Restructuring (“FR”) implementation for large scale companies that have a credit debt of at least 25 million TL. With the announcement of TBB dated 08.11.2019, it is announced that hereby the application entered into force for small scale companies that has a credit debt under TRY 25 million.
Purpose and Content of the Framework Agreement
The implementation of financial restructuring aims to ensure that companies having difficulty paying their debts can easily repay their debts and achieve economic growth by restructuring their debts with Turkish banks, factoring companies, leasing companies, and finance companies through framework agreements and contracts. For this purpose, companies within the scope of this application will be able to conclude individual contracts in accordance with the FR Framework Agreement.
- Required Criteria for The Small-Scale Companies Covered By This Implementation:
- There shall not be any decree of bankruptcy given regarding to the company that will benefit from the Financial Restructure;
- According to the financial situation assessment made about the company that will benefit from FYY, a conviction should be formed that the company will gain the ability to repay.
(The aforementioned assesment shall be made by a joint study of the debtors’ assets within and outside the scope of theri balance sheet and following this study; a Financial Restructuring Contract (“FRC”) may be entered into for the subject debtors with an affirmative vote and consent of at least two Creditor Institutions and two-thirds in terms of the amount of receivables of the Creditor Institutions. Upon such assessment, a Financial Restructuring Contract (“FRC”) may be entered into for the subject debtors with an affirmative vote and consent of at least two Creditor Institutions and two-thirds in terms of the amount of receivables of the Creditor Institutions.)
Accordingly, companies that meet the restructuring requirements will be able to apply to one of the three highest creditor organizations that sign the Framework Agreement with an application and a letter of commitment in accordance with the format specified in the Annex to the Framework Agreement by adding additional documents necessary to ensure the restructuring.
The first application should be filed to the largest Creditor Institution, and if it is not accepted by it, to the second and third Creditor Institutions respectively.
If the third Creditor Institution does not accept the application either, then the Financial Restructuring process terminates before commencing.
Creditor Institutions, shall notify the debtor in writing about non-acceptance of its application within no later than 5 business days thereafter.
The debtor whose application is not accepted can repeat its application only after the end of six months following the date of first application.
The Creditor Institution Accepting the Application (“CIAA”) will, within no later than three business days starting from the date of the acceptance of the application, give information to the Creditor Institutions having outstanding receivables from the relevant debtor, as declared by the debtor, and having signed the Framework Agreement, and request them to declare their corresponding receivables and claims and if any, their security, according to a calculation to be made in accordance with the method set forth in this Agreement.
If the application is accepted, the Creditor Institutions will, within maximum 10 (can be extented 5 days if necessary) business days thereafter, submit to the CIAA their opinion on whether or not the restructuring will be realized over the preliminary proposal regarding the restructuring submitted by the CIAA to them.
If a Creditor Institution does not send a feedback to the CIAA within 10 business days that Creditor Institution shall be deemed to have expressed a positive opinion thereon. In the case of receipt of consents of at least two Creditor Institutions and of two thirds majority in terms of amount of receivables of the Creditor Institutions about the preliminary proposal submitted by the CIAA, the CIAA will, within no later than ten business days thereafter, draft and prepare the FRC according to the determined restructuring parameters, and send the same to the Creditor Institutions for signature. Thereupon, the Creditor Institutions will, within no later than 5 business days, sign the FRC submitted to them, and send it back to the CIAA. Thus, the Financial Restructuring process is completed positively. The process terminates if the required majority cannot be reached about the preliminary proposal submitted by the CIAA.
Legal nature of the Financial Restructuring contract to be concluded:
This contract is subject to private law and does not invalidate any other agreements that the Creditor Entities have concluded with any Foreign Credit Institution or International Institution regarding the receivables subject to Financial Restructuring and which are valid as of the relevant date. The requirements of the convention are stated in the FR Framework Agreement.
Settlement of Disputes Arising From Financial Restructuring Contracts:
Any disputes arising from the failure of the creditors to fulfil their obligations arising from the Framework Agreement will be resolved by the Board of Directors of the Banks Association of Turkey.
Duration of Financial Restructuring Agreement
The Framework Agreement shall apply to Financial Restructuring Contracts to be signed by 19.07.2021.
Legal Outcome of The Conclusion Of Financial Restructuring Agreement
If the application of the company applying for financial restructuring is accepted, the creditor shall not be able to commence execution proceedings against the debtor for his / her receivables, continue execution proceedings against his / her current debt, open new proceedings and resort to other legal means. However, it should be stated that due to the statute of limitations and the lapse of time , the creditor organizations may take action concerning the cases that would lead to loss of rights. It should be stated that as a result of legal proceedings initiated by any creditor organization prior to the date of application, in case a judicial sale day is determined; or a lawsuit regarding the termination of tender is still on-going; or a commitment is given by the debtor regarding the debt; or a lawsuit regarding the action for annulment is still on-going, the aforementioned proceedings will not be affected by Financial Restructuring.
The relevant public announcement text can be found at the link below;
The full text of the framework agreement can be found at the link below;