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POSTPONEMENT OF BANKRUPTCY AND ITS CONSEQUENCES IN TURKISH LAW
** Ali Riza OZALP
INTRODUCTİON
Although delaying bankruptcy had existed since the early times in theory, our system of law, it was formally introduced as an institution for the first time in 2003, by virtue and enforcement of the 4949 Numbered Law Amending the Insolvency Act, an arrangement that grants one final chance to equity companies and cooperatives who face hardships in turning debts, before filing right away. By its most widely accepted legal definition, delaying bankruptcy is a formulation for enabling an insolvent equity company or cooperative to avoid from becoming bankrupt, if and to the extent, that its financial positions are improvable. According to Swiss practitioners of law, delaying bankruptcy is not a foreclosure procedure similar to winding up, but should rather be considered a moratorium[1]. The doctrinal approach in our country has elucidated "delaying bankruptcy" in the form of "an institution, which can be invoked, especially when a company or corporation has hope that its financial position can be restored, also with a wider perspective of the macro balances and employment issues in the country and the need for holding other companies harmless against the antagonistic outcomes of liquidation and winding up, to be a measure, inure to the best interests of the national economy [2]". By its most widely accepted legal definition, delaying bankruptcy is a formulation for enabling an insolvent equity company or cooperative to avoid from becoming bankrupt, if and to the extent that its financial position is recoverable. The purpose of delaying bankruptcy has been described as analogous to "the act of ensuring that an insolvent equity company or cooperative continues its activity by staying in the economy and thereby protecting its creditors and contributors against the detrimental consequences of or in connection with its winding up" [3]. As would obviously be conceived from all the definitions brought to delaying bankruptcy, main focus of concern seems to concentrate around two outstanding concepts, namely, the "insolvency" and "hope for becoming solvent". Therefore, it is impossible to please all the parties involved, with an institution that carries the word of "hope". However, elaboration of new arrangements that would add on the functionality of law, while meaning minimal harm to both the debtors and creditors, in any case, leaving nothing in doubt and providing utmost clarity of the processes running for all the parties involved will boost efficacy and prevent abuses. Keeping in mind that business life runs in its own dynamics, the laws governing it should not be expected to remain constant for years. This study explores delaying bankruptcy conceptually at first, and then, evaluates the effects and consequences of ordered suspension of bankruptcy in light of supreme court practices and doctrinal approaches.
A- The Conceptual Framework
As a rule of practice, when an equity company or cooperative reports or ordered to be insolvent, the courts of referral will deliver a bankruptcy order. Nevertheless, if the total liabilities of equity companies and cooperatives are ascertained to be in excess of their total assets by people entrusted with administrative and representative capacities, receivers or upon a creditor's statement, then an order is imposed for bankruptcy without the need for any further proceedings, unless, evidence, in the form of one or more material proposals, is brought by individuals properly holding administrative
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and representative powers and one of the creditors to the effect that the financial conditions of the company may in fact be cured or restored, in which case, motion would be made for delaying bankruptcy. Consequently, two conditions should be met simultaneously, that is, both the debts of the litigant should be in excess of its assets, sufficient to declare it as insolvent and there should be a material and convincing project/proposal that would eliminate the state of insolvency, in order for a bankruptcy status and relevant filing to be delayed. When considered from the viewpoint of its purpose, there are varying doctrinal opinions on delaying bankruptcy. Such opinions all focus on who would benefit from delaying bankruptcy. An opinion suggests that the primary purpose of delaying bankruptcy is to "protect the interests of the company or cooperative involved"[4]. Since delaying bankruptcy depends on the existence of company's or cooperative's ability to recover its financial position, as phrased in the first paragraph, under Section 179 of the Insolvency Act. Here the main intent is to ensure for companies or cooperative mutual societies that their operations are continued. However, with realisation of the main goal, a secondary outcome is yielded as well. Another scientific approach propounds that it is the interests of creditors which are served and protected better with delaying bankruptcy, as they would recover their claims at higher rates than in any typical winding up process. Our system of law gives priority to protection of creditors' rights and interests, by preventing the existing situation for creditors from getting more unfavourable and ensuring that they all receive equal treatment [5]. At this end, public interest and even the individual interests of insolvent companies and cooperatives are of secondary importance [6]. In my opinion, it is essential that the impacts and outcomes of bankruptcy, the final point for financially disabled companies or cooperatives to reach, should be examined in depth for both the debtors and creditors, so that a healthier designation can be made as to whom the process would benefit the most. The term bankruptcy refers to a collective foreclosure procedure which enables liquidation of all the debtor's (in this case the bankrupt's) assets by bodies appointed for the purpose in favour and for best interests of the creditors, by means of which, all seizable wealth of the debtor is spent to covering its outstanding debts. Taking this path, creditors usually recover their claims, not entirely, but only at a certain percentage [7]. In case of a debtor's becoming bankrupt, all its assets are monetised under immediate control and supervision of the trustee of the bankrupt's estate, who distributes the resulting sums to the creditors of the bankrupt company, according to the schedule of order of payments. Accordingly, none of the partners and shareholders of the bankrupt has any valid claims, including disposal rights, appertaining to its corporate wealth and assets, on bankruptcy. Withal, it is of common consensus at the court of law, that certain agreements may self-terminate, on one of its contracting party's becoming bankrupt. The cases recognised for delivering this outcome include the bankruptcy of a lessee or tenant in leasehold [8), attorney agreements [9], current account agreements [10], franchise [11] and leasing (acc. to Sec. 22 of LL)[12] agreements.
As would clearly be understood from all the above, all operations of an entity will cease and all its members (that is, partners and shareholders) be fully deprived of their representative rights and capacities, in case of bankruptcy. Consequently, delaying bankruptcy appears to serve public interest, for it protects both the insolvent equity companies and their creditors against the destructive effects of bankruptcy, in addition to enabling the furtherance of employment by preventing harm to macroeconomic balances.
B- Implications of an Order for Postponement of Bankruptcy
a) From the Standpoint of Enforcement Trails
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The paramount effect of the order is on enforcement trails. The Insolvency Act (IA) literally ceases any enforcement trails previously initiated and already in progress and bans the conduct of any trails including those of public claims under the Law No. 6183, with imposition of an order for postponement of Bankruptcy, under its Section 179/b. Certain exceptions have been made to applicability of this ban for enforcement trails under concern. According to IA Sec. 179/b-II, for claims secured through chattel - property mortgages and commercial enterprise pledges, either new or any existing enforcement trails can take the form of monetisation of the retained sums against the debtor, throughout the period for which bankruptcy is delayed. However, no protective measures can be taken on or sales can take place involving the pledged property, due to or in connection with these trails. Another exception is concerned with workers' claims. IA Sec. 179-b-III excludes Sec. 206 claims from applicability frames of the enforcement trail ban. Therefore, preferential creditors may conduct both anew and existing enforcement trails throughout the period of delay. As a rule of practice, operation of both statutes of limitations which can be paused by an enforcement trail and foreclosures stops, with the standing order (Sec. 179/b-I). Along with introduction of the orders, all enforcement trails initiated before such date and time are paused, but not abolished or abandoned. The enforcement trail ban applies to trails to be newly instigated only. This means that foreclosures attached to readily initiated trails should not be expected to be lifted or removed [13]. The commercial court processing the file for delaying bankruptcy should clearly include all measures it finds appropriate to be taken in this regard in the letter engrossment of its verdict, along with notion of its acceptance of the case. Other than this, no new judgements can be made that extend the coverage of such measures with appropriate evidencing [14]. Before a decision can be made for delaying bankruptcy from the viewpoint of the original claims asserted, the judge may cease all ongoing trails by issuing an injunction. Supreme court awards accede this practice as well [15]. The order for the postponement of bankruptcy has no effect with respect to enforcement trails and procedures to be run for joint debtors and several sureties of the company or cooperative, whose bankruptcy has been delayed. In the absence of a specific arrangement addressing this matter in the law, opinion is derived from practices of the special chamber of the supreme court [16].
b) From the Standpoint of Delimitation of Dispositional Powers of the Debtor
Contrary to the case of bankruptcy, partners, representative and executive committees or executive board will, in principle, continue to exercise their powers on the corporate assets of the equity company or cooperative. However, IA Sec. 179-a-I brings limitations to the dispositional powers exercisable over the assets of the company or cooperative and charges the court with appointing an administrator with court defined authority and reference frames to prevent this and the loss of rights on the part of creditors. Sec. 41/i of the Law of June 1st 2012 No. 6103 on the Effect and Method of Enforcement of the Turkish Code of Obligations has made an amendment to IA Sec. 179/a, which requires that an administrator be appointed by the court immediately after the filing made for delaying bankruptcy, and that the court take all necessary measures for bringing the assets of the company or cooperative under protection, disclose fully the reference and authority frames of the appointed administrator and the petition moved in for delaying bankruptcy with subsequent inscription thereof unto the Register of Companies as per the requirement of IA Sec. 166/2 and charge the administrator with preparing and submitting reports to the court on the progress of improvement of the company at quarterly periods. What becomes obvious with a thorough reading of this law provision is an acknowledgement of the need for the court to take the necessary set of measures to protect the assets of the company or cooperative. Yet, not any clarifications is found
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made as to what these measures might be, or how they ought to be implemented. It is pretty much likely that these measures have been left to the discretionary powers of judges for being determined, as they may vary greatly from one case to another. Generally speaking, these measures include caveats of non-transfer to prevent any future transfers and reassignments of the company's assets, or, subjecting any borrowing or loaning transactions to the approval of the administrator and bringing all transactions of the directors under supervision and approval of the administrator. During the period by which bankruptcy is delayed, the administrator thus appointed acts completely outside the tutelage law and is charged with defending and upholding and balancing, where needed, the interests of the insolvent debtor and its creditors, as well as, of the general public. The office of the administrator is limited to the period by which bankruptcy is delayed and the court always reserves the right to replace or remove the same, if the circumstances so dictate. The court appointing the administrator may entrust all the powers conferred on the company or its officers whether by deed or law to the latter, or, require that the latter's approval or permission be sought for validating any transactions of the executive bodies (Sec. 179/a-II). Mainly, the most important duty of the administrator, even if not clearly specified by the court, is to endeavour utmost care for the avoidance of any reduction in worth or quantity of the company's charged assets, throughout the period by which bankruptcy is delayed [17]. In order to ensure this, it is unquestionable that the administrator would possess the powers to inquire and retrieve information from the company to the business of which he or she has been commissioned, examine its corporate books and accounts and call for expert help or guidance, as and when needed. A company delaying bankruptcy would certainly pursue such activities like entering new agreements, parting in loaning arrangements and hiring labourers /employees, for its economic presence will continue, for the period by which bankruptcy is delayed. Since all the above transactions require authorisation / approval of the administrators, it is essential that the administrator convey his/her guidance and experience to the company on these matters, taking initiatives if and when necessary, to the extent he/she deems useful and that the administrator makes decisions fast in those kinds of transactions as aforementioned and having due regard to the financial and legal structuring of the company, never neglecting or omitting the commercial preferences of the executives or partners of the company.
c) From the Standpoint of the Area of Substantive Law
The order for the adjournment of bankruptcy prevents the insolvent equity company or cooperative from being made bankrupt, which is why, does not imply the same consequences as an adjudication in bankruptcy would. The effects of the order are limited to enforcement trails and debt enforcement law, wherefore no outcomes should be expected at the extent of substantive law. IA Sec. 179 encompasses no provisions about performance of contracts or contractual obligations. In principle, one contractual party's becoming bankrupt will not lead to automatic termination of the contract. These provisions will be enforced in a variety of laws such as the Law of Obligations or Commercial Code, unless a specific arrangement is brought in the context about the effects of bankruptcy on the contract. As the contractor company will maintain its existence as a legal entity throughout the period by which bankruptcy is delayed, the principle of pacta sund servanda will remain in full force and effect, with both the contractor and its client still being bound by the contract and continuing to perform their respective obligations arising thereunder. Delaying bankruptcy does by no means any effect on rights and obligations of the contractor prescribed or envisaged by the law of obligations. Since the contract entered by and between the parties will remain in full force and effect at its fullest extent, the penalty provisions included therein for
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defective manufacture and workmanship in goods or short or late deliveries of services will remain fully enforceable throughout this period. Consequently, as delaying bankruptcy would not have any constructive effect as contrary to the case of bankruptcy, it will neither render any formerly entered arrangements null and void, nor have any effect on the contents or extent of these arrangements. The only exception to this fact is the failure of the contractor to fulfil its contractual obligation to perform Works within times permitted for the purpose in the contract, during the period by which bankruptcy is delayed, which will entitle its contractual counterpart (i.e. job-owner, employer or client) to terminate the contract for default, according to Sec. 473 of the Law of Obligations [18]. Provisions similar to termination clauses exist normally in paragraph 20/1 of a typical form of Contract prepared for use in Public Procurements and under article 48 of the Building Construction Works General Specifications. Accordingly, credit-debt swaps, rights of retention and transfer and blockage operations are not brought within the scope of injunctions, through an order for adjournment of bankruptcy [19]. In addition, action can be instituted or proceeded for the returning of goods forming subject of leasing contracts or for termination of such contracts [20].However, since, the body competent for enforcement of the award will be the debt enforcement offices, even if a contract is terminated by the court and as no foreclosure can be administered in respect of a company which has delayed bankruptcy, the return deliveries of the goods that form the subjects of leasing contracts will not be afforded until the period by which bankruptcy is delayed expires or unless the company is made bankrupt. On the other hand, in our best opinion, it would be appropriate for the court which tries the claim for termination of a leasing contract at first hand to adjudicate, with consideration of the facts that no directors, officers or partners of the company would be able to make payments of lease fees without approval of the administrator, who will not approve each and every payment request brought to his/her discretion, as part of carrying out his/her primary duty to establish and maintain a balance between creditors, when the lease fees remain unpaid resulting in default, which falls within the period by which bankruptcy is delayed. This also applies to contracts covering matters other than those specified above, signed by the insolvent company, where termination may not be prevented by a court rendered injunction order [21]. Since it is of common practice to impose delimited injunction orders by courts to companies who have filed a formal request for delaying bankruptcy, no orders can be imposed in the form of injunctions by way of restraining the ability of the job-owners, employers or clients to monetise and forfeit the letter guarantees submitted to them in the outset of business as securities of the contractors' performance under contracts [22].
d) From the Standpoint of Public Claims
Public claims are public revenues that the state provides through administrative procedures resulting from its liability or debt relations (Kumrulu 1981, p. 655). By another definition, public claims are those claims which bear a privilege and character arising from the state's being a public entity and its rights as a sovereign (Tuncer 1998, p. 148).If a claim qualifies to be a public debt, then the debt is enforced and collected based on state's power, according to public law. Because public debts are preferential debts, which differ from private debts both in nature and character, Law of Jan 1st 1955 N. 6183 was promulgated to introduce prerogative procedures and special methods of foreclosure in securing such debts. The Insolvency Act Section 179 provides that "no enforcement trails can be performed during the period by which bankruptcy is delayed and this restriction applies to public debts covered by the Law numbered 6183". Within the framework of the terms laid down in the Public Notice for Collection of Debts published with sort number 1 in the OJ of June 30th 2007,
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No: 26568 with reference to the 2004 Numbered Law, if an order is imposed for delaying bankruptcy of a public debtor, no trails will be initialised by collection offices as long as that order stands. Yet, as adjournment of bankruptcy has not the force and effect of initiating a bankruptcy procedure, delay interest will continue to be applied on the public claims. This cited phrase is an arrangement to ensure uniform practices in collection of debts with public nature. Accordingly, no follow-up procedures will be conducted for public claims subject to operation of 6183 Numbered Law and any previously initiated procedures will be discontinued throughout the period by which bankruptcy is delayed. Nonetheless, Sec. 2, Law No. 5766 makes an arrangement concerning Sec. 22/A titled "Transactions which may not be carried out before public claims are paid and Responsibilities of the Transactors" inserted to Law No. 6183 [24]. Ministry of Finance has been devised with competencies on this matter, as well. Besides, the recognised owners of rights have been charged with the "obligation to solicit and obtain certificates showing the state of their affairs in respect of overdue debts from the debt collection offices acting under the Ministry of Finance", in time of payments they seek to receive at cashiers of those public agencies which are subject to the Public Procurements Act No. 4734. The term "overdue debt", as used in the context of the Notice in question, has been defined to purport the public claims outlined in the referred section, including, annual income, annual corporation, value added, special consumption, special communication, banking and insurance transactions taxes and corporation tax withholdings and advance taxes and tax loss fines, delay penalties and interests applicable thereto. Likewise, a contractor's debts linked with social security contribution and administrative fine payments are recovered through sums offset from its progress payments according to the Social Security and General Health Insurance Law No. 5510, while the overdue social security contribution obligations of the contractor, if any, either cause retention of progress payments due to the contractor until they are paid actually, or, lead to deductions of sums in just the amount needed to recover the same, in time of progress payments effected to the contractor, according to the regulations in effect, which seek for payment and issuance of a discharge certificate. These practical applications aimed at collecting tax and social security contributions obligations continue for contractors delaying bankruptcy. Otherwise, the contractor will not be able to receive its rightful contractual claims unless it consents to collection of its due obligations right at the source, in time of payments effected to it. In our opinion, the practices in concern contradict with the true purpose of delaying bankruptcy, let alone, violating the Insolvency Act and the equality principle of the Constitution. Because collection of a debt at source is also a form of debt follow-up procedure, achievable for public claims, only.
e) From the Standpoint of Workers' Claims
With an evaluation of the matter from the standpoint of recovering Workers' claims, an exception to the ban for the conduct of enforcement trails has been provided in IA Sec. 179/b-III, which states, "Receivable claims of 1st paragraph of IA Sec. 206 may be enforced by way of distraining property". IA Sec. 206 Par. 1 clarifies the preferential debts recoverable from an insolvent debtor to be "A) workers' severance and notice pays due within the last year before the date of petition in bankruptcy and in respect of their services under an employment contract, also including those they have become entitled to, upon termination of their worker statuses, as a result of bankruptcy; B) the Employer's debts against facilities and societies which have gained legal personality after being constituted for the purpose of establishing and maintaining provident funds or other organisations of mutual assistance for workers; and, C) All kinds of maintenance debts accruing in the last year before the date of petition in bankruptcy, which arise from family law and require to be met by payment in
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specie". Here, it has also been noted that the last year before petition in bankruptcy should be deemed as the last year before a decision is made for delaying bankruptcy (Turk, p. 322). The 1-year period in question does not commence with filing of an application for delaying bankruptcy or upon an injunction order rendered before the main verdict. Supreme Court awards on the matter conceded this argument, as well [25]. The new clause inserted in the context of Law No. 4447 by virtue of the 5763 numbered Law on June 28th 2009 has extended the scope of coverage of the wage guarantee fund, to include companies in the process of delaying bankruptcy. According to the referenced law, a worker will receive payments from the wage guarantee fund up to the total sum of 3 consecutive monthly salaries that he or she is entitled to receive according to his/her employment contract at base salary, provided that he or she has actually worked at the same workplace within the last year preceding his/her employer's becoming unable to pay for its debts and save that such payment would never exceed the upper threshold of the worker's allowable income and earnings. Here, the phrase "the last year preceding his/her employer's becoming unable to pay for its debts" should be deemed to take the date on which the court has rendered its decision for delaying bankruptcy as point of reference and not the date of any court rendered injunction order or the initialisation of the filing (application) process. An entitled worker may personally apply to the Wage Guarantee Fund, which will pay, totally at its sole discretion, him/her the sums he/she deserves to receive, by way of mail order. The Wage Guarantee Fund's liability to pay covers the wage entitlements of workers only and severance and notice pays are excluded. Yet, a worker or staff member in retired status, who has rightful claims receivable from a company in the process of delaying bankruptcy, may not make advantage of the fund. A worker or staff member who has worked at the workplace of a company put in the process of delaying bankruptcy but quitted job upon being unable to receive his/her wage may benefit from the wage guarantee fund. There are also scholars who criticise the situation brought by initialisation of trails against an insolvent company for the count of its wage debts against workers, while all trails have been banned for the period by which bankruptcy is delayed, based on the argument that is does not coincide with the very purpose of delaying bankruptcy [26]. It is both a conscientious and reasonable approach, also in my opinion, to protect the receivable claims of workers, the most dynamic players of the improvement project, who rely exclusively on the wages they expect to receive to make a living and recognise for them a pre-emptive, preferential right to receive their claims at the first instance. However, when there are multiple workers' claims sued against favour of the indebted company, which do not only consist of wage or wage-like payments, but also cover severance and notice pays, annual leave payments and overtime payments, in addition to court process fees and partial attorney charges, which altogether present a huge bulk, this will clearly affect the process of delaying bankruptcy adversely for the insolvent company. For this reason, I am of the belief that it would be a more convenient and viable option to give priority to workers under direct supervision of the trustees in bankruptcy and the courts throughout the period by which bankruptcy is delayed, to arrange a payment schedule with proportionate provisions made in the inventory balance prepared by the trustees as well as in the insolvency balance and make severance indemnity payments from each and every progress payment or income earned during the time to advance thereupon either in full and at once or at fixed instalments, rather than having all receivable claims recovered in full and at once preferentially, through warranted distraints or foreclosures on goods and effects of the insolvent company,
f) From the Standpoint of Precautionary Distraints
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The order for adjournment of bankruptcy does not prevent any precautionary distraints from being ruled against the debtor. The precautionary distraint may be imposed but goods distrained may not be taken under court's custody. The time count for the period specified in the procedure for enforcing the order of distrainment shall not start till the end of the period by which bankruptcy is delayed [27]. Our system of law has adopted precautionary distraint to be an institution which assists, ensures and protects the conduct of the enforcement procedures and a safeguarding measure which is capable of being transformed into an enforcement trail process and taken the enforcement trail starts as per the schedule or a motion filed, rather than an enforcement trail itself. The rightful payee of a due pecuniary claim that has not been secured with an IA Sec. 257 pledge or lien (DE 2003-4949/59) may instruct precautionary distraint upon the moveable and immovable property as well as any other rights of the debtor retained by an appointed trustee or a third party. The court may be asked to issue a precautionary distraint order for an undue debt, only if: 1- The debtor has not any usual place of residence; 2 - The debtor attempts or arranges for or, absconds, removes or conceals any of its property for the purpose of evading payment of calls (DE : 2003-4949/59) or, for the purpose, carries out fraudulent transactions in violation of the creditor's rights. If one envisions precautionary distraint as a debt assurance process and not as an enforcement trail and interprets its capability of being conducted during the period by which bankruptcy is delayed, a contradiction appears. The charged goods and effects of an insolvent company have been precluded by the Court from being transferred and reassigned to any 3rd parties during the period by which bankruptcy is delayed, which has appointed a trustee to protect the company's assets and restrain dispositional exercise thereon by the shareholders. However, the order issued and trustees appointed have been processed into the Register of Companies which holds entries of the insolvent company, wherefore, any possibility of the company to abscond, remove or conceal property or carry out fraudulent transactions in violation of the rights of the creditor has already been eliminated by the Court processing the file for delaying bankruptcy and such fact properly disclosed in the Commercial Registry Journal. No requirement for security is sought for precautionary distraint according to IA Sec.259. At this end, a creditor attempting to distrain upon goods and effects of a company which has postponed its bankruptcy procedures would eventually succeed in its attempt if it has the power to lodge the collaterals it is expected to provide, becoming a preferential debtor in regard to other creditors who may not have applied for the same due to lack of funds to meet the collateral requirements and consequently, in which case, observance of the principle of equality inter among the creditors would not be arguable. Especially when considering that an able creditor of an insolvent company in the process of delaying bankruptcy like a financial organisation or banking institution would experience no difficulty in provisioning the collateral sought, the party which precautionary distraint benefits becomes clear.
CONCLUSİONS
Delaying bankruptcy is a tool, the very purpose of which is to ensure that equity companies and cooperatives stay in the national economy under supervision of judges in certain cases, where there is strong evidence to believe that an improvement in financial status can be achieved, instead of filing for bankruptcy right away, every time they fall in a financial crisis, with reference to the broad influence the latter have on the national economy. At the same time, one may not state that creditors fall in a much worse situation along with delaying bankruptcy than they would face, in the case of filing it right away.Therefore, in order to let postponement of bankruptcy achieve its intended goals, legal texts should be arranged bearing in mind that business life is dynamic and measures
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concerning the trails be made more pleasant and indisputable. Recently there has been a boost in the number of incidents of filings for delaying bankruptcy especially in the construction and contracting industry, one of the main drives of the national economy, which increase would without doubt have adverse effects on a large community group, given the sector's role to lead growth in the economy and employment rates of the country, the government's efforts resulting in augmentation and diversification of the projects that concern this industrial discipline, which creates many tributary industrial sub-disciplines and the huge amounts of loans made available by financial organisations to corporations engaged with this business discipline. Companies with large business volumes and employment provide a considerable amount of progress payments throughout the period by which the bankruptcy is delayed, while endeavouring efforts to persevere the improvement projects. However, insolvent corporations may not be able to undergo a successful bankruptcy delaying process for a number of reasons, such as the deduction of public claims from sums due and payable to them in time of progress payments, in combination with, workers' compensation claims moved to courts by multiple workers whose employment contracts terminate, the inability of the employing entities to correctly assess and interpret the impacts of delaying bankruptcy, disputes arising out of or in connection with the contracts and failure of the trustees in bankruptcy to take initiatives right on time, effectively and efficiently, and, unfortunately the business lives of these companies end in bankruptcy, as a result. The second paragraph of Article 48 of the Constitution provides that "The State shall take measures to ensure that private enterprises operate in accordance with national economic requirements and social objectives and in security and stability". The principle of legal security, which is one of the main constituents of the principle of state of law, requires that rules of law be made clear, understandable and foreseeable in order to protect individuals against subjective treatments and uncertainties. Consequently, it should be wrong to expect the institution of delaying bankruptcy to operate with doctrines, since it shall be the state who will ensure that the private enterprise stays in national economy.
REFERENCES
* Atalay, Oguz, "Insolvency and Postponement of Bankruptcy, 2007, Postponement of Bankruptcy, The Bankers' Magazine, 2003
* Kuru, Baki-Arslan, Ramazan, "The Law of Debt Enforcement and Bankruptcy", Yetkin Publications, 2006
* Oztek,Selcuk, "Delaying Bankruptcy", The Bankers' Magazine Edition 53 Postponement of Bankruptcy, Arikan Printing & Publishing, 2007
* Pekcanitez, Hakan, "Postponement of Bankruptcy", Istanbul Bar Periodical, 2005/2 * Tercan, Erdal, "Effects of Bankruptcy on Contracts", 1996
* Bilgen, Mahmut, "Bankruptcy, Postponement of Bankruptcy, Composition, Trial Procedure / Justice/2012 Supreme Court 19th Civil Chamber Awards
* Turk, Ahmet, "An Evaluation of the Latest Amendments to the Insolvency Act concerning Equity Companies' and Cooperatives' Becoming Bankrupt or Delaying Bankruptcy and Suggestions" ( DEUSL V.6.Ed.1/2004)
** Ali Riza Ozalp/ Economist- Specialist on Law of Economics
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[1] The Debtor to require a extended payment period, upon declaring that it is unable to pay whole or part of its debts due to insolvency.
[2] Arslan/Bankacilar
[3] SC.19thCC File 2005/448- Award 2005/3753.
[4] Atalay/Insolvency p.66, Pekcanitez/ Postponement p.323
[5] Oztek/Postponement pp.21,22
[6] Oztek/Postponement p.21
[7] Kuru/Bankruptcy p.
[8] C/O §290/1,TC/O §370
[9] C/O §397/1,TC/O §513
[10] TCC §96/1-3, TCC §98
[11] TCC §121, TC/O §513, C/O §397
[12] In the absence of a clause providing that the contract would survive in case of bankruptcy, if continued performance of the contract is appraised to be inure to the benefits of both parties, the contract may be retained in full force and effect, by obtaining collaterals from the Bankrupt's Estate.
[13] SC 19th CC File 2005/2033- Award 2005/3760.
[14] SC 19th CC File 2005/6649- Award 2005/10006(2).
[15] SC 23rd CC File 2012/207- Award 2012/650…. Despite the requirement for imposition of actions enumerated under IA Sec. 179/b in the final verdict, if there is reasonable worries about the impossibility of attainment of the objective of the petition in the course of proceedings, necessary and sufficient measures can be taken in the form of interim decisions. Nevertheless, the complaint should meet the conditions specified in the third paragraph, Section 390 of the Civil Procedure Code and legitimacy of the claim should be founded on presumptive evidence.
[16] SC 19th CC File 2004/11750- Award 2005/2789; SC 19th CC File 2004/3011- Award 2004/8154(2) [
17] Turk-Insolvency, p.358
[18] Bilgen M./Postponement of Bankruptcy p.987
[19] SC 19th CC F:2006/5226- A: 2006/7364 3/17/2015 11/11
[20] SC 19th CC F:2010/6534- A:2011/773
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[21] SC 19th CC F:2007/1716- A:2007/5872
[22] SC 19th CC F:2005/10903 – A:2006/845
[23] Section 3, Part 4 titled "Trail by way of Bankruptcy and Composition with Creditors"
[24] Published on the OJ of 06.06.2008 No. 26898 (bis)
[25] SC 12th CC F:2008/16657- A:2008/20589, SC 12th CC F:2008/2740- A:2008/5615
[26] Atalay, Oguz, Postponement of Bankruptcy, Prof. Dr. Baki Kuru Armagan, p. 85.
[27] SC 11th CC F:2010/2698- A:2010/3432
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Postponement Of Bankruptcy And Its Consequences In Turkısh Law
