In the following article we address the use of standardized “Framework Agreements” – prepared by the highly-regarded Banking Association of Turkey[1] – in debt restructuring negotiations[2]. The use of this relatively new restructuring tool has been instrumental, it is fair to say, in providing at least temporary financial relief to hundreds of Turkish companies operating under the weight of crushing debt loads, the result, for the most part, of Turkey’s recent economic woes[3]. Because of this, many viable and productive companies, which otherwise faced liquidation, have been able to continue their operations and thrive.

When used in appropriate circumstances, we have found Framework Agreement-based restructuring to be quite effective, as well as being popular – and, we believe, for good reason – with our clients. For example, since coming into force, ASC Law has represented both debtors and creditors in successful restructurings, using the Framework Agreement procedure, totalling nearly five-billion Dollars.

Although the decision regarding the use of this procedure should be made only after thorough analysis of all the relevant facts and law, being aware of this important restructuring tool, along with having a working understanding of its operation, is essential for all businesses doing business in Turkey[4].


The Turkish economy, already stagnant for years, continues to suffer under a nearly decade-long depreciation of its currency, coupled, more recently, with the blow of Covid-19. Since 2013, for example, the Turkish Lira (“TL”) has dramatically weakened, from slightly less than 2 TL/US$1 to, presently, just shy of 9 TL/US$1[5]. During this same period, Turkey’s per capita income has dropped, according to World Bank, from its all-time high of US$12,615 in 2013, to only US$8,538 in 2020, close to a 33% decline[6].

Faced with this systemic, and prolonged, economic weakening, Turkey amended its Bankruptcy Law in 2018 to provide for a modified “postponed of bankruptcy” procedure, aka the “Concordatum”, whereby a Turkish company facing temporary, but serious, financial difficulties is able to seek protection from its creditors under the auspices of a Turkish Court[7]. Pursuant to this procedure, for example, creditors can be kept at bay for nearly two years, providing the parties an opportunity to seek a negotiated restructuring.

As useful, and widely used, as Concordatum has been, it requires the considerable involvement of already overwhelmed Turkish Courts, leaving both creditors and debtors vulnerable to these slow, and often unpredictable, decision makers[8]. Concordatum also leaves debtors burdened – often oppressively, and for extended periods of time – by Court-appointed Trustees charged with overseeing the debtors’ operations.

An alternative procedure – which focuses on debt held by “financial institutions”[9], and involves the use of standardized “Framework Agreements” – was also the subject of legislation passed in 2018[10]. The Framework Agreement procedure was, and is, aimed to address, among other things, several of the perceived shortcomings of the Concordatum procedure. Most importantly, the procedure all but eliminates the involvement of Turkish Courts, while doing away with third-party oversight of debtor operations.

The Standardized Framework Agreements, and the Financial Institution “Signatories”

As mentioned above, the Turkish Parliament passed legislation, in 2018, whereby the Banking Association of Turkey (“BAT”) was charged with preparing a standardized Framework Agreement for use in debt restructurings, subject to the final approval of the Turkish Banking Regulatory and Supervisory Authority (the “BRSA”). The efforts of BAT, with the BRSA’s approval, resulted in the creation, in 2019, of not one, but two standardized Framework Agreements[11].

One of these two Agreements, the “Large-Scale Financial Restructuring Framework Agreement”, is for use with regard to restructuring of the debts exceeding 100 million TL. The other Agreement, the “Small-Scale Financial Restructuring Framework Agreement”, is used for debt amounts less than 100 million TL.

The final, crucial step was securing the agreement, of a critical mass of Turkish financial institutions, to abide by the Framework Agreement terms, both during restructuring negotiations and with regard to any resulting restructuring agreements. All but a handful of these institutions signed on to the terms. The list of those who did – the “Signatories” [12] – includes all significant Turkish financial market players, and more.

Initial Indications of the Efficacy of the Framework Agreement Procedure

Since the Framework Agreements were finalized, according to BAT data, between October 2019 through August 2021 successful restructurings using the “Large-Scale” Framework Agreement have totalled more than 100 billion TL (approximately US$11.5 billion). Between November 2019 and August 2021, “Small-Scale” Framework Agreement restructurings totalled around 700 million TL (nearly US$80 million)[13].

BAT data also indicates something akin to a “rate of success” of those using the Framework Agreements. According to this data, of the 720 firms seeking relief under the “Large-Scale” Framework Agreement, 373 subsequently entered into restructuring agreements. With regard to the “Small-Scale” Framework Agreement, the numbers are less impressive, with only 59 of 144 negotiations started under it successful.

The “Standstill Process”, e., “Safe Space”, Created by the Framework Agreements

The two Framework Agreements include a series of provisions, which must be complied with by parties when using the Framework Agreement procedure. Compliance with these provisions is intended to create a protective umbrella – a confidential “safe space”, if you will – under which the parties can attempt to negotiate debt restructurings. This safe space is referred to as the “Standstill Process” in the Agreements[14].

One of the most important of these provisions is that creditors must agree to refrain, for a “reasonable” period of time, from making any effort to collect on the outstanding debt in question, such as initiating collection proceedings, or continuing the prosecution of those already pending, or seeking to foreclose on security interests they may hold[15]. At the same time, debtors must agree to refrain from, generally speaking, incurring any further debt, or debt-like obligations, and/or from selling, or otherwise encumbering, their assets[16]. Certain exceptions apply, such as, for example, permitting debtors to use “checks, promissory notes and drafts” needed for “ordinary fields and lines of business operation”[17].

The Framework Agreement Procedure

  1. Debtor’s Application and Letter of Undertaking

To initiate the Framework Agreement procedure, the debtor company must first submit to its three largest creditors – the “Applied to Creditors” – an Application and Letter of Undertaking, the forms of which are included as attachments to the Framework Agreements. As part of these, the debtor is to provide a detailed description of its financial condition, including providing a complete list of its financial institution creditors, along with a detailed proposal for the restructuring of its debts. Once the Application, and Letter of Undertaking, are submitted, the debtor’s obligation – to refrain from, among other things, incurring any further debt, or debt-like obligations, and from selling, or encumbering, any of its assets – takes effect[18].

  1. Notification to other Creditors, the Creditors Consortium, and the Feasibility Report

Next, the Applied to Creditors are to notify the debtor’s other financial institution creditors of the submission of the Application, after which the Applied to Creditors assemble a “Creditors Consortium” – the creditors’ decision-making body – which must include creditors holding at least two-thirds of the total debt in question[19]. Once formed, the Creditors Consortium arranges for the preparation of a Feasibility Report, usually done by one of the “Big Four” accounting firms, in which the debtor’s proposed restructuring plan is to be analysed. The purpose of this analysis is to determine whether the debtor has the financial wherewithal, if restructured as the debtor proposes, to satisfy its debt obligations[20].

  1. The Restructuring Negotiations

If the Feasibility Report concludes the debtor plan is indeed feasible – as is, or with certain modifications – and Creditors Consortium agrees[21], the restructuring negotiations can begin. These negotiations are similar to those during ordinary restructuring transactions, and cover such matters as new repayment schedules, events triggering prepayment, the adjustment of interest rates, currency conversion and whether new loan facilities are to be utilized. If the negotiations are successful, the creditors and debtor enter into a restructuring agreement, which can be enforced in Turkish Courts like any other contact[22].

According to the Framework Agreements, the Creditors Consortium is to, within 90 days of the Application date, conclude, or not, a debt restructuring agreement with the debtor. This period can be extended for another 90 days by agreement of creditors holding at least two-thirds of the subject debt. Also, according to the Framework Agreements, if no agreement is reached within this time period – whether 90 days, or 180 days by creditor agreement – the debtor may file a second Application, which further extends the period of time within which the parties may conclude a restructuring[23].

The Advantages of the Framework Agreement-Based Financial Restructuring

Framework Agreement-based financial restructurings provide several meaningful advantages to the participating debtors and creditors, including, among others, the following.

  1. Provides a “Safe Space”, e., the “Standstill Process”

As discussed above, the Framework Agreements can fairly be said to provide a confidential “safe space” – and one without the involvement of the Courts or third-parties monitors – during which the debtors and their financial creditors can attempt to negotiated a restructuring of the subject debt. For example, during this Standstill Period, a debtor has several important protections from actions against itself and its assets, including among others:

  • No new enforcement proceedings can be initiated against the debtor by its creditors.
  • Save where to do otherwise would result in irreputable damage to a creditor’s rights, existing enforcement proceedings are to be stayed.
  • No steps negatively impacting the rights of one creditor vis-à-vis another may be taken.
  • No other legal proceedings related to the debts subject to the restructuring negotiations can be commenced or, if already commenced, continued by creditors against the debtor.
  1. The Restructuring of All Debts with Financial Institution “Signatories”

When a restructuring agreement is negotiated under the umbrella of one of the two Framework Agreements, and includes, as parties, creditors whose aggregate lending constitutes at least two-thirds of the debtor’s total debt, all non-party financial creditors – provided they have previously agreed to abide by the terms of the Framework Agreements, i.e., the “Signatories” discussed above[24] – are, generally speaking, obliged to honour the terms of the restructuring with regard to the debt they hold.

  1. Tax Benefits

Restructuring transactions completed pursuant to a Framework Agreement are provided certain meaningful tax benefits, such as, among others, exemptions from the Turkish Stamp Tax and its Banking and Insurance Transactions Tax, as well as from other charges specified in the relevant legislation.

  1. Protection from Embezzlement Charges

Financial restructuring transactions often include, among other things, significant write-offs of outstanding loan principal, as well as non-negligible reductions in applicable interest rates, actions which, theoretically, exposing the restructuring parties to criminal embezzlement charges. The legislation enacting Framework Agreement-based debt restructuring, however, specifically exempts those participating in such restructurings from liability for the crime of embezzlement[25].

  1. Settlement of Disputes, and Panel of Referees

Finally, the Creditors Consortium is entitled to apply to BAT for the “settlement of disputes” arising from the failure of other Consortium members to fulfil their obligations, whether it is an alleged failure during restructuring negotiations or related to any resulting restructuring agreement.

Following such an application, BAT is to constitute a three-member “Panel of Referees” charged with resolving the disputes. Any decision by the Panel of Referees must be supported by a majority of its members, i.e., a minimum of two, and its decisions are binding on all parties.

About ASC Law

The İstanbul based ASC Law, founded in 2001, is a 60-plus attorney law firm, with 10 Partners and approximately 50 non-Partners. ASC Law is one of Turkey’s most respected law firms, with, among others, top-tiered Banking and Finance, Debt Restructuring, Corporate, Commercial, M&A and Dispute Resolution practices. Further information can be found on our website, ASC HUKUK.

[1] The Banking Association of Turkey, founded in 1958, is a professional organization to which all deposit, development and investment banks operating in Turkey are obliged to join. See

[2] This debt-restructuring tool was the subject of the Regulation on Restructuring of Debts owed to Financial Sector passed by the Turkish Parliament in 2018 (as amended in 2019).

[3] The use of Framework Agreements, in this context, is not entirely new in Turkey. For example, during two serious economic crises in Turkey in the early 2000s, Framework Agreements prepared by the Banking Association were also used to facilitate the restructuring of the debts of business experiencing temporary financial difficulties.

[4] Surprisingly, an “overview” of restructuring and insolvency in Turkey, prepared just this year by a highly-regarded local firm, neglected to mention the use of the Framework Agreement tool.



[7] Enforcement and Bankruptcy Law (Law No. 2004), Arts. 285-309.

[8] Unfortunately, given the volume of matters before them, these Courts, and the Experts they rely upon, often make their decisions hastily, and many times without full consideration of the competing interests of all parties.

[9] The term “Financial institutions” includes not only banks but also leasing/factoring companies and certain other entities providing financial services. Of note, in this regard, while in theory non-financial creditors can join in the restructuring negotiations, i.e., with the consent of a specified number of the financial creditors, our experience has been that non-financial creditors rarely join or, more accurately, are rarely allowed to join, these negotiations.

[10] See Banking Law (Law No. 5411), Provisional Art. 32 (to expire on 19 July 2023) and Regulation Amending Regulation on Debts Owed to the Financial Sector, both passed in 2018, with subsequent modifications.

[11] Updated just months ago, each of the two Framework Agreements is now 18 pages in length, with 15 Articles. English versions can be found on BAT’s website. The Banks Association of Turkey – Framework Agreements on Financial Restructuring ( (under “Framework Agreements for Financial Restructuring” tab).

[12] A full list of the financial institution “Signatories”, for both the “Large-Scale” and “Small-Scale” Framework Agreements, can be found on BAT’s website. The Banks Association of Turkey – Framework Agreements on Financial Restructuring ( (under “Signatories of Framework Agreements” tab).

[13] The Banks Association of Turkey – Framework Agreements on Financial Restructuring (

[14] See, e.g., Framework Agreement, Large Scale Implementation, Art. IX.

[15] Ibid.

[16] These debtor promises, generally speaking, remain in force through the full repayment of the restructured debt.

[17] See, e.g., Framework Agreement, Large Scale Implementation, Annex 1, II.5.

[18] The various prohibitions are described in detail in the Framework Agreements, and in the debtor Application and Letter of Undertaking, all of which should be carefully considered. Of note in this regard, modification, by way of “carve-outs”, can be made, provided creditors holding at least two-thirds of the subject debt agree.

[19] So as to prevent deadlock in the decision-making process, the Framework Agreements provide, depending on the nature of the decision to be made, several different constructions of the necessary “majority”. For example, there is a “Creditor Majority”, made up of at least two creditors having two-thirds of all the outstanding credit risk, and a “Creditors’ Qualified Majority”, made up of at least two creditors holding 90% of all outstanding financial risk. For certain decisions a unanimous decision is required, such as writing off principal and/or accrued interest.

[20] Although these steps are set forth in the Framework Agreements, the reality of how things progress in this regard is much more fluid. For example, during the Feasibility Report’s preparation, there are often significant, and meaningful, interactions with the debtor, often resulting in the plan’s modification. Accordingly, it is fair to say, the restructuring negotiations usually begin well before the Feasibility Report’s finalization.

[21] In this case, creditors holding at least two-thirds of the subject debt.

[22] Copies of executed restructuring agreements are to be filed with BAT, albeit solely for informational purposes.

[23] Filing of a second Application triggers a new 90-day period, which can be extended by another 90 days by the creditors, but does not, for example, trigger a requirement for the preparation of a new Feasibility Report.

[24] Supra Part B.

[25] Compare Banking Law (Law No. 5411) with Provisional Art. 32.