Under Turkish law, various types of security interests are regulated with respect to both immovable and movable property, each subject to specific formal requirements and procedural rules. With regard to immovable property, the most common form of security is the mortgage, which is comprehensively regulated under Article 881 et seq. of the Turkish Civil Code. A mortgage enables the creditor to secure their claim while allowing the debtor to retain ownership of the immovable property. For a valid mortgage to be established, a notarized deed must first be executed before the land registry office, and the mortgage right must be duly registered in the land registry. This registration is constitutive in nature, meaning that the validity of the mortgage depends on it. Furthermore, the secured claim must either be specified in amount or be subject to a maximum limit, and the property serving as collateral must be clearly identified. Failure to comply with these formalities renders the mortgage legally invalid, resulting in no real security right in favour of the creditor.

As for movable property, security interests are primarily governed by the institution of pledge, as regulated under Article 939 et seq. of the Turkish Civil Code. Generally, the pledge is established by transferring possession of the movable asset to the creditor, based on a written pledge agreement. Both the written form of the contract and the delivery of possession are mandatory for the pledge to be valid. However, in certain types of special pledges—such as the commercial enterprise pledge governed by the Law No. 1447—transfer of possession is not required. Instead, the pledge agreement must be executed before a notary and registered with the trade registry. Similarly, in specific cases such as the pledge of motor vehicles, notarization and registration in the relevant registries are also required. Non-compliance with these formal requirements may result in the pledge either not being validly created or not being enforceable against third parties.

In Turkish law, the validity of real security interests largely depends on the fulfilment of formal requirements such as written agreements, registration, and delivery of possession. A failure to comply with these formalities can lead to the invalidity of the security interest or its unenforceability against third parties. Therefore, strict adherence to procedural rules is essential in both the drafting and execution of security agreements.

Under Turkish law, there is no mechanism that allows a creditor to unilaterally enforce a claim outside the judicial process. Therefore, creditors must resort to compulsory enforcement proceedings to collect their receivables.

Secured creditors often face various practical challenges during enforcement, including judicial proceedings such as compulsory execution and bankruptcy. One of the primary difficulties lies in the requirement of judicial intervention in the liquidation of collateral, which significantly slows down the process. In security arrangements like real estate mortgages and commercial enterprise pledges, creditors cannot directly liquidate the collateral; they must proceed through enforcement offices or bankruptcy administrations. This reduces the liquidity of the collateral and undermines the creditor’s economic expectations. Moreover, the lengthy procedures involved in the judicial sale of immovable property—such as on-site inspection, appraisal, and auction—often lead to depreciation of the collateral’s value and delays in satisfying the debt.

Additionally, Turkish law does not recognize mechanisms that allow for the extra-judicial realization of collateral—such as “private sale” or “self-help remedies” commonly found in Anglo-American legal systems. The absence of such tools limits the practical effectiveness of security rights. Secured creditors are not permitted to unilaterally sell the collateral or appropriate it toward their claims in the event of a debtor’s default, without involving enforcement offices or the courts. As a result, recovery of the secured claim is often delayed due to the time-consuming nature of these procedures.

In Turkish law, several mechanisms have been developed to restructure and rehabilitate financially distressed debtor companies, aiming to avoid bankruptcy. These mechanisms function either under judicial oversight or on a contractual basis. Among them, the most structured and judicially supervised procedure is the concordat. Regulated under Articles 285 et seq. of the Enforcement and Bankruptcy Law, the concordat allows debtors who are insolvent or facing imminent insolvency to settle their debts with creditors—often through extended terms and partial debt reductions. The goal is to avert bankruptcy and allow the debtor to continue commercial operations. The process begins with a petition to the court, accompanied by comprehensive financial documentation, a proposed repayment plan, and a list of creditors. If the application satisfies procedural requirements, the court grants a temporary respite and appoints one or more concordat commissioners. During this period, the debtor may continue regular business activities but must obtain approval from the commissioner or the court for extraordinary transactions. If the court later grants a definitive respite, a concordat plan prepared under the commissioner’s supervision becomes legally binding upon acceptance by the required majority of creditors and approval by the court. At this stage, the court assesses not only whether the plan protects the interests of creditors but also the debtor’s capacity to fulfill its obligations and the overall feasibility of the proposed plan.

Apart from the concordat, a significant restructuring mechanism for debts owed to financial institutions is the Financial Restructuring Framework Agreements (FRFA), introduced under the Banking Law numbered 5411. The FRFA mechanism is designed to help debtors regain financial stability through measures such as rescheduling debts, reducing interest rates, or settling obligations in exchange for specific assets. This process is conducted on a contractual basis, outside of judicial proceedings. To benefit from the mechanism, the debtor must be experiencing financial difficulty but still have the potential to continue its operations. A restructuring plan becomes effective upon the approval of a qualified majority of participating creditors, typically representing at least 75% of the total financial exposure. The coordination of the process is carried out by the Financial Restructuring Coordination Board, established under the supervision of the Banking Regulation and Supervision Agency. While the debtor remains in control of its operations, it is obligated to comply with the terms of the restructuring agreement and may be subject to external monitoring and independent audits.

Outside these two principal mechanisms, the possibilities for restructuring within the traditional bankruptcy process are quite limited. Turkish bankruptcy law does not currently offer a developed model focused on business continuity and rehabilitation rather than liquidation. The former procedure of postponement of bankruptcy, which once provided a court-supervised restructuring framework, was abolished in 2016 due to its susceptibility to abuse and prolonged judicial delays. As such, the current restructuring regime for distressed businesses in Türkiye primarily rests on the concordat procedure and the FRFA mechanism.

Although access to new financing sources is vital for debtors undergoing restructuring to maintain their commercial operations, the lack of clear and comprehensive regulation in this area creates significant challenges in practice. In particular, under the court-supervised concordat procedure, although the debtor is permitted to continue business activities during the respite period, the provision of new financing is subject to both formal and substantive limitations. The Enforcement and Bankruptcy Law does not explicitly grant priority status to financing obtained during the concordat respite. As a result, providers of such financing are generally classified as preferential creditors only in the event of bankruptcy. Nevertheless, extending new financing to a company undergoing concordat proceedings entails considerable risk for lenders, which in turn severely limits the practical availability of such funding for debtors during the process.

By contrast, under the Financial Restructuring Framework Agreements (FRFA) introduced pursuant to the Banking Law and related regulations, the provision of new financing to distressed companies is addressed within a more systematic and commercially rational framework. Since FRFA is fundamentally a contractual restructuring process between the debtor and its financial creditors, the terms of any new financing are established by mutual agreement. Any priority status or preferential treatment afforded to new financing is defined within the terms of the restructuring agreement. Accordingly, financial institutions participating in the restructuring process may agree to extend new credit with expressly stipulated priority repayment commitments over existing debts, and in certain cases, collateral may also be provided to secure the new loans. Although such financing under FRFA does not enjoy statutory super-priority under insolvency law, the contractual priority and security arrangements available within this framework increase the willingness of financial institutions to provide fresh credit. This, in turn, has resulted in a more functional and effective model for financing distressed businesses in practice.

Although, in theory, it is possible to waive claims against third parties who are not themselves debtors—such as parent companies, group affiliates, or managers—in the context of restructuring transactions, doing so is illogical in practice. Under the Enforcement and Bankruptcy Law, restructuring procedures like concordat apply solely to the debtor’s obligations and do not eliminate the liability of third parties who are not formally party to the debt. Payment plans or debt reductions proposed by the debtor as part of the concordat process are legally binding only with respect to the debtor. Accordingly, third parties such as guarantors or parent companies that have provided sureties are not released from their obligations as a result of the debtor’s restructuring. This principle is clearly established under Article 309 of the Enforcement and Bankruptcy Law, which stipulates that the restructuring of a debtor’s obligations does not terminate the liability of jointly and severally liable third parties. As a result, creditors may pursue claims independently against both the debtor and any third parties who have provided guarantees or sureties.

In contrast, contractual restructuring mechanisms such as the Financial Restructuring Framework Agreements (FRFA) provide a more flexible framework for releasing third parties from liability. Under the FRFA process, the liability of non-debtor entities—such as group companies or guarantors—may be contractually discharged with the consent of the involved parties. Such a release is only valid if explicitly agreed upon by all relevant creditors and subject to specific terms and conditions defined in the restructuring agreement. A critical aspect of this arrangement is that creditors may agree to waive their claims against third parties in exchange for new financial terms or concessions from the debtor. These types of settlements are typically structured as comprehensive, global settlement agreements that aim to balance the interests of all stakeholders involved, including the debtor and its creditors.

On the other hand, potential claims against the debtor’s management—for example, arising from misconduct, mismanagement, or actions that contributed to insolvency—do not fall within the scope of restructuring proceedings. Such claims are governed by principles of tort liability or commercial law and remain unaffected by the restructuring of the debtor’s financial obligations. In the event of bankruptcy, the bankruptcy administration may initiate claims for damages against the company’s directors, and these actions can proceed independently of any restructuring agreement. In this context, both civil and criminal legal remedies may be pursued.

In the concordat process, creditors act individually based on their own claims rather than forming a collective negotiation or representation structure among themselves. By contrast, in restructuring processes conducted under the Financial Restructuring Framework Agreements (FRFA), creditors—particularly banks and financial institutions—tend to organize under a structure such as the Creditors’ Coordination Committee (CCC). These committees are established to facilitate negotiations and to assess the debtor’s restructuring proposals from both legal and financial perspectives. They often work alongside professional advisors to support this evaluation process. Such collective bodies also play a critical role in ensuring that decisions approved by a qualified majority of creditors become binding on all participants.

The question of who bears the cost of advisory services varies depending on the nature of the restructuring process and the agreement among the parties involved. In the concordat context, advisory fees are typically paid individually by each creditor who chooses to engage legal or financial counsel. However, in FRFA implementations, advisory services are generally funded by the debtor, as the successful outcome of the restructuring directly serves the debtor’s interest in restoring financial stability and operational continuity. Financial and legal advisors are brought into the process to analyze the debtor’s financial condition, develop a sustainable payment plan, and build credibility with creditors. Accordingly, advisory fees are usually treated as part of the overall restructuring plan and allocated to the debtor as a cost of the process.

In Turkish law, bankruptcy is a judicial process initiated either by the creditor’s request or by the debtor themselves in cases provided by law, aiming at the liquidation of the debtor’s assets and the equal distribution of the proceeds among creditors, when the debtor fails to pay their debts on time and properly. When the debtor is insolvent or unable to meet their liabilities with their assets, the bankruptcy process is triggered upon the determination of this condition. Particularly in joint-stock companies, in accordance with Article 376 of the Turkish Commercial Code (TCC), when the company becomes insolvent, the members of the board of directors are required to request the company’s bankruptcy after confirming this situation.

Failure of the company’s executives or representatives to fulfil this obligation in a timely and proper manner may result in both legal and criminal liability. If the delay in declaring bankruptcy causes damage to creditors, company executives may be held personally responsible. Moreover, intentionally delaying the declaration of bankruptcy in bad faith may lead to various sanctions under the TCC and the Turkish Penal Code. Therefore, it is crucial for company executives to continuously monitor the financial status of the company and to fulfil their legal obligations promptly when situations such as insolvency or financial difficulties arise. Otherwise, both the company and the executives may face serious legal consequences.

The main types of bankruptcy in Turkish law can be classified as follows: follow-up bankruptcy, direct bankruptcy, and bankruptcy decisions made at the end of the concordat process in case of insolvency. Follow-up bankruptcy arises when the creditor initiates enforcement proceedings, and the legal consequences of the process occur. Direct bankruptcy begins when either the debtor or the creditor directly informs the court that the debtor is in a state of insolvency and requests the declaration of bankruptcy. In case the concordat process is unsuccessful, a bankruptcy decision may also be made. Additionally, under Article 376 of the Turkish Commercial Code (TCC), if it is determined that a company’s liabilities exceed its assets, the board of directors of the company is obligated to apply for bankruptcy.

Upon the declaration of bankruptcy, the debtor’s authority to dispose of their assets is terminated, and all assets are consolidated under a community known as the “bankruptcy estate.”

During this process, the management of the company cannot be continued by the debtor until the liquidation process is completed; authority is transferred to the bankruptcy administration. The bankruptcy administration consists of individuals elected at the creditors’ meeting and is responsible for the liquidation of the debtor’s assets. The debtor, on the other hand, is obligated to cooperate with the bankruptcy administration, provide financial statements, books, and records, and give statements when necessary. Furthermore, debtors found to have intentionally or negligently engaged in actions that led to bankruptcy may face criminal sanctions.

The court’s role in the bankruptcy process is not limited to decisions regarding the initiation, conduct, and termination of the process but also includes oversight authority in pre-procedures such as concordat. Enforcement offices carry out the execution and technical organization of the proceedings. Creditors participate actively in the process both as stakeholders in the liquidation and in the formation of the bankruptcy administration. In the concordat process, temporary commissioners appointed by the court oversee the debtor’s operations, taking on the role of supervision.

The duration of the bankruptcy process varies depending on several factors, including the company’s assets, the complexity of the debt relationships, and disputes among creditors. In straightforward cases, the process can typically be completed within two to three years, while in more complex and multi-party cases, the duration may extend from five to eight years. Therefore, the bankruptcy process presents itself as a complex and multi-dimensional judicial mechanism that operates under the cooperation and supervision of various stakeholders, including the debtor, creditors, the court, enforcement offices, and bankruptcy administration.

During bankruptcy proceedings, certain legal actions are suspended in Turkish law to protect the debtor’s assets and ensure equality among creditors. In this context, Article 193 of the Enforcement and Bankruptcy Law stipulates that once bankruptcy proceedings are initiated, all enforcement actions against the debtor are halted, and new enforcement actions cannot be initiated. Furthermore, enforcement proceedings, attachment actions, and other coercive measures related to the debtor’s assets that have already begun before the bankruptcy are automatically terminated. This situation is commonly referred to in legal literature as the “bankruptcy moratorium” or “enforcement prohibition,” and its purpose is to prevent the dispersion of the debtor’s assets and ensure their liquidation in an organized and controlled manner.

As a rule, this moratorium is considered to be valid only within the borders of Türkiye. For a bankruptcy decision to have direct effects outside the country, the recognition and enforcement of this decision by other states is required. Therefore, for the bankruptcy to have binding effects on assets outside Türkiye, the relevant state’s domestic law must recognize this decision. In accordance with international private law principles, the effects of the moratorium can be extended across borders if the recognition and enforcement procedures are followed.

However, there are exceptions to the enforcement prohibition. In particular, creditors with claims secured by collateral may proceed with the sale of the collateral without submitting a claim to the bankruptcy estate. In this case, however, the creditor is required to initiate the sale process within seven days of the commencement of the bankruptcy proceedings. Additionally, certain legal actions taken for the continuation of activities involving real estate or commercial enterprises included in the bankruptcy estate may continue with the permission of the court or the bankruptcy administration. Therefore, although the main purpose of the moratorium is to prevent the fragmentation of the debtor’s assets, some creditors—especially those with rights secured by collateral—are partially exempt from this protection and can continue to collect their debts. In this regard, the bankruptcy moratorium serves as a balancing mechanism, ensuring both the collective liquidation of the debtor’s assets and the legal security of creditors.

In Turkish law, creditors must comply with certain procedural and formal requirements in order to assert their claims and ensure their protection within the bankruptcy estate. After the declaration of bankruptcy, creditors are required to notify the bankruptcy administration of their claims in writing. This notification must include the amount of the claim, its basis, and any collateral if applicable. The acceptance or rejection of claims is assessed by the bankruptcy administration, and creditors whose claims are rejected can appeal to the commercial court through a complaint process. During this process, creditors are not limited to a passive role; they can also participate in creditors’ meetings and vote on issues such as the election of the bankruptcy administration, methods of liquidation, and other important decisions, thereby directly influencing the course of the process.

There are also specific protection mechanisms for different groups affected by the process, such as employees, secured creditors, and public creditors. For example, employee claims are prioritized to a certain extent and are settled first from the bankruptcy estate. Thus, in bankruptcy and potential restructuring processes, creditors not only assert their individual claims but also have the opportunity to influence the debtor’s financial future through collective decision-making mechanisms. In this regard, Turkish bankruptcy law establishes a multi-stakeholder system that aims to protect the interests of creditors while ensuring an orderly and balanced liquidation process.

In Turkish bankruptcy law, a specific order and priority system is established for the satisfaction of the claims of creditors and other stakeholders against the bankruptcy estate. This order is determined under Article 206 of the Enforcement and Bankruptcy Law and creditors are classified into various ranks according to their priorities. In the liquidation process, first, the costs associated with the bankruptcy estate, i.e., necessary expenses for the administration and liquidation of the bankruptcy, are covered. Following this, the first, second, and third priority claims, which form the main groups of priority creditors, are included in the liquidation process.

In the first rank, claims for wages earned by employees during the last year before the bankruptcy date, severance and notice compensations, as well as compensation for occupational accidents or diseases are considered. Social security debts of employees are also evaluated in this rank. This priority reflects a constitutional approach aimed at protecting the social and economic rights of workers. In the second rank, claims arising from the debtor’s family maintenance obligations, such as alimony, are placed. The third rank includes public claims, i.e., debts to the state such as taxes, fees, and duties. All other claims that come after these ranks are classified as ordinary claims and are subject to equal distribution.

Although not yet applied in Turkish law, certain types of priority financing, such as “DIP financing” (Debtor-in-Possession financing), which is common in some legal systems, are not explicitly recognized within the current legal framework. However, in the concordat process, certain loans taken with the court’s permission to allow the debtor to continue its activities may, in practice, receive priority treatment. On the other hand, the lowering of a specific class of creditors’ claims in rank, i.e., making certain claims secondary through a subordination agreement, is not subject to explicit legal regulation in Turkish law. However, valid agreements between parties can be considered in the liquidation process and may affect the priority order. The recognition of such agreements is subject to the validity and interpretation rules under the general principles of debt law.

Certain legal actions taken by the debtor before the commencement of bankruptcy can be annulled on the grounds that they caused harm to creditors. This principle is safeguarded through the “action for annulment of transactions” outlined in Articles 277 to 284 of the Enforcement and Bankruptcy Law. This action targets transactions that were made by the debtor within a specified period prior to bankruptcy or before enforcement measures were initiated, aimed at reducing the debtor’s assets, hiding assets from creditors, or giving preferential treatment to certain creditors over others. The purpose of the annulment action is to recover the assets that were unjustly removed from the debtor’s estate and to ensure that creditors are satisfied equally.

Such transactions can be contested by creditors, the bankruptcy administration, or creditors pursuing enforcement measures. The action must be filed within two years from the bankruptcy declaration or the finalization of the enforcement action. Transactions that can be annulled include donations, actions where the debtor transfers a significant portion of their assets, sales made to close relatives at below market value, or fraudulent transactions aimed at avoiding debt repayment. To annul these transactions, it must be clearly shown that the debtor acted in bad faith or that the transaction resulted in harm to creditors.

If a successful annulment action is filed, the transaction in question, even if it was made with a third party, becomes invalid in favor of the bankruptcy estate. In such cases, the property or right returns to the bankruptcy estate, or the third party may be required to make payment. However, the good faith of the third party is important. If the third party was unaware of the debtor’s financial situation and could not have reasonably known, their rights may be protected. On the other hand, bad-faith third parties are fully responsible for the consequences of the annulment action.

With the commencement of bankruptcy proceedings, the debtor’s authority over its assets is terminated, and the fulfillment of obligations arising from contracts, as well as the continuation of reciprocal obligations, become subject to the discretion of the bankruptcy administration. Article 195 of the Enforcement and Bankruptcy Law stipulates that the bankruptcy administration will decide whether the reciprocal contracts entered into by the debtor before the bankruptcy will be executed. If the bankruptcy administration deems that fulfilling the contract serves the interests of both the debtor and the creditors, it may allow the contract to continue; otherwise, it may exercise the right to terminate the contract. In such cases, the counterparty may request compensation; however, this claim must be registered as an ordinary debt with the bankruptcy estate.

Clauses in contracts, such as termination, retention of title (especially provisions stating that ownership of movable goods remains with the seller until payment is completed), and set-off provisions, may also be impacted by the bankruptcy or concordat process. Specifically, if a retention of title clause is valid, the seller may have the right to reclaim the goods; however, this right is limited to a request for delivery to the bankruptcy estate and does not allow for the direct retrieval of the goods. Set-off, according to Article 200 of the Enforcement and Bankruptcy Law, is possible between debts existing before the bankruptcy date, but it is subject to restrictions for debts incurred after the bankruptcy.

During the concordat process, provisions exist that prevent the termination of contracts to which the debtor is a party under the temporary and final grace periods granted by the court. Without the approval of the concordat commissioner, it may not be possible to terminate the contract, which creates an exceptional situation regarding the principle of freedom of contract. During this process, the debtor may, in some cases, have the right to terminate or suspend the contract with the court or commissioner’s approval; however, this must be based on objective reasons such as performance difficulty or financial unsustainability.

In Turkish law, the sale of assets or the entire business of a debtor within the scope of a restructuring or insolvency process is subject to specific procedures and conditions. In the case of bankruptcy, the sale procedures are carried out in accordance with Articles 241 and the following of the Enforcement and Bankruptcy Law, and these sales are typically conducted by the bankruptcy administration through an auction method. However, with the decision of the creditors’ meeting, a sale via negotiation is also possible. The transparency and fairness of the process are ensured by the judicial oversight of the sale, as it must take place under court supervision. The sale of the business as a whole is generally preferred because it tends to result in a higher value for the assets.

An important issue in the sale of assets is whether the buyer can acquire these assets “free from debts and previous obligations,” i.e., “clean.” In sales conducted by the bankruptcy administration, as a rule, the assets being sold are transferred to the new buyer free from previous debts and claims. This is a natural consequence of the forced sale procedure prescribed in the Enforcement and Bankruptcy Law. However, if there is a security interest, such as a pledge, on the asset, this right will transfer to the sale price; in other words, the pledgee will receive the equivalent of the security from the sale proceeds, but the asset becomes free from encumbrance for the new owner. Nevertheless, the release of any security interest without the creditor’s explicit consent is not possible. The removal of the security interest is considered a direct interference with the creditor’s rights, and thus, the creditor’s consent or a court decision is required.

In the concordat process, the provision of new financing, i.e., credit offers, is allowed only to a limited extent. Although, in theory, obtaining necessary credits for the continuation of the debtor’s operations with the permission of the court and the concordat commissioner may be possible, in practice, this rarely occurs.

In the management of a distressed debtor, company directors and other responsible persons are under significant legal obligations both under the Turkish Commercial Code (TCC) and the Enforcement and Bankruptcy Law. Particularly when the company’s financial condition deteriorates or insolvency occurs, it is a legal requirement for managers to act with care and integrity, protecting both the company and its creditors. Articles 375 and 376 of the TCC impose an obligation on the board of directors to monitor the company’s financial structure, take necessary precautions, and, in the case of insolvency, apply to the court to initiate bankruptcy proceedings. A violation of these obligations can lead to personal liability for the managers and provide grounds for compensation claims by creditors.

Negligence by the directors, especially when it leads to the company’s insolvency, can result in direct or indirect compensation liability to both company shareholders and creditors under fault-based liability. Moreover, intentional or grossly negligent actions that lead to the depletion of the debtor’s assets or cause harm to creditors may also lead to criminal liability. In addition, with regard to tax debts and public receivables, the company’s legal representatives can be held personally liable for the company’s debts under the relevant legislation. Specifically, under the Tax Procedure Law and Social Security Legislation, managers may face direct collection actions for unpaid taxes or contribution debts.

In some cases, the liability of shareholders and partners may also arise. In particular, in joint-stock and limited companies, if shareholders fail to fulfill their capital contribution obligations or cause harm to the company in repaying loans they provided, creditors may initiate liability claims against these individuals. Furthermore, if lending institutions that provide financing to an insolvent debtor are proven to have acted in bad faith or in a guiding manner within the scope of credit relationships, their indirect liability may be called into question.

To mitigate these personal liability risks, many managers and companies secure protection through directors and officers liability insurance (D&O Insurance). This insurance covers legal and financial liabilities arising from errors, breaches, or omissions made by directors in the course of performing their duties, under certain conditions. However, insurance coverage may exclude cases of fraud, intentional misconduct, or gross negligence. Therefore, it is crucial for managers to prioritize fulfilling their legal obligations in a timely and diligent manner, rather than relying solely on insurance protection.

In Turkish law, the initiation of restructuring or insolvency proceedings does not automatically relieve the managers and other stakeholders of their legal liabilities arising from their past actions and decisions. The commencement of an insolvency or concordat (composition with creditors) process does not eliminate the consequences of any breaches of obligations committed by the managers while performing their duties; it is merely a process aimed at the financial restructuring of the company or the liquidation of its assets. Therefore, managers may be held liable to both the company and the creditors for actions taken prior to these proceedings.

Managerial liability can arise under various legal provisions, primarily the Turkish Commercial Code (TCC), the Enforcement and Bankruptcy Law, the Tax Procedure Law, Social Security Legislation, and other special regulations. According to Article 553 of the TCC, board members and managers are liable to compensate any damages caused to the company, shareholders, or creditors through their faults while performing their duties. Particularly in the case of insolvency (TCC, Art. 376), failure to file for bankruptcy in a timely manner, carrying out actions detrimental to creditors, or misusing company resources may result in personal liability for the managers. Moreover, actions such as fraudulent bankruptcy, asset concealment, or providing false statements during the insolvency process may lead to criminal liability.

Similarly, in the context of the restructuring process under concordat, managers and representatives of the debtor may incur both legal and criminal liability if they engage in actions such as concealing financial conditions, presenting false information, or deceiving creditors. These liabilities do not disappear upon the acceptance of the concordat plan or its approval by the court. The reports of the court-appointed commissioner and the court’s oversight during the concordat process provide grounds for reviewing the managers’ previous activities.

In Turkish law, the recognition of restructuring or insolvency proceedings initiated in a foreign country by a local court does not occur automatically. For such proceedings to have legal effect in Türkiye, they must undergo recognition and enforcement procedures. Recognition and enforcement are regulated under the Turkish Act on International Private Law and Procedural Law (IPLP) and certain conditions must be met for foreign court decisions to be valid in Türkiye. In this context, for insolvency decisions or restructuring agreements to be effective in Türkiye, the relevant decision must, first and foremost, be final, not clearly contrary to Turkish public order, and comply with the principle of reciprocity.

The local court’s assessment will primarily focus on the debtor’s activities and assets in Türkiye, the nature of the foreign court decision, and the consequences that recognition will have in Türkiye. In this framework, although the debtor’s main place of business (COMI – Centre of Main Interests) being located abroad is one of the factors justifying the jurisdiction of a foreign court, it is not sufficient on its own to grant recognition. Similarly, while the governing law of the debt is also considered, the decisive factors in the recognition process are whether the decision was made in accordance with proper procedures and whether it will result in outcomes that violate Turkish public order. For example, decisions made where creditors’ right to defense is violated or those obtained through fraudulent means cannot be recognized.

Türkiye has not yet incorporated the UNCITRAL Model Law on Cross-Border Insolvency or the UNCITRAL Model Law on the Recognition and Enforcement of Insolvency-Related Judgments into its domestic law, and there is no current legislation or open reform draft regarding the adoption of international model laws in this area. This indicates that Turkish law adopts a more traditional and inward-looking approach to cross-border insolvency. However, in judicial precedents, particularly before commercial courts, the number of applications for the recognition of foreign insolvency decisions is increasing, and courts are evaluating these decisions within the framework of IPLPL provisions.

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In Turkish law, it is possible for debtors with legal entities established abroad, whose centers or main areas of activity are in another country, to apply for insolvency or restructuring (such as concordat) procedures in Türkiye. However, this is subject to certain eligibility conditions and jurisdictional rules. When considering the provisions of the Enforcement and Bankruptcy Law alongside the  International Private Law and Procedure Law (IPLPL), for a foreign debtor to file for insolvency in Türkiye, the debtor must have a place of business, branch, assets, or commercial activity in Türkiye.

Similarly, for applications related to concordat or restructuring, the presence of creditors in Türkiye, the operation of commercial activities, or the ownership of assets in Türkiye are crucial factors for establishing jurisdiction in Turkish courts.

In this context, among the countries where cross-border insolvency and restructuring issues are most commonly encountered in Türkiye, European countries such as Germany, the Netherlands, Switzerland, and the United Kingdom, which have strong economic and commercial ties with Türkiye, are prominent. In particular, financial crises of companies established in these countries that have opened branches or established subcontractor relationships in Türkiye often lead Turkish creditors to seek recourse in local courts. Additionally, in recent years, transactions related to Gulf countries and U.S.-based companies have seen an increase in cross-border insolvency proceedings.

In Turkish law, although the insolvency or restructuring processes of corporate groups often require a consolidated approach in practice, the current legal framework treats each legal entity as an independent debtor, and proceedings are conducted separately for each company. While the Turkish Commercial Code includes some descriptive provisions regarding group companies, there is no specific or comprehensive regulation that addresses the collective treatment of group companies in cases of insolvency or concordat (composition with creditors). This absence of regulation can lead to fragmented and disjointed legal intervention during times of crisis, particularly in structures characterized by strong economic integration among group companies.

Türkiye has not yet adopted the UNCITRAL Model Law on Enterprise Group Insolvency (MLEGI), and there is currently no legislation or draft law on this matter. Based on available information, there is no indication that Türkiye is considering adopting this model law.

There are no specific changes currently planned in the near future for the restructuring and bankruptcy regime in Türkiye.

Although Turkish law has been shaped as a system that seeks to balance the relationship between debtor and creditor, historically, this balance has tended to favor creditors more prominently. Legal regulations such as the Enforcement and Bankruptcy Law, enacted in 1926, offered a more systematic procedure for debtors, yet still prioritized the interests of creditors. However, with the amendments made to the Enforcement and Bankruptcy Law after 2003, greater emphasis has been placed on the protection of debtor rights. In particular, the introduction of concordat (restructuring) regulations has provided debtors with the opportunity to restructure and repay debts they struggle to pay, instead of going into bankruptcy. These reforms serve as a means for debtors to survive economic difficulties and continue their operations, while also allowing creditors to protect their rights with a degree of patience over a defined period. As a result, although Turkish law has historically been more inclined to protect creditors, recent reforms have extended more protection to debtors, adopting a legal framework aimed at balancing the interests of both parties. This shift seeks to offer more sustainable solutions through an approach that allows debt restructuring without undermining the rights of creditors.

Sociopolitical factors can have additional impacts on certain stakeholders in judicial restructuring and bankruptcy processes. These effects are particularly related to elements such as social justice, job security, and social security rights. Employees are among the most affected groups during restructuring or bankruptcy proceedings. Workers at bankrupt companies may come under significant pressure in terms of their receivables, severance pay, and other social entitlements. Social security issues, such as pension obligations, are another critical concern. The protection of such social security rights directly affects not only the relationship between debtors and creditors but also societal peace and well-being.

The role of the state in these processes is also of great importance. The state not only oversees the process through legal regulations but also assumes the function of maintaining economic stability by providing financial support to debtor enterprises. This support may take the form of various incentives and credit facilities to supply the financial resources necessary for the success of the restructuring process. Additionally, the state may intervene to ensure the protection of social security rights. It can take the necessary legal measures to guarantee the claims of employees and retirees and to help businesses continue their operations. In this context, the state’s role can be considered not only as an economic regulator but also as an actor that ensures social oversight and protects social justice. Sociopolitical factors are directly linked to the decisions made by the state during these processes, and these decisions can have wide-ranging impacts both economically and socially.

The greatest obstacles to efficient and effective restructurings and bankruptcies in the judicial field often stem from the legal framework, bureaucratic challenges, financial difficulties, and conflicts among stakeholders. In Turkish law, particularly within the framework of the Enforcement and Bankruptcy Law, legal uncertainties and the courts’ difficulties in adequately overseeing the process stand out among the factors that limit the effectiveness of restructuring and bankruptcy procedures. The heavy workload of the courts and the lengthy decision-making processes lead to negative consequences for debtor companies in terms of continuing their operations. Additionally, the financial condition of debtor companies makes it difficult for the restructuring process to function efficiently. The restructuring of debts and conflicts of interest among creditors can further complicate the resolution process, resulting in time loss. To overcome these obstacles, a series of legal reforms is necessary. Financially, government-provided incentives and support can accelerate restructuring processes by improving the financial standing of especially small and medium-sized enterprises. Promoting a strong culture of cooperation and communication among stakeholders will enable the resolution of conflicts of interest among creditors and allow the process to be completed more efficiently. Such reforms would represent an important step toward ensuring economic stability while protecting the rights of both debtors and creditors.