Recent Development
On July 31, 2016, the Council of Ministers issued the third executive order on the implementation of the current state of emergency (“Executive Order“). The Executive Order amends several laws and regulations; discharges certain members of the military linked to the Fethullah Terrorist Organization (FETO); establishes a national defense university; introduces rules related to the education system of the members of the military; and prohibits the implementation of the bankruptcy suspension mechanism for companies.
What is New?
Most of the abovementioned changes and measures do not impact the business environment except for the prohibition of suspension of bankruptcy for certain companies and cooperatives during the state of emergency period. According to the Executive Order joint stock companies, limited liability companies, partnership in commendam, the capital of which is divided into shares (sermayesi paylara bölünmüş komandit şirket) and cooperatives are prohibited from requesting the courts for a “suspension of bankruptcy” during the state of emergency. A suspension of bankruptcy is a mechanism provided under Article 179 of the Bankruptcy and Enforcement Law No. 2004, which allows the applicant in distress to suspend bankruptcy under certain circumstances. According to the Executive Order, all applications made by these entities will be rejected by the courts during the state of emergency.
Conclusion
Similar to the previous executive orders related to the state of emergency issued on July 23, 2016 and July 27, 2016, the aim of this Executive Order is to eliminate threats against national security during the state of emergency and restructure our national defense institutions. The concept of a suspension of bankruptcy has been previously criticized for being easily exploited; many companies engaged in repeated instances of the suspension in order to postpone or avoid paying their creditors for a period of time. Bulent Tufenkci, the Minister of Customs and Trade, explained that the ministry received complaints regarding suspension of bankruptcy requests filed by FETO linked companies after the attempted coup on July 15, 2016. According to Bulent Tufenkci, in order to avoid any misuse of this concept, the Council of Ministers prohibited the requesting of suspension of bankruptcy during the state of emergency.
We will keep you posted should there be any further developments regarding extraordinary measures.
