Turkey has introduced regulations regarding new and existing bankruptcy suspension requests and company guardians in the wake of the 90 day of State of Emergency declared on 21 July 2016. Drastic changes have recently been introduced for the Turkish bankruptcy postponement regime (more).
Introduction
Postponement of bankruptcy
Comment
Introduction
On July 15 2016 Parliament enacted an omnibus bill which amended several laws. The Law on the Amendment of Some Laws to Improve the Investment Environment focuses on:
The Turkish collateralization system was recently updated through the introduction of the Law No. 6750 on Movable Pledges (the “Movable PledgeLaw”).
Introduction
Turkey has, for the first time, introduced mediation as an alternative dispute resolution system in 2012. The Law on Mediation for Civil Disputes (“Law”) which was published in the Turkish Official Gazette on 22.06.2012 and came into force on 22.06.2013 mainly regulates the principles and procedures applicable in resolving civil disputes by mediation.
Introduction
Execution and Bankruptcy Law (“EBL”) enables a company in financial difficulty to propose a composition to its creditors to restructure its debts. However, EBL only provides formal proceedings and does not provide out of court workouts. As a result, courts do not have the authority to order a creditor to cooperate with an informal composition. Therefore there is a lack of safeguards in favour of debtors with regards to any informal composition proceedings under the current legislation.
Turkey has restructured methods for settelement with Finance Revenue Administration (“Administration”) for related party transcations. The developments widen and clarify the scope of advance pricing agreement methods, as well as introduce time limits for the Administration to consider taxpayer requests.
The Communiqué Amending the General Communiqué of Hidden Profit Distribution through Transfer Pricing (“Amendment Communiqué”) was published in Official Gazette number 30263 on 7 December 2017.
Turkey has updated rules related to pledges on movable assets. Notably, all future legal interests in a movable asset will now be directly covered by a pledge, together with the movable asset. If a production process is pledged together with a movable asset used in the process, the pledge will now be deemed to have been automatically established.
The Law Amending Certain Laws for Enhancing the Investment Environment number 7099 (“Omnibus Law”) was published in Official Gazette number 30356 on 10 March 2018.
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.
Recent development
Seeking to ensure that the market has sufficient available liquidity following the recent political and economic developments in Turkey, the Central Bank of Turkey (the "Central Bank") reduced the Turkish banks' reserve requirements for Turkish lira liabilities on August 10, 2016. The changes will take effect on August 12, 2016.
New TRY reserve requirements
The Central Bank has reduced the reserve requirement ratios for banks' Turkish Lira ("TRY") liabilities by 50 basis points for each maturity bracket:
Maturity New Ratios Previous Ratios
The Law Amending Certain Laws for the Purpose of Improvement of the Investment Environment, Law No: 6728 has been published in the Official Gazette dated 9 August 2016 and numbered 29796 (“Amending Law”). It amends several laws including the (i) Stamp Duty Law No: 488, (ii) Law of Fees No: 492, and (iii) provisions of the Turkish Commercial Code Law No: 6102 on the incorporation of entities. With these amendments, the Turkish government aims to reduce the cost of foreign direct investment in Turkey.