Amendments to the law on execution and bankruptcy: it is now possible to sell companies as a whole

On June 19, 2021, Law No. 7327 amending the Enforcement and Bankruptcy Law and certain other laws [“Amendment Law”] was published in the Official Gazette and, as a result, significant changes were made to the law on enforcement and bankruptcy [“EBL”]. The purpose of this customer alert is to specify these modifications.

Modification of article 241 of the EBL entitled “Procedures for the realization of assets”

The modification of the 3 rd paragraph of article 241 of the EBL allowed the sale of the assets and rights integrated commercially and economically and of the companies owning these rights and assets as a whole, in the event that the sale as a whole would be more profitable. . In this regard, it aims to ensure the continuity of companies that are experiencing financial difficulties, especially during the Covid-19 pandemic. This provision also broadens the application of the notion of “commercial and economic integrity”, which was mainly regulated in the legislation relating to the Deposit Insurance Fund. [1] [Please see our article titled “Back on the Agenda: Concept of Commercial and Economic Integrity” for further information on this subject.]

Modification of article 308 of the EBL entitled “Failure to approve the composition and bankruptcy of the debtor”

Perhaps the most striking provision of the amending law is that which modifies the 4th paragraph of article 308 / c of the LBE. Pursuant to this amendment, the receivables taken back, including loans granted by credit institutions, on the authorization of the concordat commissioner after a temporary suspension decision, will be paid immediately after the pledged debts and before any other debts entered in the assets. of the bankrupt, including claims arising from labor law.

Modification of article 223 of the EBL entitled “Bankruptcy administration and the duties of the bankruptcy office”

The amending law amends section 223 of the LBE on the qualifications and procedures for selecting bankruptcy administrators who will participate in the administration of the bankruptcy. According to the relevant provision, the bankruptcy commissioners will be chosen from the list of bankruptcy commissioners established by the regional expert commissions. One of these selected agents must be a certified public accountant and another a lawyer. On the other hand, it is forbidden for a bankruptcy administrator to take charge of more than five files at a time.

Amendment to article 295 of the EBL entitled “Consequences of the final stay for pledge creditors”

The modification of article 295 of the EBL will make it possible to convert the pledged asset into cash according to the procedure provided for in the second paragraph of article 297, if it is not stipulated in the composition plan that the pledged asset will be used by the business, or if its value will decrease or if it will be expensive to keep. From the proceeds of the sale, the pledgee will be paid as much as the amount of the pledge. This amendment aims to prevent possible losses that the pledgee could suffer.

Modification of article 296 of the EBL entitled “Consequences of the definitive respite for contracts”

The amending law adds the sentence that the obligations arising from contracts which continue during the temporary and definitive respite will be mutually fulfilled in article 296 of the LBE. Consequently, the parties will have to fulfill their obligations under the agreements to which they are parties during the temporary and definitive respite. With the addition, the Legislator clearly demonstrated his desire to keep the contracts alive even in the event of a composition.

Modification of article 297 of the EBL entitled “Consequences of the final deadline for the debtor”

With the amending law, article 297 of the LBE has been amended and it is now compulsory for the court to obtain the consent of the commissioner of the composition and the chamber of creditors when it allows the debtor who has declared the composition to constitute a pledge, to be a surety, to make arrangements free of charge, to carry out operations such as the transfer and withholding of immovable or movable property which are important for the continuation of commercial operations after the decision of respite.

Modification of article 308 of the EBL entitled “Failure to approve the composition and bankruptcy of the debtor”

The amending law adds the following provision to article 308 of the LBE: “If the composition process results in bankruptcy, the court which issued the bankruptcy decision will decide that the liquidation will be carried out according to the simple or ordinary liquidation procedure. and that the ordinary court the liquidation will be carried out by the commissioners when necessary. In this case, the duties and powers of the bankruptcy administration will be exercised by the commissioners. ”.

Provisional Article 17 of the LBE

The following provisional article has been added to the EBL: “In accordance with the sixth paragraph of article 223, until the constitution of the list of bankruptcy commissioners, bankruptcy commissioners will be appointed on the list without consideration of the transfer procedure. In order to prevent a person from exercising the functions of an officer in more than five cases simultaneously, the appointed judicial officers are notified to the regional expert committee of the regional court of appeal to which the jurisdiction is attached. of execution. Pursuant to this provisional article, the procedures for appointing bankruptcy auditors were adopted until the constitution of the “list of bankruptcy auditors”, newly instituted in accordance with the aforementioned provision of the amending law amending article 223 of the BBL.

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