For companies facing financial difficulties due to economic fluctuations or unforeseen circumstances, composition is an important legal procedure that offers the opportunity to continue operations and avoid bankruptcy by restructuring their debts. However, this process carries complex legal consequences not only for the company’s debtors but also for its employees, one of the most vulnerable creditor groups. Especially in large cities like Antalya, where trade volume and employment are high, the status of employees’ receivables from a company that has decided on composition is a critical concern for both employers and employees. This article will examine in detail the legal status of employees’ receivables during the composition period, the protection mechanisms, and potential issues that may arise during the process.
An Overview of the Concepts of Concordat and Respite
A composition agreement is a solution that can be used by an honest debtor who is unable to pay their debts, or is at risk of doing so, to reach an agreement with their creditors to repay their debts according to a specific plan. This institution, regulated under the Enforcement and Bankruptcy Law (EBL), aims to ensure the debtor can continue their business activities while ensuring creditors receive their receivables at a specific rate and within a specific timeframe.
What is Concordat?
A composition agreement is a court-supervised restructuring process designed to improve the debtor’s financial situation and secure creditor receivables. There are two basic types: ordinary composition and post-bankruptcy composition. Ordinary composition, typically filed by the debtor before bankruptcy, is crucial for the continuity of the business. This process culminates in the acceptance by the creditors and court approval of the composition plan submitted by the debtor.
Concordat Term and Purposes
Following the court’s review of the composition request, a temporary or definitive respite decision is issued based on the severity of the debtor’s financial situation and the likelihood of success of the composition project. A respite period allows the debtor’s assets to be protected, creditors to suspend individual enforcement proceedings, and the debtor to prepare or revise a composition project. During this period, the debtor is permitted to continue their commercial activities, but their assets must be subject to the supervision of the composition commissioner. The primary purpose of the respite period is to provide the debtor with the necessary space to strengthen their financial standing and reach a compromise with creditors.
Legal Nature and Protection of Workers’ Receivables
Workers’ receivables are privileged receivables, afforded special protection in the Turkish legal system. This privilege is based on the principle that workers are compensated for their labor and are in a less economically advantaged position. Maintaining this privileged status during composition proceedings is crucial for safeguarding workers’ rights.
Privileged Nature of Workers’ Receivables
Article 206 of the Enforcement and Bankruptcy Law, when regulating the ranking of receivables in bankruptcy liquidation, considers employees’ receivables as “privileged receivables.” This provision applies analogously to the composition process, stipulating that employees’ receivables should be paid with priority over other ordinary receivables. This privileged status of employees’ receivables has a significant impact on the preparation of the composition project and the creditor meeting. The extent to which the project addresses employees’ receivables is a key evaluation criterion in the court’s approval decision.
What types of employee receivables are included in this scope?
Workers’ receivables that are considered privileged cover a wide range of areas. These include:
* Wage Receivables: Basic wages to which the worker is entitled for the work he/she does.
* Severance Pay: Compensation to be paid to the employee in case the employment contract is terminated under certain conditions.
* Notice Pay: Compensation paid in case the employment contract is terminated without complying with the notice periods.
* Overtime Wages: Wages for work performed beyond the working hours determined by law or contract.
* Annual Leave Fees: Fees equivalent to unused annual leaves.
* AGI (Minimum Living Allowance) Receivables: Unpaid past AGI amounts.
* Premiums, Bonuses and Similar Additional Payments: All other labor rights agreed upon in the employment contract or collective bargaining agreement.
These receivables are expected to be paid in full during the composition process or at least to be satisfied at a higher rate than other receivables.
Effects of the Concordat Period on Workers’ Receivables
Because the composition period aims to protect the debtor company’s financial standing, it has different effects on employee receivables accrued during and before this period. These effects are particularly important in terms of enforcement proceedings.
Workers’ Receivables Arising and Arising During the Term
Once a composition moratorium decision is made, the debtor company’s assets are subject to the supervision of the composition commissioner. This requires a distinction between employee claims arising before the declaration of the moratorium and those arising after the declaration of the moratorium, that is, while the company is still operating.
* Receivables Arising Before the Deadline: These receivables will be included in the composition project and will be paid at the specified rates and terms upon approval. Because of their privileged status, they are in a more advantageous position than other ordinary receivables.
* Receivables Arising During the Deadline: Labor receivables (wages, bonuses, etc.) incurred during the deadline to maintain the company’s operations are excluded from the composition project and are considered part of the debtor’s regular business activities. These receivables are not affected by the composition project and must be paid in full and on time as debts falling due within the deadline. Otherwise, enforcement proceedings may be initiated for these receivables despite the composition deadline.
Situation in Terms of Pursuit Law
The composition period, as a rule, halts all enforcement and bankruptcy proceedings initiated or to be initiated against the debtor. However, there are important exceptions to this rule regarding employee receivables.
* The Effect of the Deadline on Enforcement Law and Exceptions: Pursuant to Article 294 of the Enforcement and Bankruptcy Code (EBL), enforcement proceedings cannot be initiated against the debtor during the grace period, and any initiated legal proceedings are suspended. However, this rule does not apply to employee receivables arising during the grace period. If wages or other labor receivables arising and due within the grace period are not paid, employees may initiate enforcement proceedings for these receivables or continue existing legal proceedings. This ensures that employees are not disadvantaged during the grace period. While enforcement proceedings cannot be initiated for receivables arising before the grace period, there are exceptions for secured receivables.
* Comparison with the Status of Secured Receivables: Secured receivables also have a special status in the composition of debts. While legal proceedings may be initiated or continued during the grace period, the conversion of the mortgage into cash must be conducted under the supervision of the composition commissioner and with the court’s permission. Employee receivables, even if not secured, are in a strong position in the composition process due to their legal privileges.
The Role of the Concordat Commissioner
The composition commissioner is an independent body that oversees the debtor company’s activities during the grace period, assists in the preparation of the composition project, and serves as a liaison between creditors and the debtor. The commissioner’s role in labor claims is significant:
* Determination of Receivables Records: The Commissioner identifies all creditors of the debtor company and their receivables. This includes ensuring that employee receivables are accurately identified and recorded.
* Ensuring Priority Payment of Workers’ Receivables: The Commissioner checks whether the workers’ receivables arising within the deadline are paid on time and issues the necessary warnings for unpaid receivables.
* Place of Workers’ Receivables in the Composition Project: The Commissioner ensures that the Composition Project handles workers’ receivables in the manner and in a privileged position as prescribed by law.
Arrangement of Workers’ Receivables in the Composition Project
A composition project is a detailed plan outlining the rates, terms, and collateral required for repayment of debts to creditors. The role of workers’ receivables in this project is critical to its success.
The Place of Workers’ Receivables in the Composition Project
Due to the privileged nature of employee receivables, the law requires them to be specifically addressed in the composition project. Generally, employee receivables accrued before the deadline are stipulated to be paid at a higher rate and in shorter terms than other ordinary receivables. When approving a composition project, the court carefully examines whether the employee receivables have been adequately satisfied. Approving a project that fails to safeguard or adequately protect the rights of employee receivables is quite difficult.
Creditors’ Meeting and Votes of Workers’ Creditors
At the creditors’ meeting where the composition project will be voted on, workers’ creditors also have the right to vote. Creditors are grouped according to legal regulations, and each group votes within its own group. Workers’ creditors generally form a separate group, and a certain majority is required for the project to be approved. Voting for a project that protects workers’ rights is a crucial factor in approving the project.
Post-Term Status: Success or Failure
Once the grace period expires, the composition process either concludes with the approval of the composition or results in the rejection of the composition and the debtor’s bankruptcy. In each case, the status of workers’ receivables differs.
Confirmation of the Concordat and Its Effect on Workers’ Receivables
If the court is satisfied that the composition agreement project meets the legal requirements, reasonably protects the rights of all creditors, including employees’ receivables, and that the debtor is capable of implementing the project, it will approve the composition agreement. The approved composition agreement becomes binding on all creditors of the debtor. In this case, employees’ receivables accrued before the deadline will be paid at the rates and terms specified in the composition agreement project. Receivables accrued during the deadline must already be paid in full.
Rejection of Concordat and Consequences of Bankruptcy
If the court does not approve the composition project, or if it is determined that the purpose of the grace period cannot be achieved, the court may reject the composition request and declare the debtor bankrupt. If the debtor is declared bankrupt, the company enters liquidation. During this process, pursuant to Article 206 of the EBL, employees’ receivables are considered the first-ranking privileged receivables and are given priority over other receivables. However, if the bankruptcy estate lacks sufficient assets, there is a risk that even all employees’ receivables may not be collected.
Composition Processes and Workers’ Claims in the Context of Antalya
Antalya has an economy centered around tourism, agriculture, and services. The bankruptcy processes of businesses operating in these sectors can be affected by local economic dynamics and workforce structure.
The Importance of Local Dynamics
In Antalya, the status of workers’ receivables during bankruptcy proceedings may vary depending on the sectoral distribution of businesses within the city. For example, a bankruptcy for a company in the tourism sector may require different assessments regarding the receivables of seasonal workers or employees receiving foreign currency-based wages. In the agricultural sector, seasonal labor and product-based payments may require special attention in the determination and project planning of receivables. Local courts and commissioners may also take these dynamics into account when making decisions.
Why is Expert Legal Support Important?
The composition process is extremely complex and requires technical legal knowledge for both employers and employees. For employers, the proper preparation of the composition project, the legal settlement of employee receivables, and the successful management of the process are crucial. For employees, the accurate assessment of their receivables, the exercise of their right to object to the composition project, and the full protection of their rights are crucial. Therefore, seeking professional legal support regarding employee receivables during the composition period in Antalya is crucial to both prevent loss of rights and ensure the most efficient process. A legal professional with expertise in the field will provide the parties with the right guidance and help prevent potential disputes.
While the composition period allows a company to breathe financially, it is also a process that requires meticulous attention to the protection and payment of employee receivables. The privileged status of employee receivables constitutes one of the most crucial elements of the composition project, and satisfying these receivables is an essential condition for the project’s approval. In this complex process, both employers and employees must be fully aware of their rights and seek legal counsel to achieve fair and sustainable solutions.