Financial Preparation Before a Concordat Application in Turkey

The concordat is a procedure under the Turkish Enforcement and Bankruptcy Law that allows a debtor who cannot pay its debts as they fall due, or is at risk of being unable to, to restructure those debts through an arrangement with its creditors. The application, requests for a moratorium and the court process are legal matters; it is recommended that these steps be handled by a lawyer. This article covers only the financial preparation: which financial documents need to be prepared and how to build the cash projection.

Separation of roles

Matter	Recommended responsible party
Application petition, moratorium requests, legal process with the court and the commissioner	Lawyer (recommended)
Reasonable assurance report	Independent audit firm authorised by the KGK
Preparing the financial statements, creditor list, cash projection and the financial calculations behind the repayment plan	The company’s finance team, with external CFO and financial management support where needed

External CFO and financial management support does not provide legal representation and does not replace the independent audit firm. Its role is to help prepare the financial data accurately, consistently and in an auditable form.

The financial dimension of the documents under İİK Article 286

The current text of the law is the reference. In general, financial preparation covers the following documents:

1. Preliminary concordat project

The repayment plan proposed to creditors: the repayment percentage, the timing and the sources from which payments will be made. The critical financial question is whether the proposed plan can be met from the company’s cash generation.

2. Documents showing the financial position

Under the heading “documents showing the state of the debtor’s assets”, the law lists, among other things, for debtors required to keep books: the latest balance sheet prepared under the Turkish Commercial Code, income statement and cash flow statement; interim balance sheets prepared both on a going-concern basis and at the probable sale prices of the assets; the opening and closing certifications of the commercial books and e-ledger receipt information; lists of tangible and intangible fixed assets with their book values; other information and documents explaining the financial position; and lists of all receivables and payables with their maturities (İİK Article 286(1)(b)). Under the Regulation on Documents to be Attached to a Concordat Request, for debtors subject to independent audit the latest balance sheet, income statement and cash flow statement must have been audited (Article 7(2)). For these three statements, no more than one calendar year may have passed since the close of the reporting period they relate to; the other tables, information and documents may date from no more than ninety days before the application to the court (Article 7(3)). Book values should be current, and doubtful receivables and inventory should be assessed realistically. Inflated asset values lead to a loss of credibility later in the process.

3. Creditor list

A list showing the creditors, the amounts owed and their priority status (İİK Article 286(1)(c)). The list should be reconciled with the accounting records. Bank, tax, social security, supplier and employee claims should be shown separately.

4. Comparison with the bankruptcy scenario

A table comparing the payments to creditors under the preliminary project with the amounts creditors would be expected to receive in bankruptcy. The table should be consistent with the interim balance sheet prepared at the probable sale prices of the assets.

5. Reasonable assurance report

An audit report, with its supporting basis, prepared by an independent audit firm authorised by the KGK (Turkey’s Public Oversight, Accounting and Auditing Standards Authority) within an audit conducted under Turkish Standards on Auditing, giving reasonable assurance that the offer in the preliminary concordat project will be fulfilled (İİK Article 286(1)(e)). The firm’s work relies on the financial data provided by the company, so data that is ready and consistent affects the speed and quality of the process.

The cash projection

The cash projection is the core of financial preparation. Building it in two layers is recommended:

• Short term (weekly): A weekly cash forecast to keep operations running throughout the process. Payroll, critical suppliers and tax payments are shown separately. See the collection delay stress test for the method.
• Long term (monthly or quarterly): A projection covering the full repayment plan, based on assumptions for sales, margins, working capital and capital expenditure.

Points to watch in the projection:

• Compare assumptions with historical performance. Growth assumptions not seen in the past need separate justification.
• Reflect the possibility of suppliers tightening payment terms in the working capital requirement.
• Prepare at least one downside scenario and show whether the repayment plan can be met under it.
• Indicators such as DSCR can be used to assess debt service capacity.

Common mistakes

• Planning to complete documents after filing: The court grants a temporary moratorium when it finds that the documents listed in Article 286 are complete (İİK Article 287(1)). Other documents and records the court or commissioner may request during the process must also be provided (Article 286). Financial preparation should therefore be completed before the application.
• An optimistic projection: Assumptions that creditors and the independent audit firm will question weaken the credibility of the process.
• A creditor list that does not reconcile with the records: An incomplete or incorrect list needs correcting later.
• Forgetting operational cash needs: The cash required for the company to keep trading during the process must be planned separately.

What it means for management

The credibility of a concordat application depends heavily on the quality of the financial preparation. While the legal process is handled by a lawyer and the reasonable assurance report by an authorised independent audit firm, the company’s finance team must prepare accurate and consistent financial data on time. Starting early strengthens the basis of the application and also leaves room to assess alternative restructuring options.

Sources last checked: 21 October 2026