Recent Development

On August 17, 2016, the Council of Ministers issued two new state of emergency executive orders outlining new measures for and regulations of certain institutions and organizations (“Executive Orders“). The Executive Orders amend several laws and regulations related to the organization of the armed forces; discharge certain members of the military, police and other public officials linked to the Fethullah Terrorist Organization ("FETO"); and introduce new rules for the investigation process of FETO related crimes. Additionally, one of the Executive Orders regulates the management of organizations and institutions closed by and acquired through previous executive orders dated July 23, 2016 and July 27, 2016, and the process and procedure for payment of the debts of such institutions.[1]

Procedure for Payment of Debts

According to the Executive Order, the Ministry of Finance (or the General Directorate of Foundations (Vakıflar Genel Müdürlüğü), if the institution is a foundation) is responsible for the management and operation of the organizations and institutions taken-over through previous executive orders. The Ministry has the authority to determine the debts and obligations of such institutions, and decide whether or not to make payments to their creditors. Furthermore, it may choose to honor or terminate the existing contracts between such organizations and third parties. Accordingly, in order to collect their receivables, creditors should:

  • apply to the Ministry of Finance or the General Directorate of Foundations within 60 days following August 17, 2016, or, if the institution is closed after this date, within 60 days following such date; and
  • submit satisfactory books, records and documents displaying the claimed debt or obligation to the Ministry of Finance or the General Directorate of Foundations.

Failure to meet the application period of 60 days can result in the loss of the creditor's right to seek payment of the receivable. Payment of the debt is conditional upon the following:

  • the total amount of debt should not exceed the total asset value of the institution;
  • the relevant debt should not bring any additional burden and should not arise out of any surety provided by the institution; and
  • the relevant creditor should not be a member of, or linked to the FETO.Certain receivables, such as tax, public debts and loans secured by pledge have priority of payment over other receivables.

Conclusion

Previously, the manner in which the State treated the debts of the institutions taken-over by the State was ambiguous. This Executive Order aims to satisfy creditors unrelated to the FETO, and resolve any uncertainty about the management of these institutions' assets. We will keep you posted of any further developments regarding extraordinary measures. [1]This alert does not include all aspects of the Executive Orders and interested parties should review the entire Executive Orders for their own assessment.