Deteriorating demand conditions, increased cost pressures and accessing financing becoming very difficult, 2023 was a year with record concordat applications for Turkish businesses. After the ‘concordat storm’ in 2018 and 2019, when the postponement of bankruptcy was abolished, 2023 was the year with a record of 519 applications. Besides, in the 11 months of last year, about 20,000 companies shut down, while liquidations increased by 27.5 percent.
According to the information compiled by EKONOMİ daily from Konkordatotakip.com’s Press Advertisement Agency statistics, the number of provisional concordat decision (first application for concordat) was 519 in 2023. The number of final concordat decision was 352. The number of temporary concordat decision in 2018 and 2019, a period when the bankruptcy postponement was abolished, were 1384 and 1391 respectively. It was 419 in 2020, 451 in 2021 and 404 in 2022.
Data shows that construction and textiles were the sectors with the highest risk last year. Accordingly, the construction sector ranked first in concordat applications with 45 files, followed by textiles with 43 files and furniture with 16 files. The increase in the number of temporary concordat decisions granted to companies from the shopping mall, energy, food, health services, hotel management, packaging, metal product manufacturing and medical equipment and medical products sectors also stands out.
Speaking to EKONOMİ, sector representatives say that the average concordat process costs around TRY 3 million, and that this high cost is a deterrent for many companies, and that most companies resort to alternatives such as company closure, liquidation, and change of signboard instead of going under this burden. Pointing out that the number of concordats has increased this year despite the high cost, these sources point out that if there is no improvement in the financing channels of companies, the concordat option will continue to remain on the table.
Fabric manufacturer Emek Kumas, a supplier for world known brands, renewable energy firm Goktekin Energy, steel company Guclu Celik, and 9 shopping malls including Marmara Forum and Forum Istanbul were among the companies applied for concortat in 2023.
19,931 company closures
Business conditions getting difficult increased not only concordats but also company closures and liquidations. According to the Established-Closing Company Statistics announced by Union of Chambers and Commodity Exchanges of Turkey TOBB every month, the number of companies established in 11 months of last year decreased by 7.3 percent, while the number of companies closed in this period increased by 7.2 percent compared to the same period last year and reached 19,931. This picture was more dramatic for sole proprietorship. Accordingly, while the number of sole proprietorships established in January-November 2023 fell by 24.9 percent, the number of closed sole proprietorships increased by 44 percent. According to the statistics, 28,896 sole proprietorships were closed in the said period despite 17,744 sole proprietorships were established.
Liquidation applications up by 27.5 percent
In the January-November period of last year, there were also remarkable developments in liquidation applications. In 11 months of 2023, the number of companies that decided to liquidate increased by 27.5 percent compared to the same period of the previous year and became 24,045. 11,261 were located in Istanbul, 2,069 in Ankara, and 1,402 in Izmir.
Prolonged process creates risks for creditors
While a company entering the concordat process protects itself, the process is also difficult for the companies that are the creditors of the company. Sources speaking to the EKONOMİ point out that due to the long duration of the process and the fact that the approval decisions are generally given in the form of interest-free principal payments, the creditor’s payment has suffered a serious loss of value in the high inflation environment. The large companies protect themselves with concordat, but the creditor small companies can’t protect themselves and the fragility in the payment chain increases. According to the information obtained, the average duration of a bankruptcy decision in a concordat process is 471 days, the average duration of a concordat rejection decision is 497 days, and the average duration of a concordat approval decision is 699 days.
In addition, sector representatives say that there are cases of suspected misconduct in which some companies use the entire legal period in the concordat, waive before the last hearing and start the process over again a few days later, and in some cases, there are companies that re-apply in a different province after being rejected in a province, so legal deficiencies should be eliminated to prevent misconduct in concordat.