Points of Comparison of Formal Processes in US, UK and Turkey

Ian Jack Co-Head of Global Restructuring & Finance Department London Our global Restructuring & Insolvency team has a deep +44 20 7919 1700 [email protected] understanding of the local and cross border issues arising in all types of and recoveries. The team is ideally suited to today's business climate where financial Debra Dandeneau restructurings are rarely confined to one jurisdiction. With Global Restructuring & Insolvency Group restructuring and insolvency practitioners located across the New York globe, we can mobilise teams quickly and seamlessly across +1 212 626 4875 debra.dandeneau borders, time zones, markets and cultures to meet our @bakermckenzie.com clients' needs.

We offer cutting-edge and innovative legal and strategic solutions to complex cases. Our team regularly represents secured lenders and other secured , creditors' Muhsin Keskin Head of Banking and Finance committees, corporate , investors, insurance Istanbul companies, equity holders and trustees in crafting +90 212 376 6453 [email protected] sound and practical solutions across practices and industries in actual or anticipated financial difficulties.

Koray Söğüt Head of Dispute Resolution Istanbul +90 212 376 6422 [email protected]

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This chart provides a basic overview of key concepts under US, UK and Turkish restructuring and insolvency processes and is not intended to be exhaustive or to be relied on as a legal opinion or advice.

For questions and comments, please feel free to contact one of the team members focused on restructuring and insolvency.

Esin Attorney Partnership Baker McKenzie LLP

İsmail G. Esin Ian Jack +90 212 376 6451 +44 20 7919 1700 [email protected] [email protected] Koray Söğüt Debra Dandeneau +90 212 376 6422 +1 212 626 4875 [email protected] [email protected] Muhsin Keskin Michael Doran +90 212 376 6453 +44 20 7919 1790 [email protected] [email protected] Erdal Ekinci Adam Farlow +90 212 376 6447 +44 20 7919 1514 [email protected] [email protected] Duygu Gültekin Haden Henderson +90 212 376 6441 +44 20 7919 1711 [email protected] [email protected] Bevis Metcalfe +44 20 7919 1102 [email protected] Geoff O'Dea +44 20 7919 1968 [email protected] Simon Porter +44 20 7919 1970 [email protected] Megan Schellinger +44 20 7919 1517 [email protected]

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US UK Turkey Chapter 11 Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

INITIAL CONSIDERATIONS

1. Nature of Chapter 11 used to effect Insolvency Act process Insolvency Act process used Companies Act process used Essentially a contractual Execution and process operational restructuring, primarily used to effect a primarily to effect debt-for- for solvent or insolvent process binding on banks Bankruptcy Code deleverage balance sheet, pre-packaged sale of the equity swap or deleverage restructurings. that signed the framework process used for solvent and/or commence asset business or assets balance sheet. agreement (FA) produced or insolvent sale of the business as a effected by by the Turkish Banks restructurings. going concern. administrators (i.e. Association (TBA) and external qualified debtors that separately appointees). apply to enter the process.

2. Solvency Solvency not relevant for Available for insolvent Available for solvent or Available for solvent or Available for insolvent Available for an insolvent requirement voluntary bankruptcy. entities or those likely to insolvent entities. insolvent entities. entities or those likely to company unable to pay Involuntary bankruptcy become insolvent. become insolvent. Not due debts or unlikely to limited to entities that are available if has pay debts upon maturity. not generally paying their entered into bankruptcy Creditors in a position to debts as they come due. proceedings. file for bankruptcy may Not available if creditors also file for composition. with more than 25% of aggregate claims have begun legal proceedings against the debtor.

3. Requirement to No, but debtor must Yes. Yes. Debtor must have sufficient Procedure only available to Procedure only available demonstrate demonstrate that it has a connection with England or Turkish debtors. to Turkish debtors. COMI ("centre of domicile, place of business, Wales and be capable of Furthermore, Turkish banks, main interests") or property in the US to be being wound up under the financial leasing companies, eligible to file. Insolvency Act.In the case of finance companies, foreign companies English factoring companies, capital If COMI exists elsewhere, creditors may ask the court Law governed loan will markets institutions, to dismiss the case in favor suffice. insurance and reinsurance companies, payment of commencement of Governing law of debt may be proceeding in other changed to English law to services and e-money jurisdiction." provide jurisdiction (where institutions and system operators cannot benefit debt document so permits). No "bad faith" bar. from the framework agreement as debtor. If process is combined with Administration, COMI must be in/shifted to the UK - not a particular obstacle in the case of financial holding companies.

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

4. Is pre-pack sale Yes, by way of Section 363 Yes. No, unless process is combined with an administration. Not applicable. Yes. The debtor can possible? sales or a prepackaged transfer all or part of its chapter 11 plan. assets to the creditors (malvarlığının terki suretiyle konkordato).

5. Restructuring of Yes. Yes. No, secured and preferential Yes. Not a restructuring Yes. But the provisions both secured creditors cannot be bound nor procedure to the extent that of concordat process are and unsecured their rights altered without cannot write off debt without different with respect to claims? express consent. 100% consent. secured and unsecured Similarly, security rights creditors. For example, cannot be impaired without the debtor can negotiate individual and conclude a separate consent. Ability to change restructuring deal with its other terms of debt secured creditors. (unsecured and secured) with stipulated majority consent across relevant creditor group.

6. Classification of Only similarly situated No classing of creditors. No classing of creditors. Affected creditors are No. Secured and unsecured creditors and creditors can be classed However, secured creditors separated into classes creditors are separately shareholders together for voting not bound by outcome. (classes are made up of classified. purposes, but plan creditor/members and proponent has flexibility. subsidiaries of them) whose Secured and unsecured rights are not too dissimilar to creditors are separately allow them to consult on the classified. proposed plan.

7. Required voting Absent a "," each No voting of creditors. Approval of CVA requires: (i) Each class of creditors or Approval by 2/3 in value of Approval of the approvals by class of impaired creditors 75% in value of those present members must accept the creditors in the Creditor composition plan by creditors and and each class of impaired and voting (excluding secured SoA by (i) 75% in amount and Institutions Consortium (i.e., creditors would require shareholders shareholders must accept or part secured claims); (ii) (ii) majority in number. Turkish bank/financial the affirmative vote of (i) the plan by 2/3 in amount approval is invalid if more institution creditors and half in number of the and majority in number. than 50% in value of creditors Foreign Credit Institutions registered creditors that who are not connected to the and International own a minimum of 50% debtor vote against; and (iii) Organizations) who signed by value of the claims 50% or more in value of the FA and who have subject to the members must vote in favour. exposures to a debtor) composition plan; or (ii) required to approve specific one-fourth of the restructuring agreement for registered creditors that particular debtor, and most own two-thirds of the other decisions. claims subject to the Foreign credit institutions composition plan. The

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

and international voting right is available organizations authorized to only for creditors affected extend credits to debtors by the composition under the laws of their home project. jurisdiction ("Foreign Credit Institutions and International Organizations") can join the financial restructuring process by signing the FA on a case-by-case basis without being subject to the Creditor Institutions Consortium's approval. Write down of debt requires 100% approval. 75% by volume and 30% by number to approve the accession of third party creditors which have not signed up to the FA, to approve the borrower's borrowing from those willing to lend and/or extending the duration of negotiations to 150 days. 90% by volume and 2 by number for additional lending.

8. Ability to bind The plan may bind a Dissenting creditors may be SoA must be substantively Per voting majorities above, Dissenting creditors may minority/dissenti dissenting member of an A plan is not necessary bound to the terms of the plan fair, which is defined as a no ability to bind dissenting be bound by the terms of ng creditors accepting class if it pays the subject to requisite majority scheme that an "intelligent creditors to any write off. the plan subject to but a CVA or SoA can be dissenter at least as much proposed by the approvals in each class. and honest man, a member of Per voting majorities above, requisite majority as it would have received in administrator who can Those with no economic the class concerned and limited ability to bind approvals. a chapter 7 . interest need not be acting in respect of his also effect the sale of the dissenting creditors for To bind a dissenting creditor business or its assets. consulted. interest might reasonably additional lending. approve." class, the plan must be fair 2/3 by value majority in and equitable and not Dissenting, subsequent relation to other matters will unfairly discriminate against ranking creditors may be bind dissenting creditors the dissenting class. bound to the terms of the plan who are signatories to the A dissenting class of subject to requisite majority FA. approvals in each class. secured creditors must

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

retain its and receive Consent of all classes of Will not bind non- an amount equal to the affected stakeholder required. signatories. present value of the assets Out of the money creditors securing the claim or the (who would receive nothing amount of its secured claim. by reference to an insolvency For an unsecured dissenting analysis) can be crammed class, the plan must satisfy down by combining a SoA with an Administration, the “absolute priority rule.” This means that junior restructuring in the money creditors and shareholders debt into the acquirer and leaving out of the money debt may not receive a distribution or retain an in the seller shell. interest in the reorganized To invoke an Administration, debtor. One possible COMI must be in/shifted to exception is if the junior the UK. creditors or shareholders contribute "new value" under specific guidelines.

9. Who can Voluntary proceeding may Voluntary proceeding Proceeding may be Voluntarily proceeding may Debtor - see row 2 above. Voluntary proceeding commence? be commenced by the may be commenced by commenced by the debtor's be commenced by the debtor. may be commenced by company at any time in the debtor entity. directors, administrator, or On application to court for the company's board of accordance with . directors at any time. Involuntarily proceeding permission to summon authorization required by its may be commenced by meetings of classes of Involuntary proceeding organizational documents. the debtor's directors, members/creditors, any may be commenced by Involuntary proceeding may holder of a qualifying shareholder, liquidator, or creditors in a position to be commenced by three or , or any administrator can commence file for bankruptcy of the more unsecured creditors if creditor owed more than an involuntary proceeding. debtors. the debtor is not generally £750. paying its debts as they Process may be come due. commenced by: (i) court order; or (ii) out of court by the filing of a series of prescribed documents on the public record.

10. Shareholder Typically, no. Only to the No. No. No. No, unless the articles of No, unless the articles of consent needed extent required by the association require. association require. to commence company’s organizational proceeding? documents.

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

11. Do directors A company is not obligated As soon as there ceases to be any reasonable prospect of company avoiding insolvent The directors must explore The directors must have a duty to to file for US bankruptcy liquidation, directors may incur liability for "" if they fail thereafter to take this option as part of their explore this option as commence upon discovering its every step available to minimise the loss to creditors. The liability will not apply to actions general liability as a part of their general proceeding? insolvency; there is no taken by a liquidator or administrator. The risk can encourage directors to file. director. liability as a director. director liability for failure to file.

12. Ability to In limited circumstances, No. Group No, but can have inter- No, but can have inter- No. No. consolidate bankruptcy courts may are either coordinated by conditional CVAs (i.e., where conditional SoAs (i.e., where group estates? authorize substantive appointing identical approval of a CVA by all approval of a SoA by all consolidation of debtors' administrators or under entities is a condition entities is a condition estates. It is considered an protocols. precedent to the CVA coming precedent to the SoA coming extreme remedy and Simultaneous into effect). into effect). generally only available administrations can be English law guarantees of the where it is impracticable to used to effect sale of the English law guarantees of the debt to be restructured disentangle the assets and business or its assets through a SoA can be debt to be restructured liabilities of the different across a group with the compromised without placing entities or where creditors through a CVA can be subsequent compromised without placing the guarantors into a specific can demonstrate that the apportionment of sale SoA, and regardless of the guarantors into a specific entities held themselves out proceeds between whether those guarantors as a single economic unit CVA, and regardless of insolvency estates. whether those guarantors could have been placed into a and they relied upon that.. SoA. could have been placed into a CVA.

13. Who can Debtor (or if it fails to do so For CVAs and SoAs, formally, debtor only, but creditors most usually have significant input Both the debtor and the Only debtors are obliged propose an within four months (which (and majority consents will be required to approve). creditors. to propose a composition actual plan? can be extended), creditors. Administrator plan. However, the If a chapter 11 trustee is registered creditors have appointed, the debtor’s the right to participate in exclusive right to file a plan the negotiations for the terminates. composition project.

14. Court Proceeding overseen by a Limited court Limited court involvement. Heightened court involvement No. Composition involvement federal bankruptcy court for involvement, but the The nominee must report to in class meetings and Under the FA, an arbitral proceedings are activities outside ordinary administrator may apply the court, which then decides approval of the SoA. committee (AC) is created overseen by the course of business. There is to the court for directions whether to convene meetings competent commercial Court can refuse to convene to resolve disputes arising no court operational throughout to vote. Where the class meetings or approve the from failure by creditors to court of first instance. supervision for activities administration. administrator or liquidator is SoA, even if approved by perform obligations under The court also appoints a outside the ordinary course the nominee, there is no composition commissary statutory majorities. the FA. This would not of business, but court requirement to report to court. appear to extend to whose scope of duties is Scheme can be challenged in authorized is required. CVA can be challenged in creditors failing to perform decided by the court. court for unfair prejudice or court at class meeting or sanction stage. obligations arising under material irregularity. any FRC struck with a

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

particular debtor.

15. Management of Debtor (board and Yes. Licensed insolvency Debtor (board and Debtor (board and Debtor continues to manage Yes, concordat Debtor/ management) represents its practitioner acting as management) but Licensed management) but scheme its affairs subject however officers/commissary Insolvency estate and cannot be administrator. supervisor often appointed to to the terms of an (konkordato komiseri). officer? removed except by court appointed to act as nominee. assist with SoA process. undertaking it is obliged to The scope of their duties order under extraordinary provide to commence to and authorizations are circumstances, e.g., fraud or process, which limits its determined by the court gross mismanagement. ability to do certain things, on a case-by-case basis. e.g., dispose of assets and grant security.

16. Disclosure to A court-approved disclosure No statement is required There are numerous statutory There are limited prescribed The FA specifies that any Adequate information Voting Creditors statement accompanies a for 'pre-packaged and insolvency rule matters that must be set out FRC entered into should about the debtor's plan, providing adequate administration' (i.e. a requirements for the CVA in the explanatory statement, legislate for information financial affairs to allow information about a debtor's process set up so that it proposal document, including giving considerable flexibility flows from the debtor to the creditors to make an financial affairs to allow can be fully completed setting out a comparison of to those proposing the SoA. creditor. Furthermore, with informed decision in creditors to make an immediately after the the CVA outcome with Broadly speaking, the its application for voting on the plan must informed decision in voting administration liquidation outcomes, in explanatory statement must restructuring, the debtor be provided by the on the plan. commences) but a addition to an extensive list of set out such information as an undertakes to provide concordat officers. In disclosure statement other prescribed matters average creditor would expect financial and other practice, concordat must be filed after the required to be set forth in the to see or would require in information about its affairs officers prepare and sale. proposal document. order to make an informed and the other members of submit financial reports decision such that they are its group. regarding the financial extensive. Without prejudice to the status of the debtors so provisions of the Banking that the creditors and the court itself closely Law No. 5411 and Personal Data Protection Law No. monitor the company's 6698, the bank to which the financial ability to comply with the concordat plan. debtor sends its FRP, and the leader bank, if appointed, may provide information to the Foreign Credit Institutions and International Organizations regarding the debtor's financial restructuring process pursuant to their written requests.

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

EFFECT OF PROCESS

17. Does debtor Yes, see above. Administrator assumes See row 15 above. See row 15 above. See row 15 above. The debtor may continue remain in A debtor in possession may control. Directors' powers its regular activities possession with conduct the ordinary course cease unless permitted under the supervision of continuation of with consent of the commissary. of its business without court incumbent approval and has the administrators. However, the court may management exclusive right to propose a require that the debtor control? obtain the commissary's plan of reorganization for 120 days, subject to further approval for specific extension. transactions or place the commissary directly in Court is required to approve charge of the most major business management of the decisions (e.g., sale of debtor's commercial assets and entering into activities. secured financing).

18. Stay/Moratorium Upon filing, enforcement of Yes, but does not No, unless debtor is a "small No, unless in an Yes, but subject to During the initial and all pre-filing judgments and prevent termination of company" or in an administration process or a exceptions mentioned in definitive grace period: collection activities, most contracts. administration process. moratorium scheme is used Row 7. Additionally, will only . No enforcement foreclosures, contract (which requires some of apply for 90 days unless proceedings can be terminations and creditor class majority extended by CIC (75% by initiated or continued repossessions of property of consents). value and 30% by number and no interim the debtor, etc., are approval). Moratorium will attachment and automatically stayed, fall away if FRC not signed. injunction decisions subject to certain statutory can be exercised, exceptions. including the enforcement proceedings for public receivables. . The period of prescriptions and statute of limitations that can normally be halted due to the enforcement proceedings will be suspended. . Unsecured receivables shall not accrue interest unless the composition plan

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

states otherwise. . -Should an assignment agreement for future receivables be executed between the debtor and the third party before the definitive period and the receivables subject to this agreement have arisen thereafter, the assignment agreements shall be deemed invalid. . Creditors secured with pledge may initiate or continue debt enforcement proceedings but cannot obtain any dispositive measure against the debtor or realize the sale of the pledged assets. . If a contract bearing importance in the debtors' commercial activities provides that the composition application would be deemed a violation of the contract, would be considered a just cause for termination or would accelerate the debts, such provisions shall not be enforceable. In other words, agreements cannot be terminated based on the composition application, even when

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

the agreement allows. . The debtor may terminate a continuous contractual relationship that impedes the composition project upon the approval of the commissary and court. . The debtor may continue its regular activities under the supervision of the commissary. However, the court may require that the debtor obtain the commissary's approval for specific transactions or place the commissary directly in charge of the management of the debtor's commercial activities. . The debtor cannot establish pledges over its assets; provide suretyships; transfer its immovable properties or necessary assets for its operations; and/or establish any collateral over those assets without the court's permission. If the debtor violates this article, any transaction made would be deemed void.

19. Provision for A chapter 11 debtor can Insolvency Act empowers No. No. Yes, to the extent of the No. debtor-in- obtain postpetition financing administrator to borrow security granted over possession on a "super priority" basis post-petition but not on previously unencumbered

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

super priority that also can "prime" other super priority or priming assets. No priming security financing? secured creditors if they are basis absent secured permitted without consent of "adequately protected." As a creditors' consent. pre-existing secured practical matter, non- Creditors whose support creditor whose rights would consensual priming rarely be affected. is critical to the occurs. administration process, including post-petition lenders, may be paid in full through administration by achieving priority "expense" status in the process (just behind senior secured creditors but ahead of other unsecured lenders).

20. Debt-to-equity Shareholder consent is not Yes, through pre-pack. Yes. Yes, to extent shareholder No. No. swap (without required so long as creditors rights are to be varied. shareholder are not receiving more than consent) 100% recovery.

21. Third party Non-debtor guarantors or No. In principle, release of third Yes, in principle releases of Yes, subject to limits set out No. releases other non-debtor parties party guarantors can be third party guarantors can be in Row 7. may be released under obtained under the CVA obtained as part of the SoA certain circumstances subject to any challenges by particularly where guarantees through a plan. the creditors that to do so are provided under the terms amounts to unfair prejudice. of the facility documentation, Non-consensual releases are approved only if the terms of which are being necessary for the debtor's amended and pursuant to which the English court has reorganization. jurisdiction.

22. Recognition Yes, in accordance with domestically adopted version of UNCITRAL or other applicable conflict of laws principles and/or Highly questionable as it No. abroad treaties for other countries. does not operate as a collective insolvency proceeding subject to the supervision of a court.

23. Extent of Can be a highly litigious Less litigious than Less litigious than Chapter 11 Less litigious than Chapter 11 Less litigious than Highly litigious litigation/areas procedure Chapter 11 Commonly litigated matters: Commonly litigated matters: concordat. procedure. which attract Majority of litigation centers Commonly litigated N/A Commonly litigated litigation . ranking of claims . which class a creditor around valuation and matters: matters: should be placed in

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

entitlement of creditors to . ranking of claims . proof rights . whether disclosure is . Identity of creditors certain rights, such as adequate. . proof rights . Unjust interim makewhole premiums. injunction decisions . set-off issues given by the commercial court regarding third parties; e.g., creditors . Authenticity of claims

24. Adoption of Yes. Chapter 15. Yes. Yes. Yes. No. No. UNCITRAL Model Law on Insolvency1

25. Length, Section 363 sale - very Pre-pack sale very quick. Quick and efficient with few Often time-consuming and Maximum of 150 to Very time-consuming complexity quick. Statutory limit of one reporting obligations. expensive as a formal court conclude an FRC and expensive as a application and at least two Implementation. No time formal court application. A prepackaged plan can be year, can be extended by Often less expensive than as short as 45 to 60 days. court order and thus formal insolvency procedures. court hearings are necessary. limit on how long In a nutshell, there are implementation might take. A “prenegotiated” plan can process often exceeds four main stages for the be as short as 90-120 days. one year. composition proceedings: A "free fall" filing can be Involves on-going but limited filing . Preparations for indefinite, sometimes lasting more than a year. requirements. composition application (approximately two to four weeks in practice) . Initial temporary period (three to five months) . Definitive period (12 months to 18 months) . Composition payment plan (may be several years - depends on the negotiations with the creditors and the agreed payment plan)

1 Question has relevance to recognition abroad as some countries (e.g., Switzerland) have acceded to the UNCITRAL Model Law ("Treaty Law") recognising foreign procedures under the Treaty Law only where the foreign state in question has also acceded to the model law.

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

26. Costs Costs can be material, Costs similar to those Less than Chapter 11. Less than Chapter 11. Less than concordat. Costs material. especially in a “freefall” involved in normal course chapter 11 case. Debtor’s business sale. estate also must pay for the fees and expenses of the legal and financial advisors for an official committee of unsecured creditors.

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

OTHER FACTORS

27. Wrongful or None except a "prolonging "" No, unless an administration No, unless an administration Wrongful trading directors Wrongful trading insolvent trading insolvency" tort that has claims may be brought or liquidation follows. or liquidation follows. may be held liable. directors may be held restrictions and been recognized only by a where debtor trades with liable. directors' very small minority of courts. actual intent to defraud liability administrative creditors. Fraudulent trading is a criminal offense punishable by up to 10 years' imprisonment and/or an unlimited fine. Court can require a director who engages in "wrongful trading" to contribute to the insolvency estate. Wrongful trading occurs when director(s) or shadow director(s) who conclude (or, should have concluded) there is no reasonable prospect of the debtor avoiding an insolvent liquidation, fails to take every step that a reasonably diligent person would take to minimize potential loss to the company's creditors. Court may disqualify a person who engages in fraud or other breaches of duty from acting as a director for between one and 15 years.

28. Priority of The Bankruptcy Code Statutory order of priority: Order of priority determined Order of priority determined The Execution and Bankruptcy Code prioritizes claims as Claims prioritizes claims as follows: . fixed by plan. by plan. follows: . secured claims (to extent charges/mortgages . Secured creditors have priority in respect of collecting of collateral value) the proceeds of the sale of the secured assets, which . administrator's . administrative expenses expenses, including in principle will be sold by the bankruptcy

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

of the bankruptcy those incurred under administration as soon as possible. contracts entered into . unsecured, post-petition . Unsecured creditors will be paid in the following order: claims in an involuntary by administrators . Taxes and other government charges accrued in case . preferential debts connection with the asset to be sold. . wage claims of employees (primarily limited amounts due to . Employee or labor pension related claims and . contributions to employee employees and tax alimonies. benefit plans authorities) . Claims of third parties whose assets are managed . certain recent income, . a "prescribed part" by the debtor under a custody or guardianship. sales, employment or (amount capped at . Claims prioritized under various laws. gross receipts taxes £600,000 for . Other unsecured claims. . unsecured claims unsecured creditors) . shareholder interests . floating charge holders . unsecured creditors . deferred creditors . shareholders

29. Pension A debtor may terminate its Will automatically trigger Will automatically trigger a Will not automatically trigger a N/A N/A liabilities single employer pension a significant unsecured significant unsecured significant unsecured plans through a "distressed statutory debt under the statutory debt under the statutory debt under the termination" in bankruptcy, Pensions Act for defined Pensions Act for defined Pensions Act for defined leaving the PBGC with an benefit pension schemes benefit pension schemes that benefit pension schemes that unsecured claim for the that are in deficit. are in deficit. are in deficit. termination liabilities. The Will trigger requirement Will trigger requirement to Will not trigger requirement to PBGC can force an to enter into government enter into government backed enter into government backed involuntary termination, but backed Pension Pension Protection Fund. Pension Protection Fund. rarely does. Protection Fund.

30. Clawback Rule Preferences 90 days for Preferences Not applicable. Not applicable. Not applicable. Articles 277 through 280 non-insiders and one year of the Enforcement and . (six months) for for insiders. connected (akin to Bankruptcy Code grant a Fraudulent transfers two to insiders) two years bankruptcy receiver the right to challenge (by court six years. . Transactions at process) and have set undervalue (two aside certain kinds of years) (unlimited transactions executed by time if fraud) the debtor before . voidable floating commencement of the charges (akin to US formal bankruptcy security) 12 months proceeding. By such same to extent means, the receiver can

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US UK Turkey Chapter 11 Administration Company Voluntary Scheme of Arrangement Framework Agreement Concordat / Arrangement (CVA) (SoA) Composition

(Turkish Scheme of Arrangement)

secures new clawback payments made money. or reverse transactions entered into by the debtor prior to bankruptcy. Three groups of transactions may be avoided, as follows: . transactions concluded within five years prior to bankruptcy that were intended to damage its creditors . transactions executed within the two years prior to bankruptcy made for no consideration, such as donations . certain transactions concluded within one year prior to the bankruptcy, specifically: . pledges given by the debtor as to the secured debt incurred . payments made other than with money or other common payment instruments . payments in relation to debt not yet due . the conferring of interests in [real] property for the benefit of third parties

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