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Effects of declaration of Concordat to agreements

11 May 2019
Effects of declaration of Concordat to agreements
11 May 2019

The concordat is generally included as a termination clause in most of the agreements. The parties of the agreements want to terminate the commercial relationship with a company which is weakened due to the declaration of concordat.

However, the legislator aims to prevent such practice and according to the last amendment on Article 296 of Execution and Bankruptcy Act (EBA), the provisions of the agreement stating that the concordat request “shall be accepted as a valid reason for the termination of the agreement” shall not be enforced and shall be deemed void. 

The exception of such provision is regulated under the Article 296/2 of EBA.  Agreements that keep the debtor in a continuous debt relation and prevent the success of the concordat process can be terminated at any time given that an approval from the commissar and the court must be obtained. However, service agreements constitute an exception to this rule, and it is not possible to terminate service agreements by this way. The compensation to be paid to the other party because of the termination of the agreement shall be considered as a receivable subjected to the concordat. 

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