What Is Permission to Continue Operations in Bankruptcy?
A bankruptcy decision is often understood to mean that a company must immediately cease all commercial activity.
However, this is not necessarily the case in every bankruptcy file.
Under certain circumstances, the business may be allowed to continue its operations temporarily during the liquidation process. In Turkish legal practice, this is commonly referred to as permission to continue operations in bankruptcy.
The main objectives of continuing business activity are:
Preserving the economic value of the enterprise
Preventing further losses for creditors
Maintaining the integrity of the business
Increasing the value obtained through liquidation
Do Business Operations Automatically Stop After Bankruptcy?
Once bankruptcy is declared, the assets of the company become part of the bankruptcy estate and liquidation proceedings begin.
Nevertheless, this does not always mean that every commercial activity must immediately cease.
In some cases, controlled continuation may be more beneficial where the immediate termination of operations could result in:
Unfinished production processes
Incomplete projects
Loss of inventory value
Termination of customer contracts
Reduction in the overall value of the business
Continuing certain operations may therefore protect both the value of the enterprise and the interests of creditors.
Legal Basis
Permission to continue operations is not regulated as a separate legal institution under that exact name in the Turkish Enforcement and Bankruptcy Law.
However, the practice is generally evaluated within the framework of:
Relevant provisions of the Enforcement and Bankruptcy Law
Protective measures taken by the bankruptcy office
Duties and powers of the bankruptcy administration
Protection of the common interests of creditors
In practice, Articles 210, 224 and 226 of the Enforcement and Bankruptcy Law are frequently discussed in this context.
When May Continuation of Operations Be Considered?
Continuation is not suitable for every bankruptcy case.
The following factors may be considered:
Whether the economic value of the business can be preserved
Whether continuation is likely to benefit creditors
Whether ongoing production or service activities exist
Whether continuation may create a higher return than immediate liquidation
Whether employment or public interest considerations are relevant
Who Makes the Decision?
After bankruptcy is declared, the authority of the company’s management is significantly restricted.
The main authority during the liquidation process generally belongs to:
The bankruptcy office
The bankruptcy administration
The creditors’ meeting, where legally required
The bankruptcy administration manages the process by considering the interests of the bankruptcy estate.
What Is the Purpose?
The continuation of operations is not primarily intended to rescue the company from bankruptcy.
Its main purpose is to preserve or increase the economic value of the bankruptcy estate during liquidation.
Examples may include:
Completing an unfinished construction project
Finishing products already in production
Delivering high-value customer orders
Selling perishable goods under economically favourable conditions
In such circumstances, temporary continuation may generate a higher return than immediate liquidation.
Can Every Company Continue Operating?
No.
Permission to continue operations is exceptional.
Continuation may be refused where it:
Does not benefit creditors
Increases losses
Delays liquidation
Creates additional financial risks
Is It the Same as Concordat?
No.
These mechanisms serve different purposes.
Concordat
The aim is to prevent bankruptcy.
The debtor generally continues operations under its own management.
Financial restructuring is the primary objective.
Continuation of Operations in Bankruptcy
The aim is to preserve the value of the bankruptcy estate.
Operations are conducted under the supervision of the bankruptcy administration.
The process remains part of liquidation.
Frequently Asked Questions
Can a bankrupt company continue production?
Not automatically in every case.
The continuation of production depends on whether it serves the common interests of creditors and preserves economic value.
Does permission remove the bankruptcy decision?
No.
Permission to continue operations does not eliminate or reverse the bankruptcy decision.
Can company managers continue to manage freely?
No.
After bankruptcy, management powers are significantly restricted and the bankruptcy administration plays the decisive role.
Conclusion
Permission to continue operations in bankruptcy is an important practical mechanism, although it is not regulated as an independent legal institution under that exact name.
Its primary purpose is to preserve the economic value of the enterprise and maximise the recovery available to creditors.
Each case must be assessed individually by considering both legal and economic conditions.
This article is intended solely for general informational purposes and does not constitute legal advice.
