Balance-sheet insolvency (borca batıklık)

Balance-sheet insolvency (borca batıklık) is the state in which a Turkish company's assets no longer cover its liabilities. It differs from a mere liquidity shortage: cash-flow difficulties may be temporary, whereas here the balance sheet shows that creditors' claims cannot be met in full.

Where such insolvency is suspected, the management body must prepare an interim balance sheet on both going-concern and liquidation values. If insolvency is confirmed, the situation must be notified to the court, which may result in the company's bankruptcy. Where recovery seems possible, a composition with creditors (konkordato) may be sought instead.

Failure to notify is one of the riskiest omissions for directors, as it can trigger their personal liability. The technical rules for calculating capital loss and insolvency are updated from time to time through secondary legislation.