The Capital Markets Law No. 6362, which was accepted on 06 December 2012 (“Law”), was published in the Official Gazette dated 30 December 2012 and entered into force on the date of publication. The Capital Markets Law No. 2499 was abrogated with the entry into force of the Law. The Law foresees that the secondary legislation under this Law shall be enacted within one year as of the date of publication of the law on the Official Gazette (i.e. until 30 December 2013), and the provisions of the current secondary legislation which do not contravene the Law shall continue to be in force until the issuance of the new legislation.
Issuance of Capital Markets Instruments
Capital Markets Board of Turkey (“CMB”) shall grant its approval for the issuance of capital markets instruments. CMB only approves the prospectus or relevant issuance document and with the new Law the registration of shares or securities by the CMB is no longer necessary. In accordance with Article 6 of the Law, CMB shall decide whether or not to approve the prospectus application within 10 business days and the relevant persons shall be notified. During the initial public offering, the prospectus review period is 20 business days. The approved prospectus shall be published in compliance with the principles determined by the CMB; registration with the trade registry and publication in the Turkish Trade Registry Gazette (“TTRG”) is not required. However, the place where the prospectus is published shall be registered with the trade registry and published in the TTRG. Pursuant to Article 7 of the Law, the prospectus may be published before the approval in accordance with the principles determined by the CMB.
Pursuant to Article 8 of the Law, investors may withdraw their offers to purchase within 2 business days following the publication of the additions and amendments made to the prospectus. Article 9 of the Law stipulates the validity period of the prospectus as 12 months from the first date of publication. More than one issuance may be conducted within 12 months with a sole prospectus.
Financial statements and reports shall be prepared and submitted in compliance with Turkish Accounting Standards regulations as to form and substance.
In accordance with Articles 14 and 15 of the Law, all information, instances and progress, which may affect the value of the capital markets instruments, the market price or the investment decision of the investors, shall be disclosed to the public. The liability of persons preparing reports with material disclosures and the scope of issues subject to material disclosure has been widened with the Law.
Included in the Law are provisions with regard to corporate governance principles which were regulated only under a communiqué before. The CMB may require that listed companies apply the corporate governance principles.
Pursuant to Article 17/3 of the Law, a resolution by the board of directors, which determines the principles of a transaction, must be adopted before entering into a transaction with the relevant party. The resolution must be adopted with the approval of the majority of the independent board members. If the independent board members do not approve, this issue shall be disclosed to the public and submitted to the approval of the general assembly.
The approval of the CMB is required for companies to enter the registered capital system. However, as per Article 18 of the Law, additional approval of the CMB is not required for companies that have already entered the registered capital system pursuant to Turkish Commercial Code No. 6102.
The CMB no longer determines dividend ratios. Public companies may distribute profit in accordance with the profit distribution policies as determined by their general assemblies. The CMB may, however, determine that different principles shall be applied to certain companies and certain sectors, as per Article 19 of the Law.
A separate provision with regard to prohibition on the hidden income (income shifting) has been added to the Law (art. 6).
The Law defines which transactions are regarded as being of an important nature for public companies and authorizes the CMB to determine the principles and procedures to be applied to such transactions, as well as the sanctions to be imposed in case of noncompliance.
Article 24 of the Law provides for the “right to exit ”. This right allows shareholders who attend general assembly meetings where resolutions regarding transactions of an important nature are taken, and who vote against such resolutions, to exercise the right to sell.
A shareholder’s voting rights shall be frozen where they are in noncompliance with the mandatory call obligation pursuant to Article 26 of the Law.
Art. 27 of the Law addresses takeover bids. Known as the “squeeze-out right”, this right arises in cases where a shareholder reaches a certain threshold of shares, to be determined by the CMB. Having reached the required threshold, such a shareholder may exercise his right to purchase the shares of or “squeeze out” minority shareholders by paying them fair compensation for their shares.
The Law gives the CMB the authority to terminate the privileges related to voting rights and representation on the board of directors in public companies who show losses for 5 consecutive financial years, pursuant to their financial statements. However, pursuant to Article 28 of the Law, this provision shall not apply to the privileges of state institutions and organizations.
In line with corporate governance principles, the Law holds that the general assembly shall be convened to meet as determined in the articles of association and by announcements made on the Company’s website, Public Disclosure Platform and/or other places as determined by the CMB. This call must be made at least 3 weeks before the date of the meeting, excluding the date of publication and date of the meeting. Moreover, pursuant to Article 29 of the Law, upon request of the CMB, matters may be added to the agenda of the general assembly meeting and the principle of commitment to the agenda shall not apply in such a situation.
Pursuant to Article 29 of the Law, the provisions of the Turkish Commercial Code No. 6102 shall apply to general assembly resolutions and meeting quorums, except the special quorums set for certain resolutions. Moreover, observers may be sent by the CMB to the general assemblies in accordance with Article 95 of the Law.
Capital Markets Institutions and Activities
Regulations regarding collective investment companies have been introduced with the Law. The Open Ended Investment Trusts, which are formed by different portfolios/companies, was added to the Law.
Detailed provisions regarding stock exchanges are regulated for the first time in the Law. Moreover, central exchange, central custody and data storage institutions, which are financial infrastructure institutions, are regulated under the Law.
A Recovery Center for Investors has been established (Art. 82 et seq.)
Supervision and Measures
The CMB is authorized to audit all of the institutions that fall within the scope of the Law. Companies may not avoid providing the information and documents requested by the CMB by invoking privacy and secrecy provisions in other laws.
Measures have been written into the Law in a detailed way. For example, as per Article 94 of the Law, the CMB may file a case for the return of an amount determined by the CMB to the affected company (which incurs losses) in case it determines an income shifting. Further, a new article has been introduced which authorizes the CMB to prevent access to web sites conducting unauthorized capital market activities via electronic means (Art. 99).
Capital Markets Crimes
Articles 106-108 of the Law cover abuse of information (insider trading) and market fraud (manipulation), and the circumstances that do not fall within the scope of these crimes are indicated separately.
With regards to market fraud, provisions regarding active regret have been added to the Law. A reduction in the sanctions may be granted by the CMB if an amount equal to twice the benefit is paid to the Treasury.
The Law has introduced significant regulations in accordance with the new laws and necessities of the new age; and has been structured in line with the long term experiences. The secondary legislation should be issued immediately to complement the Law. We are of the opinion that the Law, will be understood more efficiently in practice and with the help of secondary legislation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.