Turkey provides substantial opportunities for private equities
with rapidly developing sectors, liberalization policies in
state-owned areas and corporate tax benefits. The attractiveness of
Turkish economy is based on stable economic growth and
restructuring potential of family-owned companies parallel with
global developments. Besides, Turkish financial system is mainly
dependent to banking sector which is a very crucial drawback for
small and medium sized enterprises (SMEs) with respect to create
alternative fund resources. Private equity investments funds are
highly expected to meet this deficit in consideration of latest
foreign inflows. SMEs are also able to take advantage of
operational and technological support of private equities that will
pioneer to increase gross margin profit amongst these
Valuation is an essential issue particularly on investment
decisions as a consequence of high expectations of Turkish
International funds are not favoured as much as it should be
Political concerns trigger uncertainties in Turkish
Conservative managerial approach of Turkish companies to
Turkish companies are not aware of exit strategies such as IPOs
and strategic sales.
Tax Deduction Benefit
According to clause 325/A of article 15 on Law Code 6322 private
equity investment partnerships enable to allocate tax deductable
private equity funds which shall be less than 20% of
shareholder's equity and should not exceed 10% of annual
declared income in current fiscal year.
In accordance with article 19 of Private Equity Investment Funds
Communiqué III No:52.4, 80 % of
fund's total value shall be comprised of more than one private
equity investments. In case private equities' investment amount
for SME's exceeds 10% of total fund value, the maximum
investment shall be 51% of total fund.
Furthermore, article 23 reiterated restraints on private equity
investment funds' investment strategies regarding financial
strategies that could be implemented.
Private equities are not allowed to invest in commodities and
gold or forwards that are based on these materials.
Short selling is not applicable that obstructs speculations
linked to price volatility.
Private equity investment funds are able to take advantage of
derivatives for the purpose of hedging the currency and interest
rate risks which is limited with 20% of total fund amount.
Any security transaction on credit is not possible for private
Fund information document is binding for managing the other
assets of fund which are not connected to private equity
Exit strategy could be bolstered with additional bankruptcy
On condition that private equity investment funds face with
bankruptcy or exit decision has been given, Capital Markets Board
("CMB") may give additional time with the object of
meeting minimum investment amount criteria that has been mentioned
under article 19. This time period could be maximum 2 years and may
be applied once in last five years of Private Equities'
operations start. Thus, private equities are capable of constitute
different types of investment strategies with respect to market
conditions within proper time frame.
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.
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