Turkey: The International Capital Markets Review Turkey Chapter


Despite the recent political and economic uncertainty and the coup attempt of 15 July 2016 against the government, Turkey has strong fundamentals for stable and long-term economic growth, which is evident in the following data demonstrating its stable growth performance. Turkey's GDP grew by 2.9 per cent in 2014 and 4 per cent in 2015. In the first quarter of 2016, Turkey's GDP has grown by 4.7 per cent and, in the second quarter, by 3.1 per cent.1

In parallel with the stable economic growth of the past 10 years, Turkish capital markets have also developed significantly in recent years, and Turkey has taken strides towards its goal of becoming one of the most significant and prominent international financial centres. One of the biggest drivers behind this development was the Istanbul International Financial Centre Project, which aims to make Istanbul a regional and global financial hub. Under this project, for the development of capital markets and financial instruments, priority was given to the establishment of a solid legal infrastructure, the increase in diversity of financial products and services, and the improvement of the regulatory and supervisory framework. To this end, starting from 2012, the fundamental principles governing Turkey's corporate and financial legislation were revamped through the introduction of the Turkish Commercial Code,2 the Turkish Code of Obligations3 and the Capital Markets Law (CML).4 The CML, which became effective on 30 December 2012, constitutes a major reform for the Turkish capital markets and has introduced fundamental changes to the entire legal framework of the Turkish capital markets, as well as the organisation and structure of the capital markets. The CML is designed to modernise the Turkish capital markets legislation by aligning it with EU regulations and market practice, and since then, the Capital Markets Board of Turkey (CMB), the primary regulator and supervisor of the Turkish capital markets, has taken significant steps towards that goal by restructuring the secondary legislation in line with the CML.

The CMB, as the main authority of the Turkish capital markets, regulates and supervises public companies, listed companies, underwriters, investment institutions, exchanges, mutual, closed-end and pension funds, the Settlement and Custody Bank (Takasbank), the Turkish Capital Markets Association (TSPB), the Central Registry Agency, the Investor Compensation Center (ICC) and other financial institutions operating in the Turkish capital markets, such as independent audit firms and rating agencies. One of the most important novelties brought by the CML was the establishment of Borsa Istanbul as a new stock exchange. Upon the enactment of the CML, Borsa Istanbul has been established as a private joint-stock corporation to replace Istanbul Stock Exhange (ISE), and the ISE, Istanbul Gold Exchange and Derivatives Exchange merged into Borsa Istanbul. To this end, Borsa Istanbul brings together all the exchanges operating in the Turkish capital markets under a single entity.

Another development under the project was the formation of an independent and professional arbitration system in Istanbul. The Istanbul Arbitration Centre was established in early 2015.


Following the enactment of the CML at the end of 2012, the Turkish capital markets legislation has been overhauled through the introduction of a number of communiqués issued by the CMB. The CML has encompassed greater flexibility and a greater role for the secondary legislation than the former in order to align the Turkish capital markets with international standards and cope with the Turkish market's needs.

To this end, the CMB has been adopting a number of new communiqués concerning different subjects ranging from corporate governance to tender offers in order to establish a robust system. While certain principles have been retained in the revamped regulations, crucial new tools and instruments have been introduced by the secondary legislation. On the other hand, the introduction of new tools and substantial changes to the existing ones have resulted in heated debate among market players and investors in bringing regulations into practical life. The CMB had to consider the discussions and also made material changes in newly adopted communiqués.

The following is a summary of notable mechanics and novelties introduced by certain communiqués issued by the CMB, including changes brought about afterwards.

i Features of the secondary legislation

Material transactions

The CML classifies a variety of transactions of public companies as 'material transactions' and provides additional rules to govern their mechanics, which is further elaborated on by the Communiqué on Common Provisions relating to Material Transactions and Exit Rights (II.23.1).5 Among others, mergers, demergers, type conversions, dissolution, transfers of all or a material portion of assets, granting privileges, amending the scope of existing privileges and delisting are considered as 'material transactions' for public companies.

In the event of a material transaction, the general assembly of shareholders' approval is required for the public company to enter into such material transaction. Shareholders dissenting from the general assembly resolution pertaining to the material transaction have an exit right by selling their shares to the company itself. The exit right price must be equal to the 30-day weighted average of the stock price, this 30-day period ending on the day preceding the date on which the material transaction is disclosed to the public.


Delisting is listed among the material transactions under the CML. While the exit right is the main tool for the minority shareholders to protect themselves from the adverse implications of the material transaction, the CML entitles the CMB to introduce a mandatory tender offer requirement for certain material transactions instead of the exit right. Accordingly, under the Communiqué on Common Provisions relating to Material Transactions and Exit Rights, delisting is listed among the transactions triggering a mandatory offer requirement in public companies.

To have a public company delisted from Borsa Istanbul, a single shareholder or shareholders acting together must own directly or indirectly 95 per cent or more of the voting rights of the public company. As a 'material transaction', delisting still requires the general assembly of shareholders' approval, but shareholders who want to exit the company must sell their shares to the controlling shareholder through the tender offer. The company must apply to Borsa Istanbul and the CMB within five days following the date of the general assembly's approval to initiate the tender offer process.

In the event of delisting, the mandatory tender offer price must be equal to the exit right price calculated based on the 30-day weighted average of the stock price, this 30-day period ending on the day preceding the date on which the delisting is disclosed to the public. This calculation method was heavily criticised by market players and investors, and the CMB had drafted an amendment for provisions relating to the calculation of mandatory tender offer price. However, the CMB then decided not to amend the pricing method and decided instead to amend the principles applicable to squeeze-outs.

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* Umut Kolcuoğlu is the managing partner, Damla Doğancalı is a counsel and Aslı Tamer is an associate at Kolcuoğlu Demirkan Koçaklı Attorneys at Law.


1 www.tuik.gov.tr/PreHaberBultenleri.do?id=21512.

2 Law No. 6102, published in the Official Gazette dated 14 February 2011.

3 Law No. 6098, published in the Official Gazette dated 4 February 2011.

4 Law No. 6362, published in the Official Gazette dated 30 December 2012.

5 Published in the Official Gazette dated 24 December 2013.

© Kolcuoğlu Demirkan Koçaklı Attorneys at Law 2015

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