The changes to the Capital Markets Law No. 6362 were published in the Official Gazette dated December 5, 2017 and the Capital Market Board is authorized to form the secondary regulations and further amendments.
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Public attention focuses on crowd funding for a while. In
"Code on the Amendment of Certain Tax Laws, Law and the Decree
Laws (" Code "), which entered into force with Official
Gazette dated December 5, 2017-numbered 30261, also crowd funding
takes a place. In fact, money collection by calling from all kinds
of ways to the public with the aim of the incorporation or increase
of the capital of a company or giving such promises to the public
is prohibited in accordance with Article 552 of the Turkish
Commercial Code ("TCC") and according to Article 562 of
TCC this action requires to be punished with imprisonment from six
months to two years.
TCC enables the Capital Markets Board to arrange exceptions for this prohibition by regulating that the provisions of the Capital Market legislation are reserved. Thanks to the affectivity of the Code, the Capital Market Law had been amended and the crowd funding had constituted an exception for the prohibition of collecting money.
What does Crowd Funding mean and what is the purpose of Crowd Funding?
Crowd Funding is defined as an individual investors' method of funding or endowing to enterprises / projects with small amount through social media and the internet. It is an important potential financial system for people, who have new business ideas or are in innovation processes that are especially difficult to access financing and seen as a financing model specifically in order to support technological initiatives.
What does the Code say?
Definition of "Crowd Funding" was added to the Capital Market Law with the affectivity of the Code. Besides, it is ensured that such money collection through crowd funding is not subject to the obligations of publicly-held companies and issuers.
Establishment of an electronic crowd funding platform is a precondition for providing fund by such way and absolutely consent of Capital Markets Board ("Board") is necessary. Also, the regulation of the condition to establish an investment committee by the crowd funding platform is expected in secondary regulation. On one hand, it will not be necessary to prepare a prospectus or issuer certificate while collecting money from the public through crowd funding as mentioned above, since crowd funding platform will not be subject to the obligations of publicly-held companies and issuers and for the same reason even if the number of shareholders exceeds 500 the entrepreneurial company will not be considered to be offered to the public.
On the other hand, crowd funding platform is organized differently from stock markets, market operators and other organized markets. Access to related internet site can also be disabled by the Information Technologies and Communications Authority in case of determination of collecting money through crowd funding platform without the consent of the Board.
Although not mentioned in the Code, verbal information taken from the Board shows that the right to establish crowd funding platform would be provided banks and institutions and foundation having the authority to fund raising on condition that they notify the Board; various conditions for the members of the above mentioned investment committee would be requested and structuring the crowd funding platform as joint stock company would be foreseen.
Surely, details of all these and the same of the foundations of crowd funding platforms, conditions of share transfers and maximum investment that the investor can make, maximum investment amount that can be collected by the entrepreneur company, the kind of rights which can be conferred for given fund/s to the investors will be determined by the secondary regulations to be issued by the Board.
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.
