Turkey: Crowdfunding In Turkey

The first legislation concerning crowdfunding came into force with an amendment dated December 5 2017 to Capital Markets Law numbered 6362 and dated 30 December 2012 ("Capital Markets Law"). With this amendment, equity crowdfunding made its debut in the legislation in Turkey. Thanks to this amendment in Capital Markets Law, an additional new method of crowdfunding became available other than the ones that are currently being used.

With the amendments to the Capital Markets Law: (i) a definition of crowdfunding has been made; and (ii) general principles of crowdfunding platforms and establishment of such platforms have been stipulated. Crowdfunding platforms must seek an authorization from the Capital Markets Board of Turkey ("CMB") and as per CMB, crowdfunding platforms would not be regarded as an investment or a portfolio management company. For that matter, supervision of the crowdfunding platforms will be conducted by CMB in accordance with the relevant legislation. However, rules prescribed in Capital Markets Law with regards to crowdfunding is limited and therefore, necessity for a secondary legislation raised.

To meet such necessity, CMB has published Draft Communique on Equity Crowdfunding ("Draft Equity Crowdfunding") for the consideration of the public. Draft Communique stipulates the rules and procedures regarding crowdfunding platforms, operations of such platforms, membership to the crowdfunding platforms, crowdfunding campaign period, utilization of the funds and startup companies. Draft Communique does not establish rules regarding other crowdfunding methods and the legal status of crowdfunding platforms adopting other methods of crowdfunding would not be affected. Nevertheless, whether or not the crowdfunding platforms may adopt other crowdfunding methods together with the equity crowdfunding is ambiguous. It can be said that, as long as the crowdfunding platforms are in compliance with the Draft Communique, they may act as equity crowdfunding platform along with other crowdfunding methods.

Provisions of the Draft Communique

Important Provisions Regarding Crowdfunding Platforms

  • Crowdfunding Platforms shall have a share capital of at least TRY 1,000,000.00 all paid-up, be established as a joint stock company and the type of shares of the crowdfunding platform shall be registered shares;
  • Trade name of the company must include the phrase "Crowdfunding Platform" and it must be stated in the articles of association of the platform that the company shall exclusively conduct crowdfunding activities;
  • Shareholders and members of the board of directors must meet the requirements stipulated in the Draft Communique;
  • Crowdfunding platform shall establish an investment committee in compliance with the Draft Communique; and
  • Crowdfunding platform and the start-ups who seeks funding shall enter into a written agreement.

In accordance with the Draft Communique, crowdfunding platforms shall not act as intermediary for loan and lending for a consideration or based on a pledge, shall not conduct crowdfunding activities related with capital market instruments or real estate. As stipulated in the Draft Communique, debt based crowdfunding is also prohibited.

Important Provisions Regarding Startups

  • Startups shall enter into a written membership agreement stipulated by crowdfunding platforms in compliance with the Draft Communique;
  • Startups should conduct activities related with technology and/or manufacturing;
  • Startups should be established within 2 years of the publish date of the crowdfunding information form; and
  • Startups should meet other requirements prescribed in the Draft Communique.

As per the Draft Communique, crowdfunding information form is published on the crowdfunding campaign website and consists of information regarding the shares that are going to be issued through crowdfunding and rights and privileges attached thereto.

In accordance with the Draft Communique, (i) publicly traded companies; (ii) companies whose management is controlled by another legal entity; and (iii) companies who have capital markets entities as shareholders that have a profound influence shall not collect funds through crowdfunding.

Platform Membership and Fund Collection

  • Persons who want to take part in the fund collection process through crowdfunding should obtain a membership to a crowdfunding platform. Accordingly, crowdfunding platforms shall stipulate a membership agreement. Such requirement is also applied to the qualified investors;
  • Maximum investment amount can be made by the non-qualified investors is TRY 20,000.00. There is no investment limit for qualified investors. Supervision of the investment limits shall be conducted by Central Securities Depository of Turkey;
  • Fully paid-up funds collected from the investors shall be transferred to the startup company through increasing the share capital of the company in the amounts of the funds collected through crowdfunding and issuing new shares. Startup are prohibited from collecting funds through the transfer of the existing shares. In addition, new shares may be issued without voting rights attached thereto;
  • Funds collected through crowdfunding throughout the crowdfunding campaign shall be blocked in a bank account of an escrow officer authorized by CMB. In the event of an unsuccessful campaign period where target fund amount could not be reached, funds collected shall be returned to the investors and the campaign period will come to an end. Crowdfunding who were taken out of the list by CMB shall also terminate the crowdfunding campaigns and funds collected shall be returned to investors;
  • An audit company in compliance with the Capital Markets Law shall supervise the usage of the funds collected through crowdfunding to ensure a use that in line with the purpose of the crowdfunding; and
  • Amount of funds to be collected shall be determined by CMB.

In addition to the provisions mentioned above, Draft Communique also regulates, in details, activities of the crowdfunding platforms, activities of the crowdfunding platforms based overseas, membership to the crowdfunding platforms, crowdfunding campaign run by the startups, principles regarding the usage of collected funds and announcement requirements regarding substantial changes occurred in the startup company.

Published Draft Communique based on equity crowdfunding has a profound importance for entrepreneurs who have innovative ideas and especially startups. Equity crowdfunding may be seen as important way to raise funds especially when financing through debt is difficult due to high interest rates. Successful application and implementation of equity crowdfunding would help the development of capital markets in Turkey. Moreover, equity crowdfunding would be an alternative and a unique way compared to capital markets instruments when connecting investors and entrepreneurs. Nevertheless, Draft Communique is not finalized and CMB still takes public opinion and suggestions about the draft.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Country
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions