1. Introduction

It is essential for investors to gain reliable information from publicly-held companies in order to make any sound investment decision. The disclosure requirement aims to provide accurate and up-to-date information to potential investors in order to create a fair market for them. The public disclosure of information pertaining to the publicly-held companies enables the investors to have equal access to the information provided, which they will be able to duly assess before making any investment decisions.

Along with the potential investors, the disclosure requirement is also crucial for the shareholders (current investors) of the publicly-held companies. Through the disclosed information, the shareholders will be able to acertain the current status and activities of publicly-held companies, evaluate their current investments and decide whether to withdraw from a partnership or not. It is therefore very important that pertinent and sufficient information is shared timely with current and potential shareholders. It is in this light that we will focus on the statutory disclosure requirements for publicly-held companies in Turkey.

2. Legal Framework

Public disclosure is mainly regulated under the Capital Market Law numbered 6362 ("CML"). According to Article 15 of the CML, information, events, and developments that may affect the value and price of capital market instruments or the investment decision of investors shall be disclosed to the public by issuers or the related parties.

In addition to the provisions of CML, the Communiqué on Disclosure of Material Events (II-15.1) ("Communiqué No: II-15.1") sets forth the principles regarding the disclosure requirements of publicly-held companies. Generally, the Communiqué No: II-15.1 requires disclosure with respect to the following situations and matters: (i) inside information, (ii) unusual price and quantity movements, (iii) verification of news or rumors, (iv) forward-looking statements, (v) transactions of persons having administrative responsibility, (vi) changes in capital structure and management control, (vii) share-based securities, (viii) general information, (ix) general assembly meetings and capital increases, and (x) issuers offering non-share securities to the public. The Capital Markets Board has also issued the Material Events Guide to bring some clarity to provisions of the Communiqué No: II-15.1, in practice.

3. What, When and How to Disclose

a. What to Disclose

The main purpose of the disclosure requirement is to create a reliable market and to provide accurate information to all actors of the market at the right time. In order to achieve this goal, the disclosed information must be accurate, full, objective, equally accessible and understandable by everyone. Under the CML, it is mandatory to disclose certain types of information. On the other hand, publicly-held companies can also disclose particular types of information (e.g., sustainability report) on a voluntary basis.

Within the framework of the statutory disclosure requirement, "information" itself is divided into two categories: (i) information which must be disclosed continually, and (ii) information which must be disclosed in the event of specific circumstance or changes (material events) determined by the applicable law. An example of information subject to continual disclosure is the disclosure of financials. According to the Communiqué on Principles of Financial Reporting in Capital Markets (II-14.1) ("Communiqué No: II-14.1"), annual financial statements, annual financial reports, annual activity reports prepared by the board of directors and audit reports are required to be disclosed annually on the website of publicly-held companies and on the Public Disclosure Platform ("PDP"). Interim reports are to be disclosed within a 3 (three) month period on the website of publicly held companies and on the PDP.

On the other hand, material events disclosures are required in case of certain specific circumstances as determined by Communiqué No: II-15.1. According to Communiqué No: II-15.1, material events are grouped mainly under 2 (two) separate categories: (i) inside information and (ii) ongoing information. Inside information is the non-public information, events, and developments that may affect the value or price of securities or the investment decisions of investors. Inside information should be related to a specific incident, which should be deemed significant by a reasonable investor when making an investment decision; should be non-public, provide an advantage to the user of this inside information, and should be able to affect the value or price of securities, or the investment decisions of investors in case of its public disclosure. Ongoing information is all information, events, and developments that fall outsidere the definition of inside information. In that regard, the ongoing information could be the changes in capital structure and management control, and any information related to the partnership and general assembly.

In addition to the inside information and ongoing information, according to Article 18 of the Communiqué No: II-15.1, following events should also be disclosed to public: (i) board of directors' resolutions relating to date, time, place and agenda of general assembly meeting; (ii) information on use of the right to attend general assembly meetings, and the total voting rights at the assembly; (iii) decisions taken by the board of directors or the general assembly about distribution of profits; (iv) list of attendees and minutes of the general assembly meetings; (v) if a general assembly meeting cannot be held, the reasons thereof and date of the next meeting, (vi) the resolution of the board of directors regarding the issuance of new shares, and use of preemptive rights on newly issued shares, and information about the exchange process in the case there arises the right of cancellation and exchange of issued shares due to a capital increase.

As per the Communiqué No: II-15.1, publicly-held companies are obliged to make disclosures in case of following events: (i) a change in the prices or trading volumes of securities which cannot be explained by ordinary and usual market conditions, (ii) news or rumors about issuers that diverge from the information which has previously been disclosed to public, or is disclosed to public for the first time through press and media or by other means of communication, and which may affect the value and price of securities or the investment decisions of investors, (iii) forward-looking statements, subject to the discretion of the publicly-held companies, and (iv) all transactions executed by the persons having administrative responsibility, those persons closely related to them, and by the issuer's parent company with regard to shares representing the capital and other securities relying upon such shares.

If and when the direct or indirect shares or voting rights of a natural person or legal entity or of other natural persons or legal entities acting together with that natural person or legal entity in the capital of a publicly traded issuer reach or fall below 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95%, the duty of disclosure is performed by the said persons; however, if and when the direct or indirect shares or voting rights of investment funds belonging to a founder in the capital of an issuer reach or fall below 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95%, the duty of disclosure is performed by the said founder. Falling below or reaching these thresholds will trigger a public disclosure requirement.

Lastly, all relevant communiqués and regulations of the Capital Market Board should be checked and evaluated for each specific case considering that these could also stipulate further disclosure requirements.

b When to Disclose

Publicly-held companies are obliged to fulfill their disclosure requirements within certain specified periods, as stipulated under the relevant communiqués of the Capital Market Board. On the other hand, specific updates or developments and material events, other than information regarding capital and management control, must be disclosed to the investors immediately. For example, in accordance with Article 9 of Communiqué No: II-15.1, if and when any information about material events, which also includes forward-looking statements, is intended to be disclosed to the public through press and media or by other means of communication, a disclosure is also to be made in PDP prior to or concurrently with the said disclosure, or if such information is inadvertently disclosed in a public meeting, the relevant PDP disclosure is made immediately.

Insider information and any changes to such information which was previously disclosed to the public, must also be publicly disclosed, whenever they occur or as soon as the issuers become aware of them.

c. How to Disclose

In Turkey, the PDP was established in order to create an online platform where publicly-held companies, along with the other entities with similar disclosure obligations, can disclose the information they wish to convey to the public. Disclosures thus made via PDP, a website operated by the Central Registry Agency, are to comply with the format, content, and terms of requirements determined by the relevant laws, Capital Market Board, and/or the PDP. For example, publicly-held companies must follow the format annexed under the Communiqué No: II-15.1 while disclosing a material event on the PDP, and must use an electronic signature to authenticate the information submitted.

4. Conclusion

To provide a secure, transparent, and reliable environment for operations in capital markets, it is important for shareholders and potential investors to be informed about certain issues pertaining to the publicly-held companies' activities. Publicly-held companies have statutory requirements to dislose certain particular information via the PDP and on their websites, so that shareholders and potential investors are able to assess the disclosed information before taking the next step. By providing the mandatory information through PDP or on the publicly-held companies' websites, it is ensured that each shareholder and potential investor has equal access to the same data, and no actor will have an unfair advantage over others.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2021. A link to the full Legal Insight Quarterly may be found here

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.