With Law No. 7061 (“The Law on the Amendment of Certain Tax Laws, Laws and Decree Laws”), Turkey joined the likes of the USA, UK and several others who have been regulating crowdfunding for the past couple of years. According to the new law - enacted by the Turkish parliament and published in the Official Gazette on 5 December 2017 – entities shall be eligible for selling equities through online platforms to be licensed by the Capital Markets Board of Turkey (the “CMB”) and under terms and conditions to be regulated by the CMB through the issuance of secondary legislation.
The CMB will be expected to issue secondary legislation governing, among others, criteria to operate an equity crowdfunding platform, share transfer thereof, requirements to be met by the shareholders, and the maximum amount that can be collected via equity crowdfunding platforms.
The new regulations are:
• The establishment and operation of crowdfunding platforms will be subject to the CMB’s approval. The
CMB will determine the rules and procedures applicable to establishment, shareholders, share transfers, employees, maximum funding limits for the individual and fund collection for one project or company, operations, monitoring, and supervision.
• In addition, the Board will audit and control whether the fund collected is being utilised in accordance with the purpose of the project/venture as previously announced. In this regard, the Board’s sanctionary powers are quite comprehensive as they range from issuing mere warnings to cancelling licences, filing criminal or civil complaints or “taking any precautions it may deem necessary”.
• Crowdfunding is defined as collecting funds from the public through crowdfunding platforms to fund a project or a company. The activities falling within this definition are not considered a public offering, and those who collect funds through crowdfunding platforms are not considered issuers.
• Crowdfunding platforms are “entities that intermediate crowdfunding and operate electronically” (note that no distinction is made between internet-based or other platforms). The platforms licensed by the CMB will be entitled to collect funds without preparing any offering circulars or issuance certificates.
Following the introduction of these amendments, all eyes are now on the CMB for further guidance. Crowdfunding platforms will provide entrepreneurs and investors with a structured investment environment where fundraising is less bureaucratic, more accessible, and considerably faster.
While the amendment is regarded as an auspicious step towards growing and strengthening the crowdfunding market in the region, it still may not be time for start-ups, those looking for investment and investors to celebrate just yet.
Dr Gökce Uzar Schüller, Lawyer
Frankfurt and Istanbul