Recent Legislative Amendments
Changes made by the Omnibus Code No. 7061
Changes made under the Capital Markets Code
Omnibus Code No. 7061 was passed and published in the Official Gazette dated December 5, 2017 numbered 30261, amending the Capital Markets Code No. 6362 (the “CMC”), introducing and regulating crowdfunding within the CMC (the “CMC Amendment”) which creates a new way of raising venture capital. Crowdfunding is defined as a funding needed by a project or a venture capital company provided through crowdfunding platforms, within the framework determined by the Capital Markets Board (“CMB”), while not being subject to the provisions of the CMC on investor compensation.
Crowdfunding will not be subject to the proceedings of public offerings or debt instruments issuances since it is not considered as an investment activity within the CMC or any other CMB legislation. Pursuant to the newly added paragraph to Article 4 of the CMC, raising capital public by means of crowdfunding will not require preparing a prospectus or issuance certificate within the meaning of CMC, thus the process of funding period is decreased and eased. The aim of this newly introduced financing method is to make the procedure more flexible to boost the investment amount raised in start-up companies since the public offerings or issuance of debt instruments require more detailed and burdensome procedure. Terms of crowdfunding enable contribution of large investors’ portfolio with limited financial requirement which would create an aggregate total capital needed for a project or a venture capital company in return for share or interest depending on the nature and terms of investment.
The CMC outlines crowdfunding platforms as the intermediary institutions for crowdfunding purposes operating through internet. Such platforms can only be established by obtaining a licence the CMB. The CMB will determine the guidelines regarding the establishment, company structure, transfer of shares, employees, the top limit of the funding raised by project owners or venture capitals or invested by every single fund provider and all other principles and guidelines these platforms shall comply as well as principles of supervision and control of the raised capital to make sure the investment amount is used for the right purposes. The provisions applicable for other institutions as to the measures to be taken in case of unlawful activities and transactions will also be applied comparatively to the crowdfunding platforms. The relationship between the investors and fund providers and parties who raise the funding public shall be governed within the general legislation of Turkish Commercial Code and Turkish Code of Obligations. If the CMB is notified of an unauthorised crowdfunding activity in Turkey or abroad aimed at raising capital the residents in Turkey, Information Technology and Communication Board shall block access to such online crowdfunding platform upon the application of the CMB requesting so.
Communiqué on the Amendments to the Communiqué on Procedures and Principles of Record Keeping of the Dematerialized Capital Market Instruments
The Communiqué (No: II-13.1.b) on the Amendments to the Communiqué on the Procedures and Principles of Record Keeping of the Dematerialized Capital Market Instrument Communiqué (No: II-13.1) was published in the Official Gazette numbered 30255 and dated November 29, 2017 (the “Amending Communiqué”). A new paragraph has been added to Article 33 of the Communiqué on Procedures and Principles of Record Keeping of the Dematerialized Capital Market Instruments. With the new paragraph, the Amending Communiqué enables the statements and the information of entitlement of the right holders who are residing outside Turkey to be transmitted by the Central Registry Agency (“CRA”) to both the right holder and the foreign custody institution providing them with custody services abroad as long as the agreement between these right holders and the custody institution abroad shall have a provision stating that this institution may access to the right holders’ information. Also there has to be an agreement between the custody institution abroad and the local custody institution framing this specific issue. In order for the CRA to provide the requested information to the foreign custody institution directly, the local custody institution shall make an application to the CRA and notify the CRA of the relevant right holders, the title of the foreign custody institution to be informed on the right holder and a specific statement that there is an agreement between this foreign institution and its clients which allows information transmission. It is required that the foreign custody institution shall keep all information received for above-mentioned purposes confidential.
Highlights by Central Bank Decisions
The Central Bank’s decision dated November 21, 2017 and numbered 2017/47 reduced the banks’ borrowing limits at the Central Bank of the Republic of Turkey (CBRT) Interbank Money Market for the overnight maturity (O/N) transactions to zero to be effective as of November 22, 2017. Also to be effective the same date, banks’ limit for the intraday liquidity facility will be increased as twice the size of Interbank Money Market borrowing limits valid as of November 21, 2017.
With the Central Bank’s decision dated November 6, 2017 numbered 2017/44, the upper limit and the tranches for the FX maintenance facility within the reserve options mechanism have been revised for the purpose of financial stability due to the fact that the markets have witnessed volatile price formations that are inconsistent with economic fundamentals. The upper limit for the FX maintenance facility has been lowered to 55% 60% and all tranches have been reduced by 5 points. With this revision, it is targeted that approximately 5.3 billion Turkish liras of liquidity will be withdrawn the market and approximately 1.4 billion US Dollars of liquidity will be provided to banks.
Amendments by the Capital Markets Board of Turkey on Real Estate Certificates
In the official gazette numbered 30255 and dated November 29, 2017, the CMB has adopted a new Communiqué (No: VII-128.2.c) Amending Real Estate Certificates Communiqué (No: VII-128.2) (“Amendment Communiqué”) which introduces several changes on various aspects of real estate certificate issuances.
The Amendment Communiqué generally includes the issuance principles concerning the following:
Some of the independent sections, such as buildings or blocks that are available in structures can only be used when the whole structure is completed, and cannot be subject to issuance. These sections shall be constructed with the same quality standards as the individual sections in buildings that are in the same Project.
In case of public offering, the price stability can be ensured through procedures with a sufficient information undertakings.
A temporary article is foreseen which provides that no CMB registration fee shall be applicable for the issuers whose voting rights and share capital are directly or indirectly owned by the public authorities with at least 51% for 2 years starting November 29, 2017.
Previously, 10% of the funds obtained the issuance were transferred directly to the issuer by the authorized establishment before the construction began. With the Amendment Communiqué the said amount has been increased to %25 of the funds will be transferred with the same protocol.
In the event that the independent parts of the project are completed by another person or establishment, the fund corresponding that parts shall also be transferred to the person or institution with the same procedures and principles.
The principles considered appropriate by the CMB to improve the rights and interests of the investors may be foreseen and such principles shall be included in the prospectus or the issue certificate.
. Legislative Highlights
The Regulation Amending the Regulation on the Loan Operations of Banks was published by the Banking Regulation and Supervision Agency of Turkey (“BRSA”) in the Official Gazette numbered 30268 and dated December 12, 2017 (the “Amending Regulation”) which has become effective as of the date of publication. With the Amending Regulation, the threshold for the vehicle's final invoice value for the purpose of loan extension is increased to TRY 100,000 TRY 50,000 due to the increase in vehicle prices. As of December 12, 2017, the ratio of loan amount to the value of the vehicle shall not exceed;
70% if the final invoice amount of the vehicle is TRY 100,000 or less,
if the final invoice amount of the passenger vehicle is more than TRY 100,000, 70% for the portion up to TRY 100,000 and %50 for the portion above TRY 100,000.
The insurance policy amount will be used in the determination of the value of the second-hand passenger vehicles.
* * *
This newsletter has been prepared only for information purposes. Please do not hesitate to contact us if you need assistance or more detailed information.