Crowdfunding in Turkey: New Draft to Regulate Debt-Based Crowdfunding

Capital Markets Board of Turkey (“Board”) has published a new Draft Communique on Crowdfunding no. III-35/A.2 (“Draft”) dated August 26, 2021, on its official website. The Communique on Equity Crowd Funding no. III-35/A.1. that is currently in force only regulates the equity crowdfunding processes and the platforms such crowdfunding campaigns are run on whereas debt-based crowdfunding is also regulated with the Draft.

Most of the amendments suggested with the Draft is regarding the platforms providing an electronic medium for equity/debt-based crowdfunding (“Platform”):

With the draft, it is stipulated that the Platforms are required to specify on their website whether they are authorized for equity and/or debt-based crowdfunding activities. Regardless of the scope of their authorization, certain changes in the shareholder structure of the Platforms are subject to the Board’s approval; (i) a person becoming a shareholder of the Platform by acquiring shares representing 10% or more of the Platform capital, or the voting rights whether directly or indirectly, (ii) share transfers resulting in one of the shareholders’ shares or voting rights to exceed or go below the thresholds of 10%, 20%, or 50% of total shares/votes, (iii) transfer of shares granting the right to be represented in the board of directors regardless of any thresholds, (iv) changes exceeding 10%, 20%, 33%, or 50% in the shareholding structure of legal person shareholders of the Platform who own shares granting right to be represented in the board of directors of the Platform, and (v) transfer of shares that grant management privileges of the legal persons who own 10% or more of the Platform’s shares or voting rights.

Share transfers inside the group owning the management control in accordance with the Capital Markets Law no. 6362 Article 26 by the same real or legal persons mentioned above, and share transfers that don’t exceed the thresholds above are not subject to the Board’s approval, but such changes are still required to be notified to the Board within 10 workdays of the transfer.

The Draft also stipulates the necessary qualifications for the members of the investment committee to be assembled by the board of directors of the Platforms. Accordingly, for the Platforms conducting debt-based crowdfunding activities, at least one of the members of the investment committee is required to have a credit rating license and most of the members are required to have at least five years of experience in one of the areas specified in the Draft. Concerning participation banks and intermediary institutions with broad authority, the Draft stipulates that if one of the members of the investment committee has a participation investor license, the requirement to include a board of directors’ member in the investment committee is not applicable. Further, the Draft stipulates that person assigned to the investment committee and the documentation regarding their necessary qualifications in accordance with the Draft are required to be submitted to the Board. Pursuant to the Draft, it is also mandatory to include the nominal values of the shares that will be given to the investors via capital increase and the sales value per share in the information form that is approved by the investment committee in fund gatherings done with equity crowdfunding.

Moreover, pursuant to the Draft, the list of Platforms approved by the Board are published in the Board’s website. In the case of a Platform not launching its activities in the six months following its acceptance to the list, such Platform will be removed from the list by the Board in accordance with the Draft.

In addition to the current obligations of the equity crowdfunding platforms regarding the information and the documentation required to be published in relation with the crowdfunding campaigns on the Platform websites, similar obligations are also stipulated for debt-based crowdfunding Platforms with the Draft.

Lastly, with the draft, investment thresholds for regular investors and qualified investors, rules and limitations for fund gathering processes for entrepreneurs and entrepreneurial companies, specifics of the funding campaigns run on through the Platforms, and rules and limitations on the use of funds gathered by entrepreneurs and entrepreneurial companies are stipulated in detail for equity crowdfunding as well as additional rules regarding the qualifications of entrepreneurial companies who want to run crowdfunding campaigns.

Kortan Gödekoğlu