Equity crowdfunding is a novel way for start-ups and small businesses to raise capital to finance their activities. It involves selling equities to a large number of investors through online portals in consideration for relatively small amounts. The importance of equity crowdfunding is more evident at the very early stage and during the development phase of a business, as such business generally has limited access to traditional financing. Equity crowdfunding therefore offers a viable and valuable solution to such lack of traditional funding.
Recently, a draft law entitled “Draft Law on the Amendment of Certain Tax Laws, Laws and Decree Laws” (the “Draft Law”) was submitted to the Turkish Parliament. Among other novelties it aims to bring, the Draft Law introduces the regulatory framework for equity crowdfunding in Turkey.As in other jurisdictions that regulate equity crowdfunding, the Capital Markets Board of Turkey (the “CMB”) shall be the national regulatory and supervisory authority in charge of equity crowdfunding.
Implementation and Regulation
The Draft Law merely introduces the regulatory framework for equity crowdfunding in Turkey under the Capital Markets Law, Law No. 6362 (the “Capital Markets Law”) and appoints the CMB to issue secondary legislation in relation to the implementation of the legal framework for equity crowdfunding. At this stage, we only know that any campaign of equity crowdfunding needs to be conducted through online platforms authorised by the CMB. If enacted, 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 Draft Law proposes that equity crowdfunding be exempt from certain legal obligations and requirements applicable to other publicly listed companies in order to attract more beneficiaries. As the Draft Law preamble puts it, a more flexible approach to entrepreneurs seeking crowdfunding will be applied in comparison to investment trusts and other investment enterprises regulated under the Capital Markets Law. One particular example is that equity crowdfunding shall not be subject to the requirement to issue a prospectus or offering memorandum (izahname).