The Capital Markets Board (the "CMB") had prepared the Draft Communiqué on the companies whose shares will be traded in the venture capitals market (the "Draft Communiqué") and presented the Draft Communiqué to public's opinion on 20 September 2022 through posting it in its official website. Following some revisions made by the CMB to the Draft Communiqué, the Communiqué on companies whose shares will be traded in the venture capitals market (the "Communiqué") has been published by CMB in the Official Gazette numbered 32194 and dated 18 May 2023 and entered into force on same day.
This Monthly Update aims to provide a brief explanation regarding the Communiqué and highlights the essential novelties introduced therein.
Scope of the Communiqué
Within the scope of the Communiqué, joint stock companies with the qualifications stated below will be able to sell their newly issued shares to qualified investors in the venture capitals market (the "VC Market") without public offering. With the Communiqué, the procedures and principles regarding (i) sale of shares of companies through capital increase without public offering; (ii) post offering matters that be followed after the completion of the offering process; (iii) disclosure of special circumstances, financial reports and independent audit reports; and (iv) exemptions and other obligations of companies are regulated.
Requirements for the Companies to List in the VC Market
In accordance with the Communiqué, companies whose financial statements audited and prepared in accordance with CMB regulations for the year preceding the year in which the shares will be traded evidence that their (i) total assets are at least 20 million Turkish Liras; (ii) net sales revenue are at least 10 million Turkish Liras; and (iii) issued share capital are at least 10 million Turkish Liras and fully paid up (the "Companies") are eligible for the VC Market.
Procedures Regarding the Sale of the Shares in the VC Market
In accordance with the Communiqué, Companies with the above qualifications are required to apply to the CMB regarding the amendment to their articles of associations for the sake of compliance with the regulations of the CMB and the Capital Markets Law numbered 6362 (the "CML"). Within 6 months following the approval of such amendments by the CMB, amendments to the articles of associations of the Companies must be approved by the general assemblies of such Companies. Accordingly, except for the Companies in the registered capital system, the Companies' general assembly shall make decisions on increase of share capital and on full or partial restriction of pre-emptive rights. For the Companies in the registered capital system, the board of directors of the Companies shall resolve on the increase of share capital and on full or partial restriction of pre-emptive rights.
As per the Communiqué, following the completion of the above-mentioned procedures, the Companies or authorized institutions are required to apply to the CMB for the approval of the prospectus. As such, a brokerage agreement shall be signed by and between the authorized institution and the issuer before the application for the prospectus is made.
With the Communiqué, financial statements to be included in the prospectus has also been determined. Accordingly, (i) for the sales period between February 1 and August 1, the last annual comparative financial statements; and (ii) for the sales period between August 2 and January 31, the last annual comparative financial statements and the last six-month interim comparative financial statements shall be included in the prospectus. Additionally, such financial statements are subject to special independent audit.
Sale of Shares through private placement (without public offering)
Following the announcement of the prospectus approved by the CMB, it is obligatory to announce the start and end date of the sale on the Public Disclosure Platform at least two days before the date on which the shares will be sold. The sales period of the shares of the Companies in the VC Market is two business days.
Public Offering Requirement After the Private Placement
Shares of the Companies trading in the VC Market cannot be sold via public offering before the completion of two years following the year in which they started to be traded in the stock exchange. However, at the latest within 5 years following the year in which their shares started trading in the VC Market, the Companies are required to apply to the CMB to offer new shares to be issued through capital increase be able to trade in other markets of the exchange. In case the CMB does not approve the prospectus or the application is not made in due time by the Companies, the shares of the Companies shall be deemed to have been removed from the VC Market by the stock exchange. Accordingly, the Companies deemed to have been removed from the VC Market cannot apply to the CMB for the public offering of their shares for two years from the date of their removal from the VC Market.
After the prospectus is approved by the CMB and the new shares starts trading in other markets of the exchange, other shares of the Companies (excluding those trading in the VC Market) cannot be converted into tradable shares for a period of two years starting from the trading of the new shares in the other markets of the exchange.
Exemptions and Disclosure Obligations
Pursuant to the Communiqué, the Companies shall be exempt from the obligation to prepare 3-month and 9-month interim financial reports.
Within the scope of the Communiqué, the Companies are obliged to publish their general information by using the relevant form on the Public Disclosure Platform and any changes in this information should be updated by the Companies within 2 business days at the latest. Additionally, inter alia, the Companies are also obliged to make disclosures immediately regarding the following issues:
- resolution of the general assembly on dividend distribution;
- resolution of the authorized body on capital increase or decrease, merger, spin-off or conversion;
- change in the actual field of activity of the Companies, partial or complete cessation or impossibility of activities or production, or emergence of developments that may lead to these consequences;
- asset transfers and acquisitions corresponding to 10% or more of the total assets in the last annual statement of financial position; and
- realization of one of the reasons for dissolution that may result in the liquidation.
In the event that the Companies are parties to the merger or spin-off transactions, the shares of the Companies will be deemed to have been removed from the VC Market by the stock exchange. Finally, the Companies whose shares are traded on the VC Market will also not be able to buy-back their shares.
Conclusion
As summarized above, the Communiqué has made substantial contributions to the CML by introducing novelties to the CMB legislation. However, further matters regarding the details and implementation of the Communiqué shall be formed with practice.
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.