Non-public companies in Turkey may now sell shares without public offering
A new communiqué introducing the possibility for non-public companies to sell their shares to qualified investors through capital increases without a public offering and to be traded on the Venture Capital Market ("GPS") is published.
Prerequisites, sale procedure and necessary procedures
In order to be traded on the GPS, a) total assets of the company shall be at least twenty million Turkish Liras, b) its net sales revenue shall be at least ten million Turkish Liras and c) its registered capital shall be at least ten million Turkish Liras for transition to the registered capital system as per the company's financial statements prepared in accordance with the regulations of the Capital Markets Board ("CMB" or "Board") and audited by a special independent auditor for the year preceding the year in which the shares are to be offered for sale.
An offering circular must be prepared by the company, similar to the public offering of companies, and this offering circular must be approved by the CMB. The sale will be made through an intermediary institution.
Prior to the application for the approval of the offering circular, the board of directors of the company needs to resolve to amend the articles of association of the company to ensure its compliance with the CMB regulations and the objectives and principles of the Capital Markets Law, and to apply to the CMB with other necessary documents. Following CMB's approval, the amendment of the articles of association must be approved by the general assembly of the company.
Subsequently, a decision needs to be taken by the general assembly (or by the board of directors in case of companies subject to the registered capital system) to increase the capital and to partially or fully limit the rights to acquire new shares. Upon the completion of this process, an application will be made to the CMB for the approval of the offering circular. After the announcement of the offering circular approved by the Board, it is obligatory to announce the start and the end date of the sale on Public Disclosure Platform at least two days before the date on which the shares will be offered for sale. The sales period of the shares is two business days.
Post-sale restrictions and obligations
The shares of the companies traded on the GPS cannot be offered to the public before the completion of two years following the year in which they started to be traded on the stock exchange. In addition, the companies and their subsidiaries within the scope of the Communiqué may not repurchase their own shares.
These companies are obliged to apply to the Board for the approval of the offering circular to be prepared by public offering of their shares only through capital increase in accordance with the relevant regulations of the Board in order to ensure that their shares are traded in other markets of the stock exchange within latest five years following the year in which their shares started to be traded on GPS.
A company, which is deemed to have been excluded from the scope of the Capital Markets Law and whose shares are deemed to have been removed from the GSP by the stock exchange due to the reasons mentioned in the communiqué, cannot apply for the public offering of its shares for a period of two years from the date of deemed removal.
The shares of the companies the shares of which started to be traded in other markets of the exchange after the approval of the offering circular and public offering of their shares, except for the shares that were previously traded in the GSP, cannot be converted into shares traded in the exchange until two years from the date their shares started to be traded in other markets of the exchange.
Within the scope of the Communiqué, companies the shares of which are traded on the GSP are also subject to obligations such as independent audit obligations and making material event disclosures on certain issues.
