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Evaluation of The Communiqué on Crowdfunding
The Communiqué on Crowdfunding entered into force by being published in the Official Gazette dated 27.10.2021. With the communiqué, the Capital Markets Board of Turkey regulated share-based crowdfunding principles and debt-based crowdfunding. With this communiqué, the Communiqué on Share-Based Crowdfunding published in the Official Gazette on 03.10.2019 is repealed.
After the communiqué on the procedures and principles related to share-based funding, it was necessary to regulate debt-based crowdfunding, as it has taken part in Article 35/A of the CMB.
The Crowdfunding Communiqué’s Evaluation
With the new regulations, the definition of entrepreneur in the definitions section of the communiqué was not limited to share-based crowdfunding. The definition of entrepreneur has been expanded to express real persons residing in Turkey and legal persons in the form of limited or joint-stock companies seeking funding for their project through share and/or debt-based crowdfunding.
The definition related to the venture company shall mean the joint-stock companies established in Turkey that will continue their activities without the obligation to establish a joint-stock company and that have a potential for development and need resources for their projects, or limited companies that have to be transformed into a joint-stock company before the funds that are collected to transfer to the blocked account opened by the trustee of funds.
Moreover, the definition of “funded company” was made in the communiqué; it has been stated that it refers to the joint-stock company established by the entrepreneurs or the venture company in which the blocked fund amount is transferred to the account at the trustee.
While the change in the definitions is like this, certain regulations regarding platform establishments are also included. In order to establish the platform;
- Being a joint-stock company,
- The capital must be at least 1 million TL and paid in cash,
- Its capital and equity capital should not be less than 1 million TL,
- If the platform is desired to be established, the phrase “Crowdfunding Platform” should be included in the title,
- The subject of the business in the certificate of incorporation is specified exclusively as an intermediary in the execution of crowdfunding activities based on shares and/or debt, the exclusive intermediation of crowdfunding activities based on shares and/or borrowings,
- The board of directors consists of at least three people.
The requirements are listed as these.
Within the framework of the provisions of the Communiqué, those who apply for crowdfunding must be included in the list by the institution. In order to be included in the list within six months after the application, an application is made to the Board together with the documents numbered in the Annex-1 part of the communiqué.
Platforms that are not operational within six months are removed from the list. The investment limit was increased from 20 thousand TL to 50 thousand TL for real persons, excluding qualified investors defined as qualified investors defined in the regulations of the Board regarding venture capital investment trusts. However, not exceeding 200 thousand TL, this limit can be applied as 10% of the annual net income declared by the investor to the platform. In the previous communiqué, this limit was applied as 100 thousand TL.
In the section on the principles of fund-raising, in debt-based crowdfunding, a regulation has been made on granting the funded company’s share or granting the possibility of fulfillment as specified in the information form instead of a cash payment of repayment obligations related to debt instruments.
Real persons who are not qualified investors will be able to invest a maximum of 20,000 TL in a project through debt-based crowdfunding. Crowdfunding activities based on debt cannot be carried out, other than the sale of debt instruments, through a debt or loan agreement or any other contract that creates a debt relationship or in exchange for any capital market instrument other than a debt instrument.
With the Communiqué on Share-Based Crowdfunding, in fund requests exceeding 1 million TL, the limit for collecting funds corresponding to at least 10% of the targeted fund to be counted as collected was also reduced to 5%. This amount was required to be covered by qualified investors during the campaign period.
Entrepreneurs and venture companies have to engage in technology or production activities in order to raise funds through equity or debt-based crowdfunding.
A venture company or entrepreneur, in any 12-month period, will be able to raise funds with a maximum of two campaigns based on a share through platforms. In the Communiqué, it is covered that, it is possible to run a debt-based simultaneously for the project whose share-based campaign process continues, and during one of those campaign periods, if the targeted fund cannot be collected, other campaign processes will also be terminated. A similar arrangement has been made for debt-based crowdfunding.
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