Turkey recently passed legislation to regulate crowdfunding, aimed at bringing together small investors to fund primarily idea-based projects. While crowdfunding has already been in limited use in Turkey, it only involved reward-based or grant based crowdfunding, due to the lack of legislation regulating return-based crowdfunding activities.
With this new legislative step, Turkey follows the United States and the United Kingdom to become the third country to adopt crowdfunding legislation. Omnibus Code No: 7061 was passed on December 5th, 2017, which amended Capital Markets Code No. 6362 (“CM Code“) to make crowdfunding that offers a return on investment (e.g. through shares) available in Turkey. However, the CM Code explicitly states that crowdfunding is not to be considered an investment activity for the purposes the CM Code and other relevant Turkish Capital Markets Board (“CMB“) legislation. Therefore, while it is under the supervision of the CMB, crowdfunding will not be subject to the more costly and time consuming processes of public offerings or the issuance of debt instruments. The procedural flexibility for crowdfunding in the CM Code was motivated by the idea that a liberal approach to this type of financing would encourage investment in start-ups, which could not otherwise bear the high costs, cumbersome procedural requirements, and long waiting periods for investment and financing, which are a relatively smaller burden for sizeable publicly held entities.
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