Q4/2017 Crowdfunding: a Funding Alternative for Projects and Business Ventures
Crowdfunding is a tool for entrepreneurs to collect funds from a large number of individuals through crowdfunding platforms to finance their projects or business ventures.
Law No. 7061 (published in the Official Gazette dated December 5, 2017 and numbered 30261) which amended the Capital Market Law (Law No. 6362) (published in the Official Gazette dated December 30, 2012 and numbered 28513) (the “Capital Market Law”) paved the way for collecting funds from crowdfunding without being subject to the Capital Markets Board regulations regarding public offerings.
The recently introduced crowdfunding provisions of the Capital Market Law are as follows:
Crowdfunding might be a viable funding alternative for new projects and developing businesses since the Capital Market Law Amendments provide a safe harbor for the collection of funds from capital markets without being subject to the heavier regulations of the Capital Markets Board regarding public offerings.
It should also be noted that the regulatory environment would be clearer when the relevant Capital Markets Board communiqué is published and crowdfunding transactions start after crowdfunding platforms become operational upon the permission of the Capital Markets Board.
Q4/2017 Amendment on the Communiqué on Sales of Capital Market Instruments
The Capital Markets Board amended the Communiqué on Sales of Capital Market Instruments (II-5.2) (published in the Official Gazette dated June 28, 2013 and numbered 28691) on December 1, 2017.
Under the amended Article 10/2, the initial public offering price, or price range in the case of demand collection within a price range, or interest or discount rate of the capital market instruments, may be revised downwards by making a special events disclosure without requiring any change to the prospectus before the date of commencement of the sale and/or demand collection or within such periods. If the price is revised before the start date of the sale and/or demand collection period, the public offering can be started on the second day following the disclosure. If the revision is made within the sales and/or demand collection period, a minimum of two business days is to be added to the specified public offering period.
In addition, according to Article 18/4, at least 10% of the nominal value of capital market instruments to be offered to the public is required to be allocated to local individual investors, and 20% thereof is required to be allocated to local institutional investors (previously the rate was 10%). The Capital Markets Board is authorized to reduce the minimum allocation ratios to zero or increase such a rate by taking into consideration the market value of the instruments to be offered to the public, market conditions and similar grounds, and the demand of the issuer.
The amendment to the Communiqué on Sales of Capital Market Instruments entered into force immediately following its publication in the Official Gazette.
Q4/2017 Amendment to the Regulation on the Merger, Transfer, Demerger, and Share Transfers of Banks
The BRSA amended the Regulation on the Merger, Acquisition, De-merger, and Share Transfers of Banks (published in the Official Gazette dated November 1, 2006 and numbered 26333) (the “Merger Regulation”) on November 16, 2017 with immediate effect.
The amendment allows an exception in the application of the Merger Regulation for the partial de-merger transactions of banks. In particular, the amendment to the Merger Regulation sets forth that partial de-merger transactions of banks where part of a bank’s assets are transferred to a third party without dissolution of the bank. In the exchange of shares and rights in the transferee, in a manner forming a subsidiary to the de-merging bank, it will not be subject to the provisions of the Merger Regulation. It should be noted that under the amended Merger Regulation, if the paid-in capital of the de-merged bank becomes less than the minimum capital requirement set forth under the Banking Law (Law No. 5411) (published in the Official Gazette dated November 1, 2005 and numbered 25983), the respective bank’s shareholders are to undertake to increase such paid-in capital of the de-merged bank within three months.
Q4/2017 Pharmaceuticals, Healthcare & Biotechnology
Q4/2017 Intellectual Property
Regulation on the Enforcement of Industrial Property Law (published in the Official Gazette dated April 24, 2017 and numbered 30047) has been amended. The amended articles have been published in the Official Gazette dated October 27, 2017 and numbered 30223. Under the Amendment, applications made via internet will be accepted after an identity check has been completed. If the applications or requests have been made according to this rule, the applicant or requester will be liable for any misstatement.
Regulation on the Data Controllers’ Registry has entered into force and the Board of Protection of Personal Data subsequently announced the expected next steps with respect to establishment of a Data Controllers’ Registry and the data controllers’ obligation to register. As is known, Article 16/2 of Law on Personal Data Protection (Law No. 6698) (published in the Official Gazette dated April 7, 2016 and numbered 29677) stipulates that real persons or legal entities, who process personal data, are to be registered in the Data Controllers’ Registry prior to the commencement of personal data processing, while Article 16/5 sets out the procedures and principles regarding Data Controllers’ Registry that will be determined by a regulation.
Q4/2017 Amendment to Secondary Legislation regarding Financial Lease, Factoring, and Financing Companies
The BRSA has amended the Regulation on the Principles for the Incorporation and Operations of Financial Lease, Factoring and Financing Companies (published in the Official Gazette dated April 24, 2013 and numbered 28627) (the “Financial Lease Regulation”) on October 21, 2017 with immediate effect.
The amendment aims to set forth certain requirements for interest-free operations of, financial lease, factoring or financing companies (the “Companies”).
In addition, the amendments provide that in order for the loan agreements entered into by the Companies operating on an interest-free basis to be taken into consideration as subordinated loans, the respective loan agreements are to comply with the interest-free basis.
In line with the amendment to the Financial Lease Regulation, other secondary legislation relating to the operations of Companies have also been amended to provide for the references made to “interest” is to be read as “profit share” with respect to the Companies operating on an interest free basis.
Q4/2017 Amendment to the Regulation on Procedures and Principles in relation to Factoring Transactions
The BRSA has amended the Regulation on Procedures and Principles in relation to Factoring Transactions (published in the Official Gazette dated February 4, 2015 and numbered 29257) (the “Factoring Regulation”) on October 6, 2017 to be effective as of its publication in the Official Gazette.
The amendment focuses on the use of e-invoices and e-archives (as defined under the amending regulation) in factoring transactions, elaborates on the verification of e-invoices through e-archives and stipulates that factoring institutions are required to meet the Revenue Administration to verify e-invoices and e-archive practices.
In addition, the amendment also provides that with respect to the guaranteed export and import factoring transactions, requirements that (i) the last endorser of the bills of exchange obtained in return for the receivables and which will be assigned to the factoring institution will be the creditor under the respective invoice and (ii) the issuer or the previous endorser of the same will be the debtor under the respective invoice that the bill of exchange relates to will not apply provided that there is an exclusive agreement between the factoring institution and the debtor, setting forth all relevant information related to (x) the bills of exchange issued or endorsed by the invoice debtor and obtained by the factoring institution and (y) the invoice or the underlying agreement between the exporter and importer out of which the receivables subject to factoring transaction arises.
Q4/2017 Consumer Goods & Retail
Regulation on Consumer Rights in Electronic Communication (“Regulation”) has been published in the Official Gazette dated September 28, 2017 and numbered 30224. Under Article 5 of the Regulation, consumers must be informed about tariffs and discounts, and secure access to the internet by the operator. Under Article 7 of the Regulation, in cases which the operator fulfills a periodic or continuous service or procurement of goods, a subscription agreement is to be made between parties.
Under the Corporate Income Tax General Communiqué (Serial No. 11) [published in the Official Gazette dated December 31, 2016 and numbered 29935 (3rd bis)], amendments are made on the explanations stated under the Corporate Income Tax General Communiqué in relation to the implementation of undermentioned issues.Exemption on regional management centers, Exemption for the incomes derived through operating educational facilities, nurseries, day care and rehabilitation centers, Exemption on industrial property rights, Exemption on the income derived through sale and lease back transactions, Exemption on income derived through the sale of all sorts of assets and rights aimed at lease certificate issue, Deductions for Research & Development, Deduction on services delivered to entities and corporations resident abroad, Reduced corporate income tax application.
The amendments stated below are made by the Law No. 6770 (published in the Official Gazette dated January 27, 2017 and numbered 29961):Incomes derived by the SMEs merged within the scope of first paragraph of Article 19 of the Corporate Income Tax Law, holding an industrial registry certificate and carrying out manufacturing activities will temporarily be subject to a reduced corporate income tax rate. The reduced rate shall apply over the transferor SME's income until the date of merger only, the transferee SME's 3 years of income including the accounting period in which the merger took place. The reduction rate is determined by the Council of Ministers providing that it shall not exceed 75%, VAT exemption will be applicable on documented software, deliveries intangible of rights and leasing to the taxpayers with incentive certificate, VAT refund may be claimed regarding the construction businesses within the scope of investments made through investment incentive certificate in the manufacturing industry. However, it should be noted that such application is only valid for the year 2017. In this regard, the VAT incurred in 2017 for the abovementioned construction businesses that could not be compensated through deductions may be refunded upon claims of the taxpayers, Taxes which could not be refunded on account due to the transactions that are subject to reduced rate will be refunded in cash throughout their year in respect of sectors, goods/services groups and periods set by the Finance Ministry, Income derived through the transfer of ships and yachts registered at Turkish International Ship Registry by cancelling those out of the registry in order for enrolling to another registry or transfer of those through another method (as scraping or export) will also be considered as being exempt from income and corporation tax. The goods located abroad as of January 27, 2017 which are foreign flagged and classified under HS codes of 8901.10.10.00.11 and 8901.10.90.00.11 and as well as yacht, cruiser, boats and excursion snips existing under 89.03 tariff position are exempt from; Inheritance and gift tax in case of free of charge transfer to individuals and legal entities resident in Turkey, Any and all kinds of taxes including customs duties with respect to the transactions for their imports to Turkey, registration and enrollment.