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September 3, 2024

CAPITAL MARKETS LAW NEWSLETTER

This newsletter updates readers on the recent developments that occurred in August 2024 in the capital markets. It includes (i) the new principles and conditions for the establishment of crypto-asset trading platforms, as stipulated by the Principle Decision No. i-SPK.35.B dated 08.08.2024 and numbered 42/1259 (“Decision on Crypto-Asset Trading Platforms”), issued by the Capital Markets Board of Türkiye (“Board”); (ii) the mandatory use of the e-Submission System for certain applications to the Board, in accordance with the Board’s decision dated 25.07.2024 and numbered 39/1162 (“Decision on e-Submission System”), (iii) the extension of reporting periods for financial statements not adjusted for inflation, as stipulated by the Board Decision dated 08.08.2024 and numbered 42/1263 (“Decision on Inflation Accounting”), (iv) disclosure of financial statements in prospectuses by issuers, as stipulated by the Board Decision dated 28.08.2024 and numbered 48/1367 (“Decision on Disclosure of Financial Statements”); and (v) recent initial public offerings (“IPO’s”).

1. Principle Decision on the Establishment of Crypto-Asset Trading Platforms

Board published Decision on Crypto-Asset Trading Platforms, introducing new principles and conditions for the establishment of crypto-asset trading platforms (“Platforms”). Decision on Crypto-Asset Trading Platforms sets forth requirements concerning the financial structures, organizational structures, and technological infrastructures for Platforms to ensure a robust and secure operational environment within the industry.

The legal basis for the Decision on Crypto-Asset Trading Platforms is Article 35/B of the Capital Markets Law No. 6362 (“Law”), which grants the Board the authority to set principles and guidelines regarding the establishment, shareholders, management, and capital requirements of Platforms. In compliance with this authority, the Board has outlined the following key requirements for Platforms:

• Platforms must be established as joint-stock companies, with all shares in registered form and issued against cash. The minimum paid-in capital requirement is set at TRY 50 million (USD 1,467,205 ), which may be increased under future regulations by the Board.

• The articles of association must comply with the Law and related regulations, and the trade name must include the phrase “crypto-asset trading platform.”

• The field of activity must be exclusively limited to crypto-asset trading, initial sale or distribution, clearing, settlement, transfer, and custody services.

• The board of directors must consist of at least three members, and the shareholding structure must be transparent and clear.

• Founders and shareholders holding 10% or more of the capital or voting rights must meet specific qualifications, including not being bankrupt, not having significant shares in certain financial institutions with revoked licenses, and not having convictions for certain financial and integrity-related crimes.

Existing Platforms, as defined by the transitional Article 11 of the Law, must meet the updated conditions and submit their applications to the Board by November 8, 2024 to continue their operations.

2. Mandatory Use of the e-Submission System

Pursuant to the Board’s Decision on e-Submission System, the mandatory use of the e-Submission System for applications to the Board has been expanded. Effective August 5, 2024, all applications from issuers within the scope of the Central Registry System (MERSİS), as well as capital market institutions and other entities governed by the Law, must be submitted electronically through the Board’s e-Submission System. This includes applications falling under the jurisdiction of the Board’s Legal Affairs Department, Institutional Investors Department, Intermediary Activities Department, Accounting Standards Department, and Corporate Finance Department.

Exceptions to this requirement include submissions made within the right to petition by courts, prosecutor’s offices, or other relevant persons or institutions, such as requests, opinion letters, denunciations, complaints, and similar applications.

This expansion is intended to streamline submission processes, reduce processing times, and enhance the efficiency of interactions between the Board and market participants

3. Extension of Reporting Periods for Financial Statements Not Adjusted for Inflation

Formerly, the Board’s decision dated 07.03.2024 and numbered 14/382 permitted issuers applying inflation accounting to disclose certain unaudited financial data from 2023 financial statements to investors (analysts) under specified conditions.

With the Decision on Inflation Accounting, the permitted period for reporting financial data not adjusted for inflation has been extended to cover all interim periods of 2024 as well as the annual financial statements dated December 31, 2024. This measure aims to facilitate the healthy functioning of the market and allow issuers sufficient time to update their assumptions and provide necessary information to the market, including important expectations and assumptions that were not previously adjusted for inflation.

The disclosures must clearly state the responsibility principles, specify whether inflation adjustment is included, and indicate whether the information has undergone independent auditing. Additionally, issuers are required to comply with public disclosure regulations and report these disclosures via the Public Disclosure Platform and other relevant channels.

4. Disclosure of Financial Statements in Prospectuses by Issuers

Board issued the Decision on Disclosure of Financial Statements, clarifying the requirements for the presentation of financial statements in prospectuses prepared by issuers. Decision on Disclosure of Financial Statements addresses the purchasing power of the currency used in the financial statements included in the prospectuses, particularly for capital market instruments that do not grant partnership rights and for capital market instruments with partnership rights offered to the public by publicly held companies.

According to the Board’s earlier decision dated 08.02.2024 (Decision No. 9/22), financial statements presented in the prospectuses must comply with the principles and timelines stipulated in Article 11 of the Communiqué on Prospectus and Issuance Document No. II-5.1 (“Communiqué”). Specifically, the requirement applies to comparative financial statements starting with the annual financial statements for the fiscal year ending on December 31, 2023, adjusted for inflation.

Issuers must include in their prospectuses, prepared in accordance with subparagraph (c) of the first paragraph of Article 11 of the Communiqué, all financial statements adjusted for inflation as disclosed on the Public Disclosure Platform in a comparative format. For example, if a prospectus includes annual financial statements for the years 2021, 2022, and 2023, as well as interim financial statements for the six-month period ending on June 30, 2024, the following requirements apply:

(i) Annual financial statements for the fiscal year ending on December 31, 2021, should be presented without inflation adjustments.
(ii) Annual financial statements for the fiscal years ending on December 31, 2022, and December 31, 2023 should be presented with inflation adjustments, reflecting the purchasing power as of December 31, 2023, as disclosed on Public Disclosure Platform.
(iii) Interim financial statements for the six-month period ending on June 30, 2024, should be presented with inflation adjustments, reflecting the purchasing power as of June 30, 2024, as disclosed on Public Disclosure Platform.

The above statements under (i) and (ii) must be presented together in a single table, while the statement under (iii) should be provided in a separate table.

5. Recent IPO’s

In August 2024, the Board authorized 6 (six) company’s IPO application: (i) Bahadır Kimya Sanayi ve Ticaret A.Ş., (ii) Kıraç Galvaniz Telekomünikasyon Metal Makine İnşaat Elektrik Sanayi ve Ticaret A.Ş., (iii) Gündoğdu Gıda Süt Ürünleri Sanayi ve Dış Ticaret A.Ş., (iv) AHES Gayrimenkul Yatırım Ortaklığı A.Ş., (v) Özata Denizcilik Sanayi ve Ticaret A.Ş., and (vi) Cem Zeytin A.Ş.

We are proudly announcing that we advised Bahadır Kimya Sanayi ve Ticaret A.Ş. which has become the first company to go public under the Board’s Principle Decision on the Reduction of Amounts in the Pre-Initial Public Offering Requirements for Shares (i-SPK 128.22).

Should you have any inquiries, please do not hesitate to contact us.

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