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Main equity markets/exchanges
Borsa Istanbul A.Ş. (BIST) is a self-regulatory entity in the form of a joint stock company that brings together all the exchanges operating in Turkey (www.borsaistanbul.com). A wide variety of instruments are traded on BIST, including stocks, exchange traded funds, government bonds, treasury bills, money market instruments (repos and reverse repos), corporate bonds, lease certificates (known as sukuk), derivative instruments, foreign securities (eurobonds issued by the Turkish Treasury) and precious metals.
BIST mainly consists of the following four markets:
The Equity Market of BIST, on which publicly-held companies from various sectors are traded, is made of the following sub-markets:
Market activity and deals
As at 17 April 2017, 412 companies were quoted on the Equity Market of BIST, as follows:
In 2016, the only initial public offering (IPO) related to Çuhadaroğlu Metal Sanayi ve Pazarlama A.Ş., which generated a capital raise of TRY37 million. In 2017, the IPO of Mistral Gayrimenkul Yatırım Ortaklığı A.Ş. raised a capital of TRY53.625 million.
In 2015, the CMB approved the prospectuses of seven companies that intended to go public, two of which did not successfully complete the public offering process. Out of the successful five companies that went public, two companies started trading on the Main Market, two companies started trading on the Emerging Companies Market and one company started trading on the Collective and Structured Products Market. The aggregate amount of capital raised by these five companies was TRY96,172,500.
The main regulator is the Capital Markets Board of Turkey (CMB). The CMB is supported by the following regulatory bodies:
The main laws and regulations that apply to the equity markets/exchanges in Turkey are the:
IPO requirements. The following requirements apply on an initial public offering (IPO):
Foreign companies. The following pre-conditions apply to foreign companies:
Listing requirements. The following requirements apply to listing on BIST:
Minimum size requirements
A company listed on BIST must satisfy the conditions of the group of the market to which it belongs, as follows:
Trading record and accounts
The issuer must prepare complete and up-to-date financial statements and reports in accordance with the Turkish Accounting Standards and the CMB regulations. These financial statements must be submitted to the CMB and disclosed to the public, where required.
Minimum shares in public hands
While the CMB regulations do not impose any requirement relating to minimum shares in public hands, Borsa Istanbul Listing Directive defines the companies to be traded in relevant groups and markets based on the minimum market value of the shares offered to the public and the minimum ratio of publicly offered shares to paid-in capital (see above, Minimum size requirements).
A publicly-held company that intends to list non-traded existing shares, or shares arising from a capital increase, must file an application with the Capital Markets Board of Turkey within 30 days following the date of its resolution on the listing. A listing application to Borsa İstanbul (BIST) must be made simultaneously.
New shares issued through a capital increase, rights offerings or bonus issues will be traded on the relevant market of BIST, in accordance with the Borsa Istanbul Listing Directive.
Minimum size requirements
There are no minimum size requirements for a secondary listing.
Trading record and accounts
There are no trading record and accounts requirements for a secondary listing.
Minimum shares in public hands
There are no minimum shares in public hands requirements for a secondary listing.
There are no secondary listing requirements for foreign companies.
There are three ways of structuring an IPO:
In Turkey, a subsequent equity offering is referred to as a “secondary offering” and can be structured as follows:
Shareholders’ pre-emptive rights can be restricted in a sale of new shares arising from a capital increase. When pre-emptive rights are restricted, the shareholders cannot benefit from the capital increase. A full or partial restriction of pre-emptive rights must be approved by a resolution of the authorised body of the publicly-held company.
As for an initial public offering, a secondary offering requires a publicly-held company to prepare a prospectus and other documents listed in the Communiqué on Shares No VII-128.1. An application for approval must be filed with the Capital Markets Board (CMB). Therefore, it may take a long time before trading commences on Borsa İstanbul (BIST). In addition, publicly-held companies must pay the CMB fee and the BIST listing fee, which may be a financial burden for the relevant company.
The main advantage of a secondary offering is that the company will be able to generate cash and to strengthen its reputation on the market. A secondary offering may allow the company to be considered as a global and reliable corporation by investors.
Procedure for a primary listing
The main steps for a company applying for a primary listing of its shares are as follows:
Procedure for a foreign company
The requirements and procedure for the listing of capital market instruments issued, or to be issued, by foreign institutions in Turkey or abroad, and of capital market instruments issued abroad by domestic institutions, are the same as those described above.
A company whose shares are offered to the public must complete the offering process with the assistance of an internal working group and external advisers.
Internal working group
An internal working group must be set up within the company to carry out the required public offering applications. The group must be made of experts from the company’s finance and public relations divisions, and other relevant mid-level managers.
In addition to the internal working group, professional external advisers must be appointed to complete the full IPO process in a diligent, appropriate and transparent manner. The external advisers are as follows:
Prospectus (or other main offering document) required
For capital market instruments to be offered to the public, a prospectus must be prepared and approved by the Capital Markets Board (CMB). The prospectus is also required for the BIST listing application.
An issuance document must be prepared and approved by the CMB in the following cases:
Main publication, regulatory filing or delivery requirements
The prospectus (or issuance document) and other documents required under the relevant legislation must be filed with, and approved by, the CMB. Generally, the CMB will approve the prospectus or the issuance document if the information given is found to be consistent, comprehensible and complete according to the CMB standards. Under the normal conditions, the approval must be notified to the company within ten business days following the submission to the CMB for approval. This period is extended to 20 business days in the case of an initial public offering. If information and documents are missing, or additional information and documents are required, the applicant must be informed in writing or electronically within ten business days following the date of application, and required to complete the deficiency. The applicant then has 20 business days to complete its application.
If the prospectus or issuance document is not received from the CMB within 20 business days following the date of CMB approval, or is not published within the required period, the prospectus or issuance document must be re-approved by the CMB. A prospectus approved by the CMB must be published on the issuer’s website within 15 business days following the date of receipt, as well as on the Public Disclosure Platform, if the issuer is a member of this platform.
The main exemptions from the obligation to prepare a prospectus or issuance document are set out in the Communiqué on Prospectus and Issuance Document No II-5.1. Issuers are exempt from prospectus requirements in the following circumstances:
A prospectus is not required in the following circumstances:
A prospectus must be prepared when capital market instruments issued under a prospectus exemption are re-offered for sale through a public offering.
Additionally, the sale of capital shares and foreign investment fund units by foreign corporations to their employees in Turkey under employee share option plans and similar schemes do not require an application to the CMB, provided that the following requirements are met (Communiqué on Foreign Capital Market Instruments and Depositary Receipts and Foreign Investment Funds No VII-128.4):
The prospectus and all information contained in the prospectus must:
A prospectus must include the following information:
Under the Communiqué on Prospectus and Issuance Document No II-5.1, a prospectus relating to an equity offering must include financial statements for the most recent three years and for the relevant interim period, as well as audited and/or limited review statements (if any). A prospectus relating to a non-equity offering (including warrants and certificates) must include financial statements issued for the most recent two years and for the relevant interim period, as well as audited and/or limited review statements (if any). If these financial statements are not included because the company has been recently formed and does not have the requisite two years’ worth of financial statements or similar reasons, the existing audited and/or limited reviewed financial statements can be included in the prospectus. If the issuer must regularly publish its audited and/or limited review financial statements on the Public Disclosure Platform, the prospectus can include a reference to these publications only.
In the case of changes or amendments to the information made public in the prospectus, or on the occurrence of new events that may affect the investment decisions of investors at any time before the start of sales or during the selling period, the issuer must immediately notify the CMB in writing of these amendments or new events. The relevant sections of the prospectus containing the amendments or additions must be approved by the CMB within seven business days following the date of notification to the CMB, and must be immediately published on the issuer’s website and the Public Disclosure Platform (if the issuer is a member).
A prospectus must be prepared in the case of a public offering of capital market instruments, and approved by the Capital Markets Board (CMB). In practice, the company provides the relevant details to be inserted in the prospectus and the company’s lawyers prepare the prospectus. Financial advisers also contribute to the preparation of the prospectus. The issuer confirms the prospectus before applying to the CMB.
The issuer is liable for the losses arising from inaccurate, misleading or incomplete information included in the prospectus. The following persons are liable in proportion to their fault and to the extent that losses can be attributed to them in the circumstances, when the loss cannot be compensated by the issuer or when it is clear that the loss cannot be compensated:
Independent auditors, rating and appraisal firms and lawyers who prepared the reports that are included in the prospectus are liable for any inaccurate, misleading and incomplete information included in their reports.
Persons who offer capital market instruments to the public without publishing an approved prospectus, or who sell capital market instruments without an approved certificate of issue, are liable to imprisonment for two to five years and to a fine from 5,000 days to 10,000 days (Capital Markets Law No 6362). This judicial fine is an amount payable to the State Treasury that is calculated by multiplying the full number of days subject to penalty with the amount fixed per day. The amount of the daily fine is between TRY20 and TRY100, and will be assessed in light of the private and economic conditions of the person. In addition, in the case of fraud, criminal liability can be attributed to the persons conducting the fraudulent activity.
Offered equity securities can be marketed through the following methods:
There is no specific regulation that governs financial promotion and liability for publishing research reports. Under the Communiqué on Principles of Establishment and Activities of Investment Institutions No III-39.1, investment institutions must be objective in their publications, advertisements, announcements and promulgations made through all means of communication in the context of their investment services and activities. Investment institutions must not:
The bookbuilding method is used in both IPOs and secondary public offerings. Bookbuilding can be conducted in any of the following ways:
The bookbuilding period commences after publication of the prospectus. During the bookbuilding period, the intermediary institution or consortium leader (if any) accepts the requests of investors through subscription forms. Following the end of the bookbuilding period, the intermediary institution or consortium leader (if any) prepares a distribution list, a final demand list and pricing.
Within two business days following the date of delivery of the distribution list, the issuer will approve the list and deliver it to the intermediary institution or consortium leader. On receipt of the approved distribution list, the intermediary institution or consortium leader delivers the capital market instruments to the relevant investors according to the procedures and principles specified in the prospectus.
Underwriting can be structured in any of the following ways (Communiqué on Principles regarding Investment Services, Activities and Ancillary Services No III-37.1):
Intermediary services without underwriting (also known as underwriting on a best effort basis) refers to the process in which the shares to be issued are sold through a public offering within the selling period specified in the prospectus, and the unsold portion of shares is returned to the seller, or sold to third parties who previously committed to purchase. Most IPOs in Turkey are conducted on a best effort basis, rather than on an undertaking basis.
The underwriting agreement between the company and the intermediary institution must contain the following minimum terms:
While there are many factors that can have an impact on the public offering timetable (such as the size and structure of the issuer, the industry in which it operates, the effectiveness of its advisers and employees, the method used and market conditions), the IPO process generally take about six to eight months from preparation to approval of the prospectus and listing at Borsa İstanbul (BIST).
The pre-application stage (that is, the preparation of the IPO) can take about three to four months, during which advisers are appointed, articles of association are amended, financial and legal due diligence is conducted, the equity story is developed, the valuation model is built, the prospectus and issuance documents are drafted, and so on. Following completion of the preparation stage, the regulatory review process commences when the issuer applies to the Capital Markets Board for approval of the prospectus and to BIST for listing and trading. Within four to five weeks after obtaining the regulatory approvals, the offer is announced and the bookbuilding process starts. After informing BIST of the sales results, the company is traded on BIST.
In public offerings of existing shares or following a capital increase and in secondary public offerings, after the shares start to be traded on the exchange, the intermediary institution underwriting the sales, or the consortium leader (if any), can purchase the shares for price stabilisation purposes, provided that the required information is included in the public offering prospectus (see below). The intermediary institution can engage in price stabilisation transactions on its own account or for the account of the issuer.
Price stabilisation transactions can be financed out of the issuer’s gross public offering income, provided that the required information is included in the prospectus. In this case, the funds used for price stabilisation transactions cannot be higher than 20% of the issuer’s gross public offering income, and the nominal value of the shares to be purchased cannot exceed 20% of the total nominal value of the shares offered to the public, including green shoe options.
If the funds used in price stabilisation transactions are provided by persons other than the issuer, there are no limitations on the amount of funds to be used in these transactions.
In public offerings involving price stabilisation transactions, the prospectus must include the following statements and information:
The agreement between the intermediary institution and the issuer must specify the parties who can suspend or stop price stabilisation transactions before the end of the stabilisation period. If no such provision is inserted in the agreement, the intermediary institution can suspend or stop the transactions.
After a public offering, price stabilisation transactions can be conducted for a maximum of 30 days following the first day of trading of the relevant shares on the exchange.
If a breach of the stabilisation rules set out in Communiqué on Shares No VII-128.1 constitutes market abuse or market manipulation, the Capital Markets Board and Borsa Istanbul can bring proceedings against the persons carrying out the stabilisation transactions.
Capital gains derived from the listing of equity securities on Borsa İstanbul are subject to a 0% withholding tax and to corporate tax at a 20% rate. Certain exemptions from corporate tax are available under the Corporate Tax Law, and should be considered on a case-by-case (for example, a 75% exemption when the shares have been held for more than two years).
Transfers of shares are not subject to stamp tax or value added tax.
Periodic financial and general reporting
Issuers must prepare and disclose annual financial reports (Communiqué on Principles of Financial Reporting in Capital Markets No II-14.1). Issuers must disclose their annual financial reports and independent audit reports to the public via the Public Disclosure Platform within either:
Publicly-held companies must prepare interim financial reports every quarter, semi-annually and every nine months. They must disclose their interim financial reports to the public via the Public Disclosure Platform within either:
Other disclosure obligations
The Communiqué on Material Events Disclosure No II-15.1 sets out the principles and procedures that apply to disclosure requirements. The Communiqué makes a distinction between insider information and continuous information. Insider information that must be disclosed to the public is not listed in the Communiqué, but the Capital Markets Board (CMB) expects companies to disclose insider information on a case-by-case basis.
The following continuous information must be disclosed to the public:
Developments and changes relating to previous public disclosures of material events must be continuously updated and disclosed to the public. If there are no developments relating to an event that was previously disclosed to the public, the absence of developments must be disclosed to the public (with reasons) every 60 days starting from the date of the last public disclosure of the event. In the case of a change to the general information published on the Public Disclosure Platform, the issuer must update the information within two business days of the change.
Related party transactions
The Communiqué on Corporate Governance No II-17.1 sets out the principles and procedures that apply to related party transactions of public companies. The board of directors must pass a resolution approving the transaction between the company and any related party.
Transaction representing 5% to 10% of the total equity or total gross sale revenues of the company. The company must obtain a valuation report for the transaction from an institution designated by the CMB. Shares must be sold on an arm’s length basis. The following information must be disclosed to the public on the Public Disclosure Platform:
Transaction representing more than 10% of the total equity or total gross sale revenues of the company. In addition to a valuation report (see above), the company must obtain the approval of a majority of the independent board members. Members of the board of directors who are related to the transaction cannot cast a vote. If a majority of the independent board members do not approve the transaction, this must be disclosed on the Public Disclosure Platform and include a satisfactory explanation. The transaction must then be submitted to the approval of the shareholders’ general assembly. The parties to the transaction and the persons related to the transaction cannot vote at the general assembly meeting. There is no quorum requirement for the general assembly meeting. The resolution must be passed by a simple majority of the shareholders present with voting rights.
Significant transactions require the approval of the shareholders’ general assembly. Under the Communiqué on Common Principles Regarding Significant Transactions and Exit Right No II-23.1, the following acts and transactions constitute significant transactions, provided that the significance criteria set out in the Communiqué are met:
In addition, the CMB can consider that the following constitute significant transactions:
Significant transactions must be approved by at least two-thirds of the voting shares represented at the general assembly meeting, unless the articles of association of the company provides otherwise. However, if the shareholders representing half of the voting shares are present at the general assembly, a significant transaction must be approved by the majority of the voting shares represented at the meeting, unless the company’s articles of association provide otherwise.
An individual controlling shareholder who is party to a significant transaction, or a company over which this individual exercises management control, cannot vote on the approval of the significant transaction, if the transaction results in a direct personal benefit for the individual shareholder.
The continuing obligations under Turkish legislation also apply to foreign companies and to issuers of depositary receipts that are listed on Borsa İstanbul. However, the Capital Markets Board can grant exemptions from the obligation to prepare and disclose financial reports.
Breach of the continuing obligations is subject to administrative fines (Capital Markets Law No 6362). In addition to this, Borsa İstanbul can de-list a company for failure to comply with its continuing obligations.
Restrictions on market abuse and insider dealing
Acts and transactions that cannot be justified by a reasonable economic or financial reason and that may disrupt the operation of exchanges and other organised markets in trust, transparency and stability are considered as market abuse (piyasa bozucu eylemler) (Capital Markets Law No 6362).
Insider dealing (bilgi suistimali) is defined as making purchase or sale orders regarding capital market instruments, or changing or cancelling these orders, in reliance on information that has not been made public and that may affect the price or value of the relevant capital market instruments, or the decisions of investors. The use of the information must provide an advantage to the person making the order or to any other persons.
Penalties for market abuse and insider dealing
Both market abuse and insider dealing are capital markets crimes. The following penalties apply:
Voluntary de-listing. A publicly-held company can apply to Borsa İstanbul (BIST) for de-listing where 95% or more of the company’s voting rights are acquired, directly or indirectly, individually or jointly by persons acting together, as a result of a takeover bid or otherwise.
After the general assembly resolves on the de-listing, the company must apply to BIST for de-listing no later than five business days following the resolution. The controlling shareholder must apply to the Capital Markets Board (CMB) to comply with the obligations related to mandatory takeover bids.
The following events must be disclosed to the public in accordance with the relevant CMB regulations:
Compulsory de-listing. A controlling shareholder that has 98% or more of the voting rights of a company can buy out the shares of minority shareholders, who will be entitled to sell out their shares to the controlling shareholder. After completion of this process, BIST must decide whether to de-list the company or to introduce certain restrictions for further listing.
The General Manager of BIST can temporarily suspend transactions in capital market instrument for a maximum of five days in any of the following circumstances:
The Capital Markets Law No 6362 was adopted in December 2012, after which the relevant communiqués were published by the Capital Markets Board and other market participants (such as Borsa İstanbul, the Central Registry Agency and Istanbul Clearing, Settlement and Custody Bank A.Ş) (see Question 2). The 2012 reforms aimed to deepen Turkish capital markets and to improve investor protection. No further regulatory reform of equity capital markets/exchanges is expected in the near future.