Developments in Turkish Law Related to ICO 12 December 2017

An alternative capital increase method which is named as “Initial Coin Offer (“ICO”) in foreign countries, has been adopted by our legislation with the Law on “the Amendment of Some Taxation Laws and Other Laws” (“Law”) numbered 7061 which was published in the Official Gazette dated 05.12.2017, under the name of “Crowd Funding”.

ICO is offered as an alternative equity collection system to the initial public offering (“IPO”) system in which the investors receive the generated virtual currency for their capital contribution instead of receiving stock certificates. Having said that, in the Article 107 of the Law which amends the related article of Capital Market Law (“CML”) numbered 6362, the Crowd Funding is defined as collecting money from public through Crowdfunding Platforms in order to provide the funds required by a project or venture company without being subject to the provisions of CML on investor compensation, but in accordance with the principles set by the Capital Market Board (“CMB”). Additionally, in the preamble of the draft Law on the same article, the Crowd Funding is defined as a method in which entrepreneurs fund their business ideas or projects through collecting equity via Crowd Funding Platforms to realize their business ideas or personal projects.  From the aforementioned article and its preamble, it can be concluded that the scope of Crowd Funding will cover the scope of ICO’s.

Besides, CML numbered 6362 has also been amended by the Articles 107, 108, 109, 110 and 111 of the aforementioned Law. In these Articles it has been stated that;

• The definition and scope of Crowd Funding,
• The Crowd Funding could only be performed by the Crowd Funding platforms allowed by CMB,
• There is no obligation to issue prospectus or export document regulated in CML when collecting capital from the public with Crowd Funding method,
• The companies that collect money from the public with Crowd Funding will not be considered as companies with public ownership, even if the number of the shareholders exceeds 500.
• The company’s that collect money from public without obtaining the permission of CMB will be notified to the Information and Communication Technologies Authority and the online access to these institutions will be blocked.

Additionally, Article 35/A with the title of “Crowd Funding Platforms” has been added into CML with Article 110 of aforementioned Law. In this article it is regulated that;

• The Crowd Funding platforms are defined as “the organizations that act as intermediary on crowd funding and provide service in digital platform”,
• The establishment of Crowd Funding platforms and initiating their activities are subject to the permission of CMB,
• The measures regarding the illegal activities and transactions of Crowd Funding platforms could be taken by the CMB,
• The Crowd Funding and its affiliated activities are not subject to the provisions of the CML concerning the stock market operators and other organized market places, and
• The relationship between the Crowd Funding platforms or persons who collect money from public through Crow Funding and the persons who fund them will be subject to general provisions.

To summarize, the Crowd Funding, also known as ICO in foreign literature, has taken its place in our legislation by the enactment of the abovementioned articles of mentioned Law. Based on the articles explained above, CMB will have the authority to regulate the activities of Crowd Funding and to control and audit the Crowd Funding platforms with its secondary regulation.

Türkçe Versiyonu İçin

http://www.kasaroglu.av.tr/tr/hukukumuzda-kitle-fonlamasi-ico