Category: Turkiye

The Capital Markets Board (“CMB”) updated some amounts subject to revaluation within the scope of capital markets legislation for the year 2023 with the Capital Markets Board Bulletin dated 30/12/2022 and numbered 2022/74 published pursuant to its decision dated 29/12/2022 and numbered 77/1900.

Some of these re-evaluated thresholds are as follows;

• The minimum capital amount required for the transition of companies to the registered capital system was increased from TL 10.000.000 to TL 30.000.000.
• The minimum initial capital of portfolio management companies was increased from TL 7.500.000 to TL 30.000.000.
• For 2023, the minimum amount of equity capital that portfolio management companies are required to hold according to the size of the portfolio under management is (i) TL 30 million for portfolio management companies with a portfolio size of up to TL 1 billion, (ii) TL 40 million for portfolio management companies with a portfolio size of between TL 1 billion and TL 4 billion, and (iii) TL 50 million for portfolio management companies with a portfolio size of between TL 4 billion and TL 36 billion, (iv) updated as TL 100 million for those exceeding TL 36 billion, (v) for those exceeding TL 72 billion, additional equity capital requirement of 0.02% of the amount exceeding TL 72 billion (iv) if the equity capital of the portfolio management companies exceeds TL 200 million, additional equity capital requirement will not be required.
• The minimum initial capital required for the establishment of real estate investment trusts and the minimum amount required for each of the existing paid-in/issued capital and shareholders’ equity for conversion to a real estate investment trust was increased from TL 64.500.000 to TL 142.000.000.
• The minimum amount required to be reached by the fund portfolio value within one year at the latest following the commencement of the sale of participation shares of real estate investment funds to qualified investors has been increased from 13.000.000 TL to 40.000.000 TL.
• The minimum total amount of resource commitment to be received from qualified investors in venture capital investment funds was increased from TL 6.500.000 to TL 25.000.000.
• The minimum initial capital required for the establishment of venture capital investment trusts and the minimum amount required for each of the existing paid-in/issued capital and shareholders’ equity for the conversion to venture capital investment trusts were increased from TL 29.000.000 to TL 100.000.000.
• In the event that the shares of venture capital investment trusts are sold only to qualified investors, the minimum amount required to be held for each of the initial capital at the time of establishment and the existing paid-in or issued capital and equity capital at the time of conversion has been increased from TL 7.250.000 to TL 30.000.000.

Conditions for Initial Public Offerings Tightened!

• The market value to be taken as a basis for the underwriting obligation of the companies whose shares will be offered to the public for the first time according to the market value to be calculated based on the public offering price of the shares to be offered to the public, excluding additional sales, is determined as TL 150.000.000- TL 250.000.000; previously it was TL 60.000.000- TL 100.000.000.
• The market value to be taken as a basis in determining whether the shares to be made available for sale will be created according to the market value to be calculated based on the public offering price of the shares to be offered to the public, excluding additional sales, of the corporations whose shares will be offered to the public for the first time has been increased from TL 104.025.474 to TL 231.903.989.
• The amounts to be taken as the basis for determining the financial statement sizes required for exclusion from the scope of the Capital Markets Law have been determined as total other revenues excluding net sales revenue and net sales revenue both less than TL 180 million or total assets less than TL 300 million for 2021, and total other revenues excluding net sales revenue and net sales revenue both less than TL 270 million or total assets less than TL 450 million for 2022.

By Onur Kucuk, Managing Partner, and Tansu Eksi, Assocate, KP Law

Paksoy has advised Imerys on the sale of its 50% stake in JV Pergem to IPM Industries. Cim Hukuk reportedly advised IPM Industries.

According to Paksoy, “Imerys, a world leader in mineral-based specialty solutions for the industry, has entered into a share purchase agreement with mining group IPM Industries and individual shareholders for the sale of its 50% stake in their Turkish joint venture Pergem, which was established to produce and export crushed and screened perlite ore to the CIS markets. The transaction successfully closed on 22 December 2022, resulting in the Turkish partner taking over sole control of the company.”

According to the firm, “the carve-out of Imerys’ participation in this joint venture takes place within the broader context of the sale of Imerys’ high-temperature solutions business in 16 countries worldwide to global investment firm Platinum Equity, for an enterprise value of approximately EUR 930 million.”

Paksoy’s team included Partners Stephanie Beghe Sonmez and Sansal Erbacioglu, Senior Associate Simge Sengun, Associate Beritan Arik, and Senior Tax Specialist Canay Palak.

The rapid developments in the world of technology put the law into a difficult concept puzzle to follow. While the discussions on smart contracts made with blockchain technology have not yet ended, a new organization that can direct the life of business has taken its place in the international market; Decentralized Autonomous Organization (DAO). This mechanism offers people new democratized ways to operate their organizations, radically separated traditional institutions.

How decentralized organizations work?

Smart contracts enable the execution of a distributed system between many people organized in a network. The terms agreed between the parties are signed in encrypted form and uploaded to the blockchain. Smart contracts on the Ethereum blockchain provide the foundation for DAOs. However, in the future, DAOs are expected to operate on different types of distributed systems.

When setting up a DAO, the rules are first determined, and a smart contract is prepared accordingly. Then, the fundraising phase begins and people who want to join the organization buy tokens using the cryptocurrency that the application processes. With this process, called tokenization, the funding activity is carried out just like the capitalization of a company. The accumulated funds are used for the DAO’s activities, and the tokens give members rights such as voting, income from activities, etc. All these rights are used by answering questions in smart contracts, the responses to which are usually yes or no. Therefore, there is a fast and reliable flow in the overall organizational structure without the need for third parties.

Legal Status of DAOs

Although the organizational structure of the increasingly popular DAOs has common points with today’s legal structures, it has not been regulated in almost any country’s law. While there is a view that existing regulations are adequate for the needs of DAOs, it is widely accepted that the law is behind the developing technology. However, it should be noted that the purpose of developing DAOs is closely connected to the principle of “code is law”, which is often mentioned in blockchain technology. This means that people who do not know each other trust a system whose immutability is guaranteed by blockchain technology. However, in 2016, due to an issue that was overlooked in the coding of theDAO project, an investor over and overused the withdrawal right and disappeared, taking about 40 million dollars in funding. In the wake of the scandal, the limits of the principle that the code is the law and the necessity to consider the rule of law have been discussed. For this reason, while “law” is the codified rules in smart contracts, it is of great importance that the legal regulations that will constitute a secondary protection are prepared in accordance with the DAO concept.

The first step for the regulations that will ensure the development and widespread use of DAOs worldwide came from the American State of Wyoming in 2021. In 1977, the state, which became famous for recognizing LLCs (Limited Liability Company), became a pioneer in the crypto sector by introducing a law recognizing DAOs as a different limited liability company. According to the law, DAOs will now be considered as a legal entity and, as a result, will be able to do all the business and transactions that a company can do. Later, following the example of this innovation in the State of Wyoming, the States of Tennessee and Vermont began to adopt similar regulations.

What the Ooki Case Shows Us?

The Commodity Futures Trading Commission (“CFTC”) sued Ooki, a DAO operating as an unregistered derivatives exchange, alleging that it engaged in unauthorized leveraged trading, failed to register as a futures commission merchant (FCM), failed to implement know-your-customer (KYC) and customer identification program (CIP) procedures as required of FCMs under the Bank Secrecy Act, and violated the Commodity and Exchange Act.

The Turkish Commercial Code also defines ordinary partnerships apart from companies with legal personality. For an ordinary partnership to be formed, the elements of (i) person, (ii) capital, (iii) contract, (iv) common purpose and (v) will for the common purpose are required. Considering the functioning of DAOs, it seems possible to apply the ordinary partnership provisions by analogy.

Despite the many unknowns in the world of technology, interest in DAOs continues to grow day by day. In addition to organizations that have ended negatively, such as theDAO project mentioned above, there are many positive examples, such as the American CryptoFED DAO, the first DAO recognized in the State of Wyoming, and EnterDAO, a marketplace on Ethereum in Bulgaria that allows users to rent land in metaverse games. In addition, the Ooki Case also provides guidance in determining the legal liability of DAOs.

In order to increase the number of DAO examples in the coming period, it will be beneficial for the projects created to meet the technical and legal requirements and for the smart contracts created to meet the legal requirements in order to prevent possible disputes and to start the widespread use of DAOs.

* This article has been originally published on CoinDesk Türkiye on December 18, 2022.

By Onur Kucuk, Managing Partner and Beyza Sila Surmeli, Trainee, KP Law

Turunc has advised Bogazici Ventures on its investment in UP School’s first financing round. Bagzibagli Erdem & Sahin advised UP School.

According to Turunc, the round included the Arya Women Investment Platform and individual investors.

UP School is an educational technology company focused on training women for careers in technology.

Bogazici Ventures is a Turkish Capital Markets Board-regulated venture capital fund focused on financial technology, health technology, retail technology, and gaming.

The Turunc team included Managing Partner Kerem Turunc, Partner Yasemin Erden, and Associates Beste Yildizili Ergul, Selay Berfin Turgut, Elif Eryilmaz, and Baran Ezeli.

The Bagzibagli Erdem & Sahin team was led by Partner Orhan Erdem.

Paksoy has advised Univar Solutions on its acquisition of Kale Kimya. Egemenoglu advised the sellers.

Closing is expected in the first quarter of 2023, pending regulatory approval.

Univar Solutions is a US-headquartered commodity, specialty chemicals, and ingredients distributor.

Established in 1975, Kale Kimya is Turkey’s specialty chemicals distributor. The company has a product portfolio of beauty and personal care products, and home and industrial cleaning products, including surfactants, actives, emulsifiers, preservatives, ultraviolet filters, fragrances, polymers, conditioners, esters, and emollients.

“This acquisition is a great fit between two companies that share market-leading reputations, expert technical support, a spirit of innovation, and relentless dedication to exceptional customer service,” Kale Kimya CEO Birgen Kaleagasi Ozemre commented. “This will support the growth of our people and products even further, and I look forward to becoming a unified company with Univar Solutions.”

The Paksoy team included Partners Elvan Aziz and Togan Turan, Senior Associate Busra Akture, and Associates Tugcan Akalin, Mete Siber, and Idil Gunes.

The Egemenoglu team included Partner Efra Aydin Can and Associates Buse Yonat and Furkan Ekin Ekinci.

Gide Turkish affiliate Ozdirekcan Dundar Senocak has advised the Turkiye Wealth Fund on its acquisition of Bereket Katilim insurance companies and the subsequent restructuring of TWF subsidiaries’ takaful insurance operations.

According to ODSA, consequently, two joint stock companies have been established for takaful insurance: Turkiye Katilim Sigorta and Turkiye Katilim Hayat.

“Both companies will be operating under the ‘full takaful model’ and engage in life and non-life insurance activities, providing services in areas and subjects that comply with the principles of participation and takaful insurance,” ODSA informed. “Turkiye Katilim Sigorta and Turkiye Katilim Hayat aim to build a new-generation insurance approach and target becoming a leading player in the participation and takaful insurance market.”

The Turkiye Wealth Fund is a sovereign wealth fund owned by the Government of Turkey.

The ODSA team was led by Partner Arpat Senocak and Associate Nil Duman.

Moral, Kinikoglu, Pamukkale, Kokenek has advised Israel’s Amiad Water Systems on its acquisition of the final 49% stake in FTS Filtrasyon Aritim Sistemleri. SCH-Legal reportedly advised the sellers.

According to Moral, Kinikoglu, Pamukkale, Kokenek, as a result of the acquisition, Amiad Water Systems now becomes the sole shareholder of the acquired company.

Amiad Water Systems is a Tel Aviv Stock Exchange-listed company that specializes in water filtration solutions.

FTS Filtrasyon Aritim Sistemleri is an Ankara-headquartered enterprise.

The Moral, Kinikoglu, Pamukkale, Kokenek team included Partners Resat Moral and Serra Haviyo, Senior Associates Dilara Kaymaz and Aybike Gurcan Arslan, and Associate Zeynep Yalcin.

Editor’s Note: After this article was published, SCH-Legal confirmed it had advised the sellers – the Sandikcioglu family. The firm’s team included Managing Partner Hasan Karslioglu, Executive Lawyers Selcen Koksal and Nilhan Artan Kanbir, and Lawyer Mahmut Atakan Coplu.

Former Senior Associate Gokturk Sahin has been promoted to Managing Associate and appointed Head of the Litigation Department at Moral, Kinikoglu, Pamukkale, Kokenek.

Specializing in corporate and M&A, litigation, and insolvency and restructuring, Sahin has been with the firm since 2019, having first joined as a Senior Associate. Before joining the firm, he was an Attorney-at-Law with Egemenoglu, from 2016 to 2019, and with the Kucuk & Kucuk Law Office, from 2014 to 2016. Earlier, Sahin spent two and a half years with Cukur & Yilmaz, from 2011 to 2014, having first joined as a Trainee Lawyer and being promoted to Lawyer in 2012.

Belda Ozturk has joined Kazanci Holding as its Chief Legal Counsel.

Ozturk moved from Hattat Holding, where she held the same position since 2019, and where she also worked as a Legal Counsel between 2013 and 2014. Between her two periods with Hattat, she was a Partner with Ozturk & Ozturk Attorney Partnership.

Ozturk also worked as an Of Counsel for Celepci Counseling Services between 2008 and 2010, as a Senior Associate with CTK Law Firm between 2007 and 2008, and as an Attorney at Law with BAB Law Office between 2002 and 2007.

“I am excited to join Kazanci Holding where we may put our joined efforts into creating sustainable values,” Ozturk commented.

Originally reported by CEE In-House Matters.

Law No. 4054 on the Protection of Competition (“Competition Law”) applies to merger and acquisition transactions (“Transactions“) since they may lead to consequences such as establishing/strengthening a dominant position or restricting effective competition in the market. Additionally, as per Communiqué No. 2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Communiqué“), some Transactions are subject to the Competition Board’s (“Board“) approval. In this regard, the Turkish Competition Authority (“Authority“) releases the Mergers and Acquisitions Overview Report each year to describe the overview of the Transactions examined within its body and thus provides a breakdown of the Transactions that took place in the market as along with a broad market overview. The Mergers and Acquisitions Report for 2022 (“Report“) was published and made public by the Authority on January 6, 2023.

Number of Transactions Dropping in 2022 Compared to the Previous Year

According to the Report for the year 2022, the Board examined a total of 245 mergers and acquisitions during the year. The number of Transactions in 2022 decreased compared to 310 transactions in the previous year. However, as indicated in the Report, it can be concluded that the number of Transactions in 2022 is near the average, given that the average number of Transactions examined over the last ten years (2013-2022) is 219.

Of the 245 Transactions carried out in 2022, 39 are between companies of Turkish origin, 154 are between foreign companies, and 34 are between Turkish and foreign companies. Accordingly, foreign-to-foreign M&A transactions have the largest share in terms of the number of Transactions.
Whit regard to the Transaction values, a dramatic gap is observed between the Transaction values realized by Turkish and foreign-origin companies: the entire reported value of Transactions involving only companies of foreign origin is 5 trillion 580 billion TL, whereas Transactions involving only Turkish origin companies have a value of 25 billion 73 million TL. These numbers also highlight the difference between the values of Turkish-origin and foreign-origin companies. In addition, the Report states that the value of the reported mergers and acquisitions, to which both Turkish and foreign companies are parties, was 36 billion 224 million TL. Accordingly, it can be concluded that transactions carried out by foreign companies are the group with the highest transaction value.

Pursuant to Article 10 of the Competition Law, the Board may conduct a Phase II review of Transactions for which their effects on the market’s competitive structure need a deeper examination. According to the Report, the Board decided to conduct a Phase II review of three M&A transactions in 2022 and approved one. The review process for the remaining two Transactions is still in progress.

United Arab Emirates and Netherlands Rank in First Place Among Foreign Investors

Based on the report’s analysis of the distribution of foreign investors in Turkey, foreign investors invested a total of 43 billion TL in 36 separate Transactions, with Netherlands and United Arab Emirates investors taking the top spot. In 2021, in which there were 50 Transactions totalling around 22 billion TL, Luxembourg came in the first place, followed by the United States. In light of this, it can be observed that this table displays a declining tendency in 2022 when both the number of Transactions and the value of Transactions US Dollar exchange rate for the pertinent year are examined.

The Report also examined 145 Transactions made by foreigners overseas in 2022, with a total reported transaction value of 5 trillion 570 billion TL. In addition, the top industries in which investments were made globally in 2022 are as follows: (i) wholesale and retail trade and repair of motor vehicles and motorcycles, (ii) programming and broadcasting activities, (iii) repair and installation of machinery and equipment, (iv) manufacture of basic pharmaceutical products, (v) financial services, and (vi) manufacture of chemical products.

Electric Energy Sector Is on The Rise in 2022

The report states that, in 2022, the largest number and the highest value of M&A transactions occurred in the sector of “production, transmission, and distribution of electric energy”. Excluding the privatisation transactions, the Transactions in this sector constitute 11% of all Turkish Transactions, where the target company is set up as per the Turkish laws. In 2021, the largest number of Transactions were observed in the sector of “production, transmission, and distribution of electric energy”, and the highest value of Transaction belonged to the sectors of “production of plastic packaging materials”. This shows that there was a rapid increase in the Transaction values related to electric energy in 2022.
In terms of Transactions, where the target company is Turkey-based, the “production, transmission and distribution of electricity” sector was in first place with 20,5 billion TL. The sector of “production and distribution of electric, gas, steam and air conditioning” was in second place with the volume of 12,2 billion TL followed by the “accommodation and food service activities” sector.

The Privatisation with the Highest Transaction Value: Airport Management

According to the report, 7 privatisation Transactions were subject to the Board’s review in 2022. These Transactions occurred in following sectors: (i) production, transmission, and distribution of electric energy, (ii) airport management, (iii) import and distribution of natural gas, and (iv) manufacturing sector.
The “airport management” sector, with an approximate Transaction value of 9,75 billion TL, has the largest Transaction value among the aforementioned privatisation Transactions. As per the report, the privatisation transactions make up %16 of all transactions with target companies of Turkey origin.

By Zahide Altunbas Sancak, Partner, and Gokce Kuranel Albayrak, Senior Associate, Guleryuz & Partners