Category: Turkiye

“Banking is essential, banks are not…”(Bill Gates, 1994)

In the 21st century, which can be described as the age of technology, many publicly traded companies have internet-centric and platform-based business models. The digitalization trend and the internet and technology-oriented adventure are showing their effects in the finance sector as well as in other sectors. The best example of this can be defined as ‘Neobanking’, which is the trend of today and open to developments. Thanks to neobanks, which is one of a series of FinTech banking initiatives, customers can perform all their transactions with financial institutions in a digital environment. In these digital banks, which do not have a physical branch, the process is to be able to perform all banking transactions via computers and phones. The benefit for customers is that such banks can benefit from banking products and services with low fees, commissions and interest rates, since there are no cost items such as branch opening in their balance sheets. In addition, customers can perform their transactions in international money transfers and online shopping without being subject to high exchange rates. With the Regulation on the Operating Principles of Digital Banks and Service Model Banking, which entered into force on January 1, 2022 in Turkey, FinTechs with e-money licenses, which aim to become the main bank of their customers, entered the market.

Customer Oriented E-Transformation

We can count many factors in the abandonment of classical and traditional banking operations and procedures in the world and the spread of FinTech banking models. Providing financial services with consumer and user-friendly applications much easier and less costly, providing 24/7 banking service to customers, making contactless card payments without the hassle of carrying cash, from invoice issuing to return processes, contactless payments are also integrated with NFC systems from mobile. There are many examples where data matrix applications become widespread in transactions such as deposit/withdrawal, money transfer, bill payment, instant loan opportunities are offered by banks without going to the branch during shopping, and many more. We can say that there is only one motivation for the emergence of these services; The expectations of the customers are that they develop more speed and convenience, less cost and they always want more innovative applications to be included in the system. For this reason, we can say that the digitalization phenomenon in the banking sector has emerged as a result of the merger of customer expectations and technology. Let’s take a closer look at FinTech-based innovations and the challenges of systems in the market.

FinTech has functions such as radically changing the way products and services are presented and revolutionizing existing business models, rather than improving the products and services offered in the banking sector. This function is most evident in the transition from using valuable documents such as cash, checks, policies and bonds to credit cards in payments made for commercial affairs and personal expenses in the past, and today, in the transition from credit cards to digital wallets via QR code and SMS verification system with the development of technology and it has shown itself in becoming the preferred payment tool by individuals. In this process, customers have become able to use the cash they load into their digital wallets, both in stores and in online payments, just like the wallets they carry physically. In fact, some digital wallets can quickly withdraw the missing amount from the defined bank or credit card if the balance is insufficient during shopping. With the digital wallet, which is one of the most successful FinTech applications in the payment services pioneered by PayPal, users can make instant and contactless shopping. Another important factor in the use of digital wallets is sustainability. Consumers can view their receipts and invoices electronically on their wallet, thus avoiding wastage of paper. In terms of companies, this situation is seen in the reduction of input costs.

Digital Battle and FinTech Regulations

It is an undeniable fact that FinTech’s innovative applications on the banking sector, explained with examples above, provide many advantages for customers and users. However, this situation has deeply affected the dynamics of competition between established players in markets such as banking and insurance and new players in the market. In fact, it has become a priority for banks to offer their customers the services they need through digital channels such as the Web, Whatsapp and portal, and to allocate large-scale investments in order to move their financial processes to digital. At this point, it would be appropriate to say that there is/will be fierce competition between the digital-based FinTech companies that have recently entered the market and will operate in the field of payment services and the existing financial institutions. In particular, technology giant companies such as Google and Amazon, which mediate banks and payment services, initially dominated due to their market power and customer portfolios, which inevitably had exclusionary effects for FinTek-based Startups. In order for FinTech companies to gain a foothold in the market and maintain their position, in addition to being creative and customer-oriented in line with the dynamics of the market, they also need and still need regulatory protections.

Until 2022, we witnessed the practices of incumbent financial institutions to unilaterally or collectively exclude new players who want to enter the market by using their infrastructure and customer portfolio power. The best example of this is undoubtedly seen clearly in the Bonus decision of the Competition Board dated 07.09.2017 and numbered 17-28/462-201. FinTech-based payment service providers, which have been subject to anti-competitive actions such as the ban on sub-licensing for payment service providers, now have the opportunity to expand their merchant network with their own virtual POS products. Therefore, it can be said that the concept of finance has been transformed in the axis of “growth by sharing” rather than the monopoly of banks. The regulations that reveal the infrastructure and cornerstones of this growth are Electronic Banking Communiqué, Remote Customer Act Communiqué and Payment Systems Communiqué in our country.

In such a competitive environment, a series of directives, regulations, laws have been published and certain uniform rules have been introduced by both local authorities and European Union authorities. In the beginning, there were enforcements to exclude payment service providers and electronic money institutions from the ecosystem by abusing the dominant position of established financial actors. In particular, the Payment Services Directive 2 (PSD2) of the European Union and the Law on Payment Services and Electronic Money Institutions in Turkish Law have established the foundations and rules for FinTek-based third party service providers to enter the banking markets. With the said directive, banks assumed a platform role and the concept of Account Information Service Providers emerged. The concept in question enabled bank customers to move their accounts to another bank, without renewing the contract, just like carrying a number. At this point, the other most efficient convenience offered to bank customers is that the account number (IBAN) and financial history will not change. At this point, bank account ownership is no longer seen as a product but as both a service and a right. On the other hand, we can say that the directive created the phenomenon of “Open Banking”, the most game-changing application of FinTech in the financial sector. Accordingly, customers can access all their bank accounts on a platform screen, share the customer’s transfer and account information under certain conditions with the permission of third-party service providers, manage cryptocurrencies with a digital wallet, create a common customer pool, receive investment advice from a digital consultant. It paved the way for customer-based transactions such as online payments. With these aforementioned services, it has been simplified for customers to make their payments with identification and to benefit from loan financing, especially during this period when they are at home due to the pandemic.

Target: Maximum Digitalization

Although it is possible to say that FinTech companies have a large share of the cake for now, we can say that the banks have no intention of losing their dominance in the sector. In our next article, we will examine the parameters that show that this acceleration of competition will increase even more in open banking and neobanking services. It is useful to point out,  as the competition heats up, it is inevitable that the winners will be customers. We’ll wait and see.

By Ezgi Anasiz, Associate, KP Law

In Turkey, digitalization in corporate law practice has been significantly and gradually increasing in the last few years. Provision of digital signature declarations through the Central Registration System (“MERSIS”), making foreign direct investment notifications through the Electronic Incentive Practices and Foreign Capital System (“E-TUYS”) and receiving electronic notifications from the Social Security Institution (“SSI”) are some of the recent examples and developments of this effort. In this article, we will evaluate these current developments and explain significant points that should be taken into consideration for efficiency.

Digital Signature Declarations

Signature declarations were issued through a visit to Turkish notaries public and/or trade registries, before the novelties. The Law on Amendment of Technology Development Zones Law and Certain Other Laws, numbered 7263 and published in the Official Gazette on February 3, 2021, has amended Article 40/2 of the Turkish Commercial Code (“TCC”) by stipulating that signatures of real person merchants and those who are authorized to sign on behalf of legal person merchants will be obtained electronically from databases of public institutions and organizations and recorded in the trade registry file under the central common database. Accordingly, the Communiqué Amending the Communiqué on Signing Articles of Associations at the Trade Registry Offices During Company Incorporations published in the Official Gazette on February 20, 2021 and it elaborated on provision of signature declarations in a digital environment and listed other exceptional circumstances as to acceptance of physical signature declarations.

Digital signature declarations are now obtained from the database of the General Directorate of Civil Registration and Nationality (“CRN”) before application to the trade registry for registration purposes. Turkish citizens who are being appointed as directors or signatories to Turkish entities and who holding new type Turkish identity cards are requested to provide their approval for such appointment through MERSIS by logging into the system. If their digital signature declarations can be successfully obtained from the CRN, they will no longer be required to visit trade registries/ notaries and submit a physical signature declaration. On the other hand, those who do not have a new type Turkish identity card (e.g. Turkish citizens having former version of Turkish identity card or foreign nationals) or whose digital signature samples cannot be obtained from the CRN due to technical obstacles are still required to submit a physical signature declaration to trade registries.

Foreign Direct Investment Notifications through E-TUYS

Foreign investment regime under the Turkish jurisdiction is mainly regulated under the Foreign Direct Investments Law and the Regulation on the Implementation of the Foreign Direct Investment Law.

Pursuant to Article 5 of the Regulation on Implementation of Foreign Direct Investment Law, foreign-capitalized companies and branches should submit the following information to the General Directorate of Incentive Practices and Foreign Capital (“General Directorate”):

• Information as to (i) “foreign investor”, (ii) “list of shareholders” and (iii) “subsidiaries” (if any) should be submitted within 1 (one) month as of registration of the authorized user with the General Directorate.
• Information as to activities of the company should be submitted on annual basis and each year until the end of May at the latest.
• Information as to share capital increase or decrease transactions should be submitted within 1 (one) month as of realization of the share capital increase/decrease.
• Information as to payments made due to share capital increase or share transfer transactions should be submitted within 1 (one) month as of realization of the share capital increase or share transfer.
• Information as to share transfer transactions should also be submitted within 1 (one) month as of realization of the share transfer.

In order to file notifications regarding the foregoing, each foreign-capitalized company should appoint a user on their behalf and this person should be registered with the Electronic Incentive Practices and Foreign Capital System (“E-TUYS”) first. For the appointment, necessary documentation should be sent to the General Directorate through registered electronic mail address (“KEP”) of the company. The user may be an authorized signatory of the company or a third party designated for this task. Once the appointment process is completed, E-TUYS notifications can be made through electronic signature of the user.

Receiving Electronic Notifications from the SSI

On September 24, 2021, the Regulation on the Electronic Notification by the Social Security Institution (“Regulation”) has been published in the Official Gazette numbered 31608. The purpose of this Regulation is to determine the procedures and principles regarding the notification processes to be made in electronic environment by the SSI. Accordingly, the SSI published a Circular No. 2021/38 (“Circular”) on November 10, 2021 and included detailed explanations regarding implementation of the Regulation.

In accordance with the Regulation and Circular, ones responsible for obtaining an electronic notification address are as follows: (i) legal entity employers who started to employ individuals deemed to be insured (those employed by one or more employers with a labor contract) before October 1, 2021 and continued to employ insurance holders after October 1, 2021 and (ii) legal entity employers who started to employ persons deemed to be insured for the first time after October 1, 2021. As per announcement of the SSI dated December 11, 2021, the employers fall under the foregoing criteria must obtain their electronic notification addresses until January 31, 2022.

Pursuant to the Circular, electronic notification address application can only be made through e-Government Gateway account of a person who has been registered with the trade registry and MERSIS as an authorized signatory or the SSI workplace registration record.

However, it should be noted that foreign nationals are unable to log in e-Government Gateway Portal. Therefore, employers, officials/authorized signatories of which are all foreign nationals, are technically unable to obtain electronic notification address. Therefore, these companies will continue to receive notifications from the SSI physically until new methods are made available. 

Given the fact that e-Government Gateway Portal is available for Turkish citizens only and content of e-Government Gateway Portal and notifications of the SSI are only in Turkish language, authorizing a Turkish person would be efficient in order to receive the notifications in a digital environment.

Conclusion

Turkish corporate law requirements usually necessitate execution of a great number of documentation. With the help of digitalization, it is eventually aimed and expected to reduce volume of documentation as much as possible and complete the many legal steps in an online environment. The foregoing developments are appropriate examples to these purposes. Digitalization also makes a great contribution to time efficiency and security of the processes, and it reduces forgery risks on the documentation. Adaption to digitalization in Turkish corporate law is consistently supported with the regulatory novelties. It is expected by that many other corporate processes (e.g. company incorporation, trade registry applications, issuance of powers of attorneys etc.) can be easily and swiftly handled online without necessity of physical documentation in the near future. Once the digital systems are made available to use of foreign nationals with the English language preference as well, more companies, foreign investors and individuals will be able to utilize from these systems.

By Gonenc Gurkaynak, Partner, Nazli Nil Yukaruc, Partner, Selen Ermanli Sakar, Senior Associate, and Nisa Aybuke Eroglu, Associate, ELIG Gürkaynak Attorneys-at-Law

Clifford Chance and its Turkish associated firm Ciftci Attorney Partnership have advised the joint venture of airport operators TAV Airports Holding and Fraport on a EUR 1.255 billion bridge financing towards the renewal of operational rights for Antalya Airport in Turkey. White & Case and its Turkish associated firm GKC Partners advised the financing banks.

Financing for the bridge loan was provided by nine banks: Deutsche Bank, Ziraat Bank, Akbank, Vakifbank, TEB, Alpha Bank, QNB Finansbank, Piraeus Bank, and Kommunalkredit Austria.

TAV Havalimanlari Holding operates 15 airports in eight countries, including Esenboga Airport in Ankara, Tbilisi Airport in Georgia, Madinah Airport in Saudi Arabia, and the Zagreb Airport in Croatia. Fraport AG Frankfurt Airport Services Worldwide operates and provides aviation-related services at more than 30 airports including Frankfurt Airport in Germany, Mykonos Airport in Greece, Ljubljana Airport in Slovenia, and the Porto Alegre International Airport Salgado Filho in Brazil.

According to Clifford Chance, “the joint venture of TAV Airports and Fraport AG used the bridge loan to finance in part the payment of the EUR 1.8125 billion (excluding VAT) upfront fee to Turkey’s State Airports Authority (DHMI) for a new concession to increase the capacity and lease the operational rights for the domestic and international aviation and CIP terminals of Antalya Airport. The upfront fee represents 25% of the total lease fee of EUR 7.25 billion (excluding VAT) for the full new 25-year concession period starting 2027 and terminating at the end of 2051.”

According to the firm, “the project, which will see the annual capacity of Antalya Airport being extended to 80 million passengers, marks Turkey’s largest airport capacity expansion to date, with the joint venture of TAV Airports and Fraport AG committing to a EUR 765 million investment, in addition to the lease fee.”

The Clifford Chance and Ciftci Attorney Partnership team included Istanbul-based Partner Sait Eryilmaz, Associates Basar Kirka and Pelinsu Demircan, and Trainee Berke Avarkan, with further team members in London, Frankfurt, and Abu Dhabi.

The White & Case and GKC team included Partners Sebastian Buss, Gumiz Gokca, and Ates Turnaoglu and Associates Aybike Iplikci, Baran Abur, Kaan Alkan, Caglar Senol, Ahmet Ekin Cinar, Ebubekir Bal, Sertac Yuksel, and Segenay Kerimoglu.

The phrase “between husband and wife” in Article 278/3 of the Bankruptcy and Enforcement Code No. 2004 [“BEC”] was annulled by the Constitutional Court on March 22, 2022. The annulment will take effect 9 months after its publication, on December 22, 2022.

What Does BEC Art. 278 Regulate?

In the Turkish legal system, a creditor who is unable to collect their debts through enforcement proceedings may request from the court the annulment of the debtor’s transactions for the purpose of hiding assets. While Article 277 of the BEC contains general rules on action for annulment of transaction, Article 278 regulates the annulment of gratuitous transactions.

In this context, the article subject to the Constitutional Court decision constituted an uncontradictable assumption where every transaction between spouses and other related parties were considered to be gratuitous. As a result, these transactions concluded within the last two years could be nullified by court decisions. For example, following a reciprocal transaction between spouses, if one of the husband’s creditors applied to court for the transaction to be annulled, the transaction between the husband and wife would directly be deemed gratuitous and ultimately invalidated.

The issue was brought before the Constitutional Court with the argument that the uncontradictable categorization of these transactions as gratuitous contracts is unconstitutional. Constitutional Court, in its judgment, decided that the assumption of all transactions between spouses as gratuitous transactions is neither necessary or required for the fulfilment of the purposes, which are to eliminate the difficulties the creditor may experience regarding their burden of proof, or to prevent concealment of assets.

The Constitutional Court further ruled that the assumption established by BEC Art. 278 disrupted the balance between public and private interests, and that right to seek legal remedies and property right were unjustly constrained. As a result, the phrase “between spouses” in BEC Art. 278/3 is removed.

Possible Outcome of the Constitutional Court Decision

As the annulment judgment will take effect 9 months later, the legislative branch is likely to act to alter the relevant part of BEC Art. 278, which was deemed to be unconstitutional, and to replace the uncontradictable assumption envisioned in this paragraph with a disprovable presumption. To put it another way, the problem can be resolved by introducing an amendment that allows the debtor wife or husband to prove that the contract was reciprocal.

In its current form, unless Article 278 of the BEC is amended within 9 months, the provision that establishes the assumption for transactions between spouses will be annulled, and the burden of proof regarding these transactions will shift to the creditor who alleges that the savings are gratuitous and thus invalid. If the Parliament does not adopt a new amendment in the annulled article during this timeframe, it is possible that concealment of assets via such transactions may increase and as a result, disputes would arise.

Finally, if an objection is raised for the remaining part of the article that has not yet been annulled –descendants and ancestors, third-degree relatives, and dispositions between the adopter and adoption– the Constitutional Court may annul it on the same grounds.

By Tarık Guleryuz, Partner, and M.R. Cafer Koc, Legal Intern, Guleryuz & Partners

Former White & Case associated firm in Turkey GKC Partners Partner Ceren Sen has joined the EBRD as a Principal Counsel. 

Sen had been with the firm since January 2006, first joining the firm as an Associate. In 2017 she was appointed to Counsel and she was made Partner in 2019. Between 2003 and 2005, Sen worked as a Lawyer at the European Court of Human Rights.

“I was extremely happy to work for a firm such as White and Case and I had reached a point, where, as a Partner, I thought I had accomplished many of my professional life goals,” commented Sen. “I come from an international background, born in Turkey, raised in France, have always been in English speaking schools and workplaces. I thought there was a calling for me in international financial institutions, where the policies and transactions have a real impact on people’s lives on a micro, and countries’ destiny on a macro level. I think lawyers should be on the frontlines of social change and the promotion of sustainable development goals and I thought I was a good fit to do that. That is why I moved to EBRD, which I believe is an institution where efficient policies are made and difference-making objectives are pursued. I believe I can contribute positively to EBRD’s investments and efforts to make legal reforms in the countries where it operates. I look forward to working on projects where the social and environmental impact will be palpable. I am thrilled to be part of this experience.”

Originally reported by CEE In-House Matters.

On February 25, four leading lawyers in Turkey sat down for a virtual round table moderated by CEE Legal Matters Managing Editor Radu Cotarcea to discuss the Turkish technology sector, its recent developments, and the technology sector-related regulatory landscape.

Round Table Participants:

Ali Selim Demirel, Partner, Esin Attorney Partnership

Ayse Ulku Solak, Partner, Nazali

Sinem Mermer, Partner, Boden Law

Vefa Resat Moral, Managing Partner, Moral & Partners

You can also listen to the conversation as a podcast below.

CEELM: Let’s start with the first thing that popped up in the news feed and was an initial starting point for this round table. Trendyol recently made the headlines as Turkey’s first decacorn. Was this success story a fluke, or do you believe that it was a sign of things to come?

Moral: Before we start, to see the big picture, I want to share some numbers evidencing that such investment behavior was not a fluke. In 2021-2022, the total investment injected into startups was more than USD 1.6 billion. We can see that this volume, exceeding the total number of 2019 and 2020 combined, shows the progress of Turkish startups, the investment appetite of angel investors, venture capital, PE, and family offices. We can see that Trendyol, Getir, and Hepsiburada have become unicorns and decacorns. There are certain emerging sectors, such as gaming, artificial intelligence, data analytics, delivery, and fintech. For example, three years ago, we were talking about conventional businesses, such as manufacturing, packaging, chemistry, etc. and now we are talking about technology and startups. Therefore, in short, we can say that evolution is real and will continue. This is not related to the country’s current conditions, such as the devaluation of the Turkish lira, but to the product and bright brains.

Demirel: I agree with Resat, however, I would like to mention that while tech M&A has increased in numbers, the per-deal value has been lowered. When you look at the overall value (of all M&A activity, not only tech), you see that the major three or four deals mentioned by Resat create nearly 60% of all the deal volume. There are great opportunities in Turkey, but when you look at the global landscape, with the COVID-19 pandemic and growth in technology and gaming industries, I think the activity here is still low and there are many untapped opportunities. It might sound a bit grim for the time being, but that also means that there is a lot of potential in Turkey. There is a strong consumer and technology base, and I believe there is more to come. But again, in e-commerce and gaming, we’ve already started to blossom.

CEELM: With regards to the slightly different numbers, is your point that, while the value increased in 2021 compared to 2019-2020 combined, funding only goes to a very small number of entities?

Demirel: Exactly.

Solak: As a woman, I am very proud of Trendyol’s deal as it is very promising. Trendyol raised USD 2.8 billion this year and reached the decacorn status with a valuation of USD 10 billion. It is now one of the most valued companies in Turkey. It evolved from a marketplace to its current status by incorporating some super-app features. It definitely is not a fluke, as it started from a fashion-focused website and has become the largest e-commerce platform now in Turkey, with some additional services. It is now operating delivery networks such as Trendyol Express, an R&D Center (a service driving digital transformation for Trendyol tech), as well as an instant grocery and food delivery service – which witnessed monopoly in the past, but now with [other] players, it’s getting a competitive market. The company also operates the largest second-hand platform under the Dolap umbrella. It seems that it is going to grow very fast, with an approach to developing high customer confidence. They are on the same path as Amazon, as they are immersed in building up consumer trust. Now, with the cooperation with the Union of Chambers and Commodity Exchanges of Turkey, Trendyol is launching the Grow Your Business with Trendyol small and medium-sized enterprises (SME) support program, which creates a win-win situation for both parties involved. In addition, they also have a key element – a program supporting female entrepreneurs’ empowerment as part of the ESG campaign – which I am personally very proud of. I believe that ESG will be one of the key elements in Turkey and will trigger consumer trust and consumer sympathy. Consumers will hopefully also become more aware of those elements. In short, I am sure that it is not a fluke but a big success story.

CEELM: What made it a success story? Were there any particular conditions that it benefited from, or was it bound to happen at some point anyway?

Mermer: In general, the deals that were made with Trendyol were magnificent in the tech sector ecosystem in Turkey – although it coincided with difficult financial times in August 2021. With that attraction, compared to when we started in 2018, we definitely observe an increase in interest in the Turkish tech ecosystem. Trendyol is and will be very successful in the Turkish e-commerce ecosystem, and the reasons for it are many, including a geopolitical one. We have been seeing a surge in the opening of investing in the Turkish manufacturing sector ranging from automotive to healthcare, giving the country a strategic power in supplying goods and services to Europe, the Middle East, and Africa. That’s why the e-commerce, delivery, and logistics sectors will further attract many new foreign investors. Trendyol sets the best example in that regard but other sectors, such as the extremely successful gaming industry, follow it. I anticipate that the manufacturing sector and the related sectors will benefit the most from investor influx in 2022.

CEELM: What is it about local technology companies that makes them particularly attractive for foreign investors right now?

Demirel: I would like to share some insights about Trendyol’s example. We first met Trendyol people back in 2017, on the Alibaba deal, and they had some angel investors. Back then, the value of the deal was around USD 800 million, for around 80% of the shares of the company. However, the founders said they expected to see a much higher price in the near future, in the billions. We, as lawyers, thought it was too much, but later we saw how Trendyol grew and things developed when we were involved in each and every funding round.

The difference between Trendyol and other competitors is that the founders of Trendyol, the angel investors, and the other investors there had more flexibility – meaning that they were more aggressive, made decisions fast, and were visionary. If you go back in 2017 and ask my colleagues whether Trendyol would be the number one amongst the other competitors, the answer would probably be “I don’t think so.” So, I think that the management made the difference.

Moral: The thing about Trendyol was a blended organizational operation, as Trendyol has provided e-commerce instruments as well as its own private-label production ability. That became a blend for the consumers to increase the appetite for purchasing from Trendyol, as it provided a one-stop shop for all consumers to be satisfied. One commercial point to add – Trendyol’s unique approach was the start of the avalanche. From the young population attending startup events, we can see that founders’ age and education levels are different. If you look at the gaming companies, or other technology-related startups, and their founders, some of them may not even have graduated from university – which shows innovation and success do not need a diploma. However, of course, the product, agility, and growth make a difference. Often, a former stakeholder from a conventional business entity may most probably become an investor via VC funds, family offices, or private equity funds. Therefore, we now have a variety of investors who have the awareness of investing and sharing success. Of course, there are tax advantages for Turkey, making the Turkish market more attractive.

Solak: I agree that such success was unforeseen. I remember probably the first establishment of the Turkish startup ecosystem. Even though we were coming together at fancy meetings, when it came to funding everyone was a bit silent. Now, when we are looking at the investment landscape, our clients – VC funds, private equity [funds] from around the world – say that Turkish startup adaptability skills are amazing. We have to be honest that Turkey is not a very easy jurisdiction in terms of territory, geopolitics, and other challenges. It is difficult to survive in this country but, if you do, you can be sure that your company can survive in other jurisdictions bearing fewer risks – which creates more and more success stories, in the phase of internalization. Also, the pandemic showed us that, when it comes to facing challenges, quick adaptability skills mean everything. Venture capital [funds] and private equity [funds] also give credit to Turkish startups due to their adaptability skills. We should keep in mind that every challenge makes us stronger. This might be another attractive point for investors while making their judgments about Turkish startups. Success stories like Peak Games, Trendyol, Getir, and Dream Games show that Turkey’s startup ecosystem has figured out what it takes to be a global player.

CEELM: Since you mention a strong investment landscape, who are the main investors in the country? Is it local capital or foreign capital, and where is it coming from?

Mermer: Compared to the early 2010s, there are lots of different players on the market. VCs are on the rise. In the past, we would come across a couple of them, but recently we have seen an increase in the number of both Turkish and international VC funds, which have established local offices or have representatives here in Turkey. Also, we see the exponential growth of Turkish businesspeople becoming angel investors. Other than that, I would like to put a special emphasis on corporate incubators which are playing a big part in supporting the whole ecosystem. The first to mention is fintech – it was one of the early subsectors in which we saw a lot of corporate backing. Various banks founded incubation centers, undertook idea competitions, and even organized hackathons. We observe the same in the manufacturing sector, too. For example, this year we advised an Estonian micro-mobility company on its merger with a US company. Interestingly, the Estonian company was first supported by a Turkish corporate incubator that has manufacturing power. This way, startups have the perfect setup of the “try, fail, and get better” phase, and they do not have to take huge financial risks.

Solak: When we look at the landscape, 294 deals were completed with the support of foreign investors. Despite the deal volume, I agree with Ali that there is still a long way to go. Amongst European cities raising the most capital, Istanbul was placed 13^th – and fourth in terms of the number of investments in the MENA region. Turkey is ranked among the top ten countries in terms of startup investments and placed in the Super League, although there is a long way to be placed in the Champions League. In addition to angels, VCs, and private equity, corporate venture capital investments were outstanding last year, and big corporations and CVCs also become important players in the startup ecosystem. The landscape is very promising with the entrance of CVCs, as 87 out of the 294 deals were supported by the corporate VCs. Approximately one out of every three deals [included] corporations or CVCs.

Moral: I agree that a huge part of the financing was injected into one or two unicorns, however, we should consider the quantity of the investment, which shows the awareness of angel investment culture in Turkish businesspeople. In 2014-2015, I was giving training to angel investors when the first legislation entered into force, providing incentives for personal income tax. Now we see that Turkish business individuals are becoming co-investors in or with VCs and PEs, while corporate institutions, including leading conglomerates, either form investment vehicles or are directly investing or co-investing in other PEs or VCs. Personally, I am currently investing in five different startups, and, as a firm, we also invest under a hybrid model in some startups which are approved by the management board. This awareness in Turkish business society will pump a great impact in empowering new VCs. It is also true that, apart from four or five Turkish-managed PEs, recently, under current circumstances, the foreign private equity [funds] do not find Turkey so attractive. However, the technology market can change this negative impact.

CEELM: Is there a sense of a stronger local capital base that is floating around?

Demirel: It is a fact that startup activities are rising. One precise evidence to it is that startups have been present in Turkey for a decade or so, however, they only recently started approaching elite law firms. Before that, they could not afford it or did not know about it. Accordingly, there is a lot of awareness and activity. We also see that Turkish conglomerates are constantly launching their own VCs to invest more. Even more so, individuals began investing in startups. Resat said he has invested in various startups. So did I, and probably other colleagues here did as well. Hence, there is a lot of recognition in the Turkish market overall. When you look at publicly available data from the mentioned sources, you will also see that roughly 80% of the transactions are done by domestic investors and, again, nearly 80% are strategic acquisitions. So, our read of Turkish M&A activity, as a law firm, is in line with what we see from the industry/market reports. In terms of institutional/financial and foreign investors, in other words the remaining 20% of deals, I assume nearly all of the 20% are spread into the four major deals mentioned previously. So, financial and/or foreign investor appetite is still low. However, overall activity is promising. I think, in time, there will be more institutional and foreign investors but, for the time being, it is mostly local.

On the picture looking promising, I have one particular example: we had a client, a gaming company, and they had not a single game – yet their valuation with only a prospect of a game was around USD 300 million. Later, they hit USD 1 billion. I think that in Turkey there is an especially big market for hyper-casual and casual gaming. The founders of these gaming companies are not necessarily college graduates. But some others are extremely well educated – like a husband-and-wife [team] from a top university in Ankara. So, you never know who is going to come up with the next big game, and the beauty of gaming is that it is not geographically limited. For example, when we did the Peak games deal, its value was around USD 1.8 billion and they were one of the biggest hyper-casual game companies in Japan.

Mermer: I strongly believe that more local capital will become available to startups over time. Considering the geopolitical position we are in, if things return to normal, companies in the gaming industry can have spectacular prospects. With the hype in the metaverse, gaming companies and in-house software companies will get a lot more capital in the future. Moreover, there is an increased interest in NFTs (non-fungible tokens) and blockchain systems in Turkey. This is no surprise, since the number of smartphone users and credit card users is always higher in Turkey compared to the European average and Turkish market indicators show similarities with the US in terms of the fast pace in adopting new technologies. With the hype of the metaverse and Web3, the gaming industry and other industries that are linked to it will find much more capital more easily.

Solak: Because of the mega-deals Getir and Dream Games reached, foreign investors made up 89% of the total investment made into startups in Turkey; in terms of the number of deals, 15% of them were signed with foreign investors; 60 different foreign investors made investments into Turkish startups in 2021 – when you look at numbers and volumes, it needs to grow. However, I would say that 60% of newcomer foreign investors were making investments in Turkey for the first time. Some of them are very well-known players, such as Goldman Sachs, Balderton Capital, Elevator Ventures, Global Founders Capital, or Index Ventures and it is obvious that it is a growing trend, and newcomers are on the horizon. When we look at local funds, there is an increasing trend as well, despite the challenges. The dissemination of the venture capital investment fund (Girisim Sermayesi Yatirim Fonu) format and the continued increase in successful exits have increased the total number of investors. Local capital, despite the bureaucratic challenges, still tries to establish the funds. In 2021 we saw very well-developed venture capital investment funds – a total number of 18 funds were established. Still, the size of these funds is around USD 180 million. Of these, 13 were GSYFs and one was a venture capital investment partnership (Girisim Sermayesi Yatirim Ortakligi). Local VCs used the experience gained through successful exits to begin making additional investments as well as international ones. In the gaming industry, for example, unicorn numbers are increasing and, even though we still have some bureaucratic and legislative challenges, it is still promising to see such an increasing trend in local funds. Reputable financial institutions and players such as the IFC, EBRD, and Endeavour also gave rise and contributed to the growth of the Turkish startup ecosystem.

CEELM: What do you think still needs to be done to secure more funding?

Moral: Apart from other conventional businesses, the technology sector is the least affected by geopolitical and economic changes, because of the nature of the business activity. I would like to add that the legislative framework, tax-wise, has some hurdles regarding current incentives. Tax legislation should be more flexible, and this should be clearer with regard to foreign direct investments. On investments, we always think of converging from a limited company to a joint-stock company – to avoid any tax risks. Tech companies are agile, as they get their first investments within the first few months rather than long years, therefore we should avoid those roadblocks to welcome more injections and foreign capital.

Demirel: I have similar remarks. For the gaming industry, I would like to highlight that Zynga was sold globally for around USD 13 billion and Peak Games – which is now part of the Zynga ecosystem – was acquired by Zynga two years ago, for around USD 2 billion. It would be a fair guess to say that Peak probably represents nearly 20% of Zynga’s value as of today. This gives a perspective on how big the Turkish gaming industry is and can become. In addition, on Ulku’s remarks about well-known investors such as Goldman Sachs – it is true that we see such big players, but still, probably only in the four big deals. We want to see them more.

Overall, M&A activity in the world increased rapidly after the pandemic, and one of the main reasons for that was the ease in capital and easy access to money from the banks. This, unfortunately, was not the case in Turkey for local investors, because money is expensive. Even though official interest rates do not seem very high when you go to a bank and apply for a corporate loan you are faced with interest rates higher than 30%. That is the reality we live in and, in that sense, one of the regulatory problems is the foreign exchange restriction. It means that in certain industries it is restricted to trade in foreign currencies, and you have to deal with the Turkish lira. So, the borrower takes all the currency risk and banks do not like businesses generating predominantly local currency – hence the high-interest rates. Therefore, unless a company is mainly an exporter, it is very difficult to secure funding. Although the foreign exchange restriction is a problem, such a restriction is also understandable, since the government tries to keep the Turkish lira on a certain level. I understand the government’s rationale behind this decision and that they have to do it, so it is like a chicken-and-egg situation.

Other than the FX restriction, there is another legal bottleneck – though it probably is not a practical concern for startups, since they usually receive investment through rounds of subscriptions/capital increases, and it is very rarely a 100% buyout. But for buyouts or majority share acquisitions, there is a particular restriction in Turkish corporate law (Article 380) prohibiting companies from showing their assets as a form of security in the acquisition of their own shares – meaning that one cannot use the target’s assets as security for acquisition financing. It could be a problem but, from the legislator’s perspective, the aim is to protect the company.

Briefly, the FX restriction and acquisition financing security issue may, from time to time, create roadblocks for the time being. But with more investments coming in and the Turkish lira recovering, these will become less of a problem.

Mermer: Access to cash through banks is problematic nowadays, due to global economic distress. Risks related to interest rates and the new legislation make it harder for investors to foresee the future. For foreign and local investors, it is important to know what will happen in terms of the legal framework. It is tough to give them an idea about the legal landscape in six months or a year’s time. Therefore, the uncertainty and ambiguity of the legal framework are definitely some of the problems.

We observe an interest in new investment methods, such as share swaps with foreign entities. We provide legal opinions on how to do that or what would be the most effective structure for all parties. We accomplished it with one of the US companies and the structure proved to be working. From the legal side, we are also trying to find new solutions; it is not only for startups to be creative, but the lawyers are also trying to navigate through these legal pitfalls and give clients advice on investments with unorthodox structures. Hopefully, the interest rates will be kept at this level and the currency exchange rates will remain more or less the same. In 2022, we will probably see a better financial environment for investments.

CEELM: Do you see the regulatory landscape more like a facilitator or roadblock for the technology sector?

Solak: ​​It is challenging when it comes to the regulatory landscape in Turkey, as we adopted the European legal system, not the Anglo-American one. I think that co-regulation and regulatory sandboxes are becoming more and more important. We should abandon the traditional way of lawmaking – and it should cooperate more with the private sector newcomers such as startups, and not only the ones that already have a voice and influence on the legislative bodies. If we want to compete with the global landscape we need to adapt and hear the voices of others and the regulatory landscape should be open for innovation. A close collaboration between the private sector and the regulators enables the private sector to test new data uses, technologies, and applications while receiving regulatory guidance.

When it comes to corporate legislation, we are always facing some challenges. Despite reforms, bureaucratic challenges still remain. This is particularly true in terms of company establishment and corporate governance, with such difficulties around e-signing, e-meeting, legalized proxies for every general assembly meeting, etc. The commercial code still restricts the freedom of contract, especially considering share transfer restrictions. Also, the lack of common stock and the restrictions on issuing shares without having any voting powers create difficulties in terms of growth finance and employee stock options models, which was also the main issue during the adoption of the crowdfunding legislation.

I had the privilege to attend the meetings held by the legislative authority while discussing the draft crowdfunding legislation which came into force in 2019. Our proposal back then was also amending the commercial code to allow companies to issue shares without any voting power. This was reflected in legislation by the Capital Markets Board back in 2019, as the amendment of the commercial code was necessitating further efforts, but then the article allowing the issuance of shares without voting power was struck out from the legislation again, in 2021, with the recent communique on crowdfunding.

In Turkey, we need to find magical solutions for maintaining conformity of the shareholders’ agreements with companies’ articles, the enforceability of call/put options, or drag-along mechanisms – as we have to abide by the mandatory and restrictive provisions of the commercial code. So, we have a long way to go in terms of legislation, freedom of contract, and enforceability. I think that our legislation is still very bureaucratic and heavy but, hopefully, it will change soon, especially for the fintech sector. The Banking Regulation and Supervision Agency is a good example of a legislative body, as it has been listening to the voices of others. The PSD (Payment Services Directive), for example, was adopted in a legislative sandbox model. Payment companies were first allowed to operate and, once they positioned themselves, this industry started to become regulated. This kind of collaboration between the legislative bodies and the private sector would be great. I have a notion that every person working as a public employee must first work in the private sector, for at least two years – otherwise, they are blind to the private sector’s problems – to be more open to, and aware of, the realities of the private sector.

CEELM: What was the impact of data privacy and data protection on the tech sector and M&A transactions in that context?

Mermer: Tech M&A projects are heavily influenced by the data protection rules. The Turkish Law on the Protection of Personal Data was adopted in 2018, and tech companies now comply with data protection rules. When the data protection law was first adopted, it was hard to explain the necessity of due diligence specifically on this topic, especially to our American colleagues. Now they are aware of data protection legislation in Europe and Turkey and understand their implications. The Turkish Data Protection Authority issued heavy fines to Yemeksepeti, one of the biggest food delivery companies, due to data breaches it suffered. This example shows how the technology sector is directly affected by data protection laws. Of course, the Turkish data protection law is not the GDPR, and the Turkish parliament aims to adopt laws that will not be limited to personal data, similar to the European approach. Accordingly, this might lead to the implementation of stricter rules in terms of data protection.

During the first two years following the enactment of the Turkish data protection law, many B2C startups failed because it was hard to comply with these rules, since compliance required some legal and financial support. That said, I believe this is a thing of the past. Another point is that the Turkish commercial code allows joint-stock companies to undertake their general assembly electronically. In 2020, during the pandemic, we undertook an electronic general assembly of a Turkish joint-stock company that has a foreign sole shareholder and whose board consists of three non-Turkish citizens. We faced many practical limitations while trying to complete the general assembly electronically, such as the need for sending the flash disks containing the electronic signatures abroad. As experienced in this case, even when the code allows a particular action to be taken, it does not necessarily mean that execution will be easy. We do give feedback to governmental organizations about our experience, and we expect such procedures to become easier in the future.

Demirel: In terms of data protection rules, when you look at penalties issued by the data protection board so far, they are around USD 100,000-140,000. Also, the rules themselves are relatively easy to comply with. Turkish companies are becoming more aware of these rules and thus more careful but, at the end of the day, whatever they do is not going to have a devastating financial impact/penalty – because the penalties are not pro-rata, not imposed over profit or turnover.

With regards to other regulations, the e-commerce industry is on the rise, and it catches the eye of the regulator. Meaning that the data protection board, the competition board, and tax regulators will look into it. So what the investors should be careful of is not data protection but the competition law. Because, firstly, you don’t know exactly how to comply with it – you can do your best, but the board can still come anytime and claim that you breached the law in its interpretation – as competition law restrictions are much more subjective rules, compared to those of data protection. Second, the penalties may be devastating, as they are applied over turnover. So, the big regulatory risk area to watch out for is competition and I would say the Turkish competition board has increased its interest in certain industries recently.

Moral: I would also highlight the obstacles against leverage buyouts, which the commercial code does not enable, but our creative financial institutions always support such transactions. However, I want to mention the new generation of government authorities, such as the competition board, data protection board, Information and Communication Technologies Authority, Ministry of Trade – they all are liberal institutions, and they employ more liberal and well-educated people. Their understanding and attitude are very tough, opening another door for wider checklists of requirements to meet for investors and lawyers.

My first M&A experience was related to the privatization of Turk Telecom, and we had a due diligence checklist. Now, when I review our current due diligence checklists, data protection, cyber-security, e-commerce compliance, foreign sanctions, the list has increased significantly. Now we provide 20 pages due to diligence checklists – it is quite challenging for investors.

CEELM: Last question: if you had to pick one, what would be the main legislative item on your wish list to help the technology sector in your country?

Solak: As a privacy lawyer, I would like to touch upon privacy legislation. I will not criticize just Turkey, but the EU as well. I think we have a little bit of a “mom and dad versus child” situation between the regulators and data subjects. When it comes to privacy, we should find a middle way between the EU approach and the US approach. Data means everything to support the technology sector and innovation. We are not only talking about traditional e-commerce activities, but also the blockchain sector, artificial intelligence, machine learning, IoT, and the metaverse. The OECD reports point to this specific issue, that policymakers should not prevent innovation. Due to the GDPR’s material and territorial scope, the newcomers doing business or targeting data subjects in the EU need to abide by the GDPR as well as other local legislations in different countries. There are many different laws that companies need to abide by. Transfer of data abroad is another difficult issue. In addition, imprisonment sanctions in the Turkish criminal code and provisions having a very broad definition of crime, in terms of unlawful processing and transferring of data, need to be amended in a very fast way. The EU also needs to slow down a bit with the fast and conservative development of data laws and should embrace new technologies and understand the importance of data when it comes to innovation. For example, companies using cookies in the EU are forced to make huge investments to adapt cookie management tools very recently to comply with the GDPR are now required to adapt to a cookieless world. I am afraid that, due to legislative bombardment, companies would be busier with compliance work rather than carrying out their own business.

Mermer: Personally, I would start with the energy legislation, especially the European Green Deal and its implications in Turkey. The reason thereof is that the Turkish energy market will be affected directly by the new legislative acts enacted in Europe. Separately, many startups are using artificial intelligence to ensure the efficiency and storage of renewables. Turkey has enacted new legislation, which entered into force in 2021, concerning energy storage facilities. We work closely with startups in the energy sector and these startups are trying to have a better understanding of the legal framework for compliance reasons. The second one is related to artificial intelligence. We follow the developments regarding the European Union’s directive on artificial intelligence and try to foresee what the Turkish stand on that will be. Once the legal framework on artificial intelligence becomes clearer, those Turkish tech companies whose core business activity is AI can more safely develop new products and business models.

Moral: As an M&A lawyer, my wish is an increase in flexibility of commercial and tax legislation, which would enable more incentives and an attractive corporate environment. Regarding the commercial code, the lack of flexibility related to shareholder relations should be addressed. As for the tax legislation, some incentives regarding share transfers and corporate income taxes would be more investor friendly.

Demirel: I would say a combination of what has been mentioned. The biggest problem for the Turkish M&A landscape is an issue arising out of several pieces of legislation – corporate law, civil code, and tax rules. According to Turkish law, share certificates are qualified as movable assets and if you cannot find them and the owner (i.e., seller) does not file a “loss lawsuit” (a lawsuit that can only be filed by the owner) and document the share certificates being lost, you cannot buy them. Therefore, if someone – a seller in bad faith – loses them, there is no option for specific performance. You could now ask why are shares printed in the first place? (As, in unprinted shares, you will not have the risk of anything being lost and the agreement itself will be sufficient for the share transfer.) The reason behind printing shares comes from the tax regulations: if a seller holds their shares for more than two years, they are exempt from the income tax. If one could align these corporate, civil, and tax codes/rules – and say, for example, that you can proceed with unprinted share certificates and still be exempted from income tax – it would be a huge help for M&A transactions.

On March 4, 2022 the Turkish Competition Authority (“Authority”) published the Communiqué No. 2022/2 on the Amendment of Communiqué No. 2010/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board (“Amendment Communiqué”). The Amendment Communiqué introduces certain new regulations concerning the Turkish merger control regime, which will fundamentally affect the notifiabiliy analysis of the transactions and the merger control notifications submitted to the Authority.

Pursuant to Article 7 of the Amendment Communiqué, the changes introduced by the Amendment Communiqué will become effective two months after the Amendment Communiqué’s promulgation on the Official Gazette. Accordingly, the changes that Amendment Communiqué entails will be effective May 4, 2022 onwards. In this sense, the regulations introduced by the Amendment Communiqué, including the threshold exemptions for certain sectors, will not be applicable to the merger control notifications concerning the transactions closed prior to this date.

Prior to delving into the details of the Amendment Communiqué, it is important to note that two of the most significant developments that the Amendment Communiqué entails, inter alia, are the introduction of threshold exemption for undertakings active in certain markets/sectors and the increase of the applicable turnover thresholds for the concentrations that require mandatory merger control filing before the Authority. This article specifically aims to shed light on this new turnover thresholds and application of threshold exemption for certain sectors.

New Thresholds Introduced by the Amendment Communiqué

As per the Amendment Communiqué, if a transaction is closed (i.e. the concentration is realised) as of or after 4 May 2022, the transaction will be required to be notified in Turkey if one of the following increased turnover thresholds is met (all currency conversions are based on the Turkish Central Bank’s applicable average buying exchange rates for the financial year 2021):

The aggregate Turkish turnover of the transaction parties exceeding TL 750 million (approximately EUR 71.9 million and USD 84.9 million) and the Turkish turnover of at least two of the transaction parties each exceeding TL 250 million (approximately EUR 23.9 million and USD 28.3 million), OR

(i) The Turkish turnover of the transferred assets or businesses in acquisitions exceeding TL 250 million (approximately EUR 23.9 million and USD 28.3 million) and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 3 billion (approximately EUR 287.9 million and USD 339.7 million), or (ii) the Turkish turnover of any of the parties in mergers exceeding TL 250 million (approximately EUR 23.9 million and USD 28.3 million) and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 3 billion (approximately EUR 287.9 million and USD 339.7 million).

Accordingly, the Amendment Communiqué increased the previous thresholds of (i) 30 million Turkish liras (approximately €2.8 million or $3.3 million) to 250 million Turkish liras (approximately EUR 23.9 million and USD 28.3 million); (ii) 100 million Turkish liras (approximately €9.5 million or $11.3 million) to 750 million Turkish liras (approximately €71.9 million or $84.9 million); and (iii) 500 million Turkish liras (approximately €47.9 million or $56.6 million) to 3 billion Turkish liras (approximately EUR 287.9 million and USD 339.7 million).

Furthermore, the Amendment Communiqué introduced a threshold exemption for the undertakings active in certain markets/sectors. Pursuant to the Amendment Communiqué, “the TL 250 million Turkish turnover thresholds” mentioned above will not be sought for the acquired undertakings active in or assets related to the fields of digital platforms, software or gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals or health technologies (“Target Company(ies)”), if they (i) operate in the Turkish geographical market or (ii) conduct research and development activities in the Turkish geographical market or (iii) provide services to Turkish users.

It is also noteworthy that the Amendment Communiqué does not seek a Turkish nexus in terms of the activities which renders the threshold exemption. In other words, it would be sufficient for the Target Company to be active in the fields of digital platforms, software or gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals or health technologies anywhere in the world for the threshold exemption to become applicable, provided that the Target Company (a) generates revenue from customers located in Turkey OR (b) conduct R&D activities in Turkey OR (c) provide services to the Turkish users in any fields other than abovementioned ones. Accordingly, the Amendment Communiqué does not require (a) generating revenue from customers located in Turkey OR (b) conducting R&D activities in Turkey OR (c) providing services to the Turkish users concerning the fields listed above for the exemption on the local turnover thresholds to become applicable.

The Sectors Exempted from the Use of Local Turnover Thresholds

To clarify the meaning and the scope of these sectors exempted from the use of local turnover thresholds, a non-exhaustive list of activities which correspond to the sectors referred to in the definition of the Amendment Communiqué is provided below. The below list reflects a mere effort to provide insight and guidance in identifying this scope, thus the list is not exhaustive:

Digital platforms: Digital platforms are systems and interfaces that form a commercial network or market facilitating business-to-business (B2B), business-to-customer (B2C) or even customer-to-customer (C2C) transactions. Digital platforms include but are not limited to social media platforms, knowledge sharing platforms, media sharing platforms, service-oriented platforms, online marketplaces and digital content aggregators.

Software and gaming software: Software relates to a set of instructions, data or programs used to operate computers and execute specific tasks, while gaming software concerns software customised for gaming. Software and gaming software include but are not limited to the activities below:

• writing and publishing of software and gaming software (including publishing of computer games) (NACE Rev. 2: 58.2)
• wholesale, retail sale, distribution and marketing of software (both customised and non-customised) and gaming software (NACE Rev. 2: 46.51, 47.41)
• reproduction from master copies of software (NACE Rev. 2: 18.2)
• manufacture of electronic games with fixed (non-replaceable) software (NACE Rev. 2: 32.40)
• translation or adaptation of software and gaming software (NACE Rev. 2: 58.29)
• computer programming activities (designing the structure and content of, and/or writing the computer code necessary to create and implement systems software (including updates and patches), software applications (including updates and patches), databases, web pages, customising of software (NACE Rev. 2: 62.01)
• software installation services (NACE Rev. 2: 62.09)

Financial technologies: Financial technologies refer to technology-enabled innovation in financial services. Undertakings which sit at the crossroads of financial services and technology fall into the scope of this definition. In brief, the term “financial technologies” is used to define software and other technology aiming to modify, enhance or automate financial services for businesses or consumers. Financial technologies include but are not limited to technologies and software developed for the following fields:

• financial services activities (monetary intermediation, financial leasing, other credit granting) (NACE Rev. 2: 64.1, 64.9)
• insurance, reinsurance, pension funding (NACE Rev. 2: 65)
• activities auxiliary to financial services, insurance and pension funding (administration of financial markets (futures commodity contracts exchanges, securities exchanges, stock exchanges, stock or commodity options exchanges), security and commodity contracts brokerage (dealing in financial markets on behalf of others (e.g. stock broking) and related activities, securities brokerage, commodity contracts brokerage, activities of bureaux de change etc.), risk and damage evaluation, activities of insurance agents and brokers, fund management activities, financial transaction processing and settlement, investment advisory activities, activities of mortgage advisers and brokers (NACE Rev. 2: 66)
• accounting, bookkeeping and auditing activities, tax consultancy (recording of commercial transactions from businesses or others, preparation or auditing of financial accounts, examination of accounts and certification of their accuracy, preparation of personal and business income tax returns, advisory activities and representation on behalf of clients before tax authorities) (NACE Rev. 2: 69.2)
• digital lending, payments, blockchain and digital wealth management.

Biotechnology: Biotechnology refers to the technology that utilizes biological systems, living organisms or parts of this to develop or create different products. The sector includes but is not limited to the activities below:

• research and experimental development on biotechnology (NACE Rev. 2: 72.11)
• DNA/RNA (genomics, pharmacogenomics, gene probes, genetic engineering, DNA/RNA sequencing/synthesis/amplification, gene expression profiling, and use of antisense technology)
• proteins and other molecules (sequencing/synthesis/engineering of proteins and peptides (including large molecule hormones); improved delivery methods for large molecule drugs; proteomics, protein isolation and purification, signalling, identification of cell receptors)
• cell and tissue culture and engineering (cell/tissue culture, tissue engineering (including tissue scaffolds and biomedical engineering), cellular fusion, vaccine/immune stimulants, embryo manipulation
• process biotechnology techniques (fermentation using bioreactors, bioprocessing, bioleaching, biopulping, biobleaching, biodesulphurisation, bioremediation, biofiltration and phytoremediation
• gene and RNA vectors: gene therapy, viral vectors)
• bioinformatics (construction of databases on genomes, protein sequences, modelling complex biological processes, including systems biology)
• nanobiotechnology (applies the tools and processes of nano/microfabrication to build devices for studying biosystems and applications in drug delivery, diagnostics etc.)
• manufacture of biotech pharmaceuticals such as plasma derivatives (NACE Rev. 2: 21.20) 

Pharmacology: Pharmacology, a biomedical science, deals with the research, discovery, and characterization of chemicals which show biological effects and the elucidation of cellular and organismal function in relation to these chemicals. In other words, pharmacology refers to the science of how drugs act on biological systems and how the body responds to the drug. The study of pharmacology encompasses the sources, chemical properties, biological effects and therapeutic uses of drugs. Pharmacology includes but is not limited to the biomedical studies and R&D activities conducted in the areas below:

• Pharmacodynamics (relationship of drug concentration and the biologic effect (physiological or biochemical)
• Pharmacokinetics (interrelationship of the absorption, distribution, binding, biotransformation, and excretion of a drug and its concentration at its locus of action)
• Clinical Pharmacology and Therapeutics (understanding what a drug is doing to the body, what happens to a drug in the body, and how drugs work in terms of treating a particular disease)
• Pharmacotherapy (treatment of a disorder or disease with medication)
• Neuropharmacology (understanding how drugs affect cellular function in the nervous system)
• Pyscopharmacology (use of medications in treating mental disorders)
• Cardiovascular pharmacology (understanding how drugs influence the heart and vascular system.)
• Molecular pharmacology (investigates the molecular mode of action of drugs, among others using genetic and molecular biology methods,)
• Radiopharmacology (study and preparation of radioactive pharmaceuticals)

Manufacture and R&D of pharmaceuticals (antisera and other blood fractions, vaccines, diverse medicaments, including homeopathic preparations), pharmaceutical preparations and medicinal chemicals (manufacture of medicinal active substances to be used for their pharmacological properties in the manufacture of medicaments: antibiotics, basic vitamins, salicylic and O-acetylsalicylic acids etc.); wholesale, retail sale, distribution and marketing of pharmaceuticals, pharmaceutical preparations and medicinal chemicals; growing of drug and narcotic crops (NACE Rev. 2: 21.1 and 21.2)

Agricultural chemicals: Agricultural chemicals refer to chemicals used in agriculture to control pests and disease or control and promote growth; such as pesticides, herbicides, fungicides, insecticides, and fertilizers. The sector includes but is not limited to the activities below:

• mining of chemical and fertiliser minerals (NACE Rev. 2: 08.91)
• support activities for other mining and quarrying (where it relates to agricultural chemicals and fertilizers) (NACE Rev. 2: 09.90)
• manufacture of fertilisers (straight or complex nitrogenous, phosphatic or potassic fertilisers; urea, crude natural phosphates and crude natural potassium salts), nitrogen compounds (nitric and sulphonitric acids, ammonia, ammonium chloride, ammonium carbonate, nitrites and nitrates of potassium) (NACE Rev. 2: 20.15)
• manufacture of organic and inorganic basic chemicals (where it relates to agricultural chemicals and fertilizers) (NACE Rev. 2: 20.13, 20.14)
• manufacture of pesticides and other agrochemical products (manufacture of insecticides, rodenticides, fungicides, herbicides, acaricides, molluscicides, biocides, manufacture of anti-sprouting products, plant growth regulators, manufacture of disinfectants (for agricultural and other use) (NACE Rev. 2: 20.2) 
• wholesale, retail sale, distribution and marketing of fertilisers and agrochemical products (NACE Rev. 2: 46.75) 

Health technologies: Health technologies are the application of organized knowledge and skills in the form of medicines, medical devices, vaccines, procedures and systems developed to solve a health problem and improve quality of life. They refer to any technology, including medical devices, IT systems, algorithms, artificial intelligence (AI), cloud and blockchain, designed to support healthcare organizations and patients. Health technologies include but are not limited to technologies and software developed or being developed for the following fields:

• human health activities (hospital activities, medical (medical consultation and treatment) and dental practice activities (dentistry, endodontic and pediatric dentistry; oral pathology, orthodontic activities) (NACE Rev. 2: 86) 
• residential healthcare activities (residential nursing care activities, residential care activities for mental retardation, mental health and substance abuse, residential care activities for the elderly and disabled) (NACE Rev. 2: 87) 
• manufacture of medical and dental instruments (e.g. operating tables, examination tables, hospital beds with mechanical fittings, dentists’ chairs, surgical appliances) (NACE Rev. 2: 32.5)

If the Target Company’s activities fall into the non-exhaustive scope of the above markets/sectors, the thresholds that would be applicable would be: “The aggregate Turkish turnover of the transaction parties exceeding TL 750 million (approximately EUR 71.9 million or USD 84.9 million)” or “the worldwide turnover of at least one of the other parties to the transaction exceeds TL 3 billion (for 2021 approximately EUR 287.9 million or USD 339.7 million),”. Accordingly, when an undertaking that falls within the definition and criteria above is being acquired, the transaction would be notifiable in case the aggregate Turkish turnover of the Target Company and the acquirer exceeds 750 million TL or the worldwide turnover of the acquirer exceeds 3 billion TL.

Conclusion

The increased turnover thresholds and the exemption on the local turnover thresholds mechanism introduced by the Amendment Communiqué will seem to be altered the scope of the transactions that are notifiable to the Authority. On that note, the concentrations related to the fields of digital platforms, software or gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals or health technologies, will be scrutinized by the Authority.

By Gonenc Gurkaynak, Partner, Oznur Inanilir, Partner, Berfu Akgun, Counsel, and Firat Egrilmez, ELIG Gürkaynak Attorneys-at-Law

Cagdas Umut Vardar has joined Sanli & Partners as a Name Partner with the firm becoming Vardar Sanli.

Focusing on banking & finance, fintech, and corporate matters, Vardar joined from Gokce Attorney Partnership where he worked since March 2020, first as a Managing Associate and then as a Senior Associate, since October 2021. Prior to that, he was an Associate with Pekin & Pekin, between 2017 and 2020, and a Trainee with Bezen & Partners, between 2016 and 2017.

The newly minted Vardar Sanli was founded in 2019 by Partner Ismail Mert Sanli.

With the amendment dated November 24, 2021 to the Bankruptcy and Enforcement Code No. 2004 [“BEC”] the sale of seized assets was to be conducted fully in an electronic environment. However, it was provided that the implementation of this provision would begin with the adoption of the relevant regulation.

The expected regulation was published in the Official Gazette no. 31772 on March 8, 2022, and entered into force on the same date with the title “Regulation on the Procedure of Electronic Sales Pursuant to the Bankruptcy and Enforcement Code [the “Regulation”]. The Regulation governs the procedures and principles for the auction sale of movable and immovable assets via the Electronic Sales Portal, which is integrated to the National Judicial Network Information System [“UYAP“]. As such, electronic sales of assets by an auction will now begin to be implemented within the framework of the Regulation.

Scope of the Regulation

The Regulation determines the procedures regarding the auction and electronic sale of both movable and immovable assets. It is important to note that, as per the Regulation, sale by e-auction is available not only for seized assets, but also for assets that have been decided to be sold by auction as a result of a lawsuit. For instance, lawsuits for elimination of joint ownership and estate also fall within the scope of the Regulation.

Steps to be followed in electronic sales under the Regulation are briefly as follows: preparation of the terms of reference, announcement of the auction in electronic environment, announcement in the gazette, and preparation of the auction results report. It is obligatory to use the printed papers supplied in the annexes of the Regulation during the execution of the processes relating to these transactions.

Announcement of Sale

During the preparation for sale and announcement processes, the date and time of the first and second auctions are set and announced at least 15 days before the start of the auction and remain accessible to public until the end of the auction. The parties’ interests are considered when deciding on the form of the announcement of sales and whether it will be published in the gazette. If there is a discrepancy between the announcements in the gazette and the Electronic Sales Portal, the text announced in the Portal is taken into consideration.

Guarantee Amount, Deposit Procedure and Return

The participants must first deposit cash collateral in the amount of 10% [ten percent] of the estimated value of the properties subject to sale in the account of the relevant enforcement office until 23:30 on the day before the end of the auction period. It is also possible to provide collateral via a definite letter of guarantee unlimited in time.

In terms of shareholders who wish to participate in the auction in the elimination of the partnership by sale or creditors who is a party to the enforcement procedures, the collateral they should provide is calculated by deducting their rights from the total collateral amount.

The guarantees of all participants except the highest bidder will be returned after the auction ends, and the highest bidder will be the buyer. If the buyer does not pay the sale price within seven days after the announcement of the report, their provided guarantee will not be paid back, and the auction expenses are deducted from the guarantee provided. If part of the guaranteed amount remains after the deduction of auction expenses, this amount is then paid to the beneficiaries for their receivables, as determined by the BEC.

Bid Period and Submission Procedure

The participants must agree to the agreement drafted by the Republic of Turkey Ministry of Justice as a condition of participating in the auction and bidding on the Electronic Sales Portal. The bidding period in the auction is determined as seven days, and if a new bid is submitted within the last ten minutes of the given time, the auction will be extended by ten minutes for once.

Furthermore, the participants’ bids cannot be less than one-thousandth of the expected value of the assets on offer, and not less than 100 Turkish Liras. Unless a greater bid is made within the auction period, the top bidder among the participants is unable to withdraw their bid and retrieve the guarantee deposited.

Auction Process

In accordance with the Regulation, the auction is initiated starting with %50 [fifty percent] of the estimated value of the asset subject to the auction, and the asset is awarded to the highest bidder. After the auction is finalized, the sold products are recorded in special registries on behalf of the buyer as may be needed and delivered to the buyer.

On the other hand, if the debtor pays his debt in full by the end of the auction period, the sale will be suspended, and the auction will end. If there is no buyer in the a new auction date can be requested within the period in the previous request.

When the process is completed, i.e., after sale by auction, the enforcement office will issue the auction result report on the first business day following the sale and announce it on the Electronic Sales Portal within the same day. In addition, once the the auction result report is prepared, the bidder is obliged to pay the sale price to the account of the enforcement office within seven days from the announcement of this report, even if there is a motion for annulment of the auction.

The Tariff on Sales Expenses is Determined by the Communiqué

In addition, the Communiqué on the sales expenses tariff of the sales to be conducted within the scope of the BEC also entered into force in the Official Gazette on the day the Regulation was published.

In this respect, while the sales expense for immovable properties is determined as 5,780 TL, expenses for other assets are as follows: 2,880 TL for automobiles and other freight vehicles in motor land vehicles; 3.110 TL for pickup trucks, minibuses, midibuses, and all-terrain vehicles; 3.930 TL for truck, bus, tow truck; construction equipment, trailers and 4,470 TL for tow trucks and trailers. Sales expenses for other movable properties is set at 840 TL.

By Baris Ulker, Senior Associate, and Vedat Aydin Gunduz, Legal Intern, Guleryuz & Partners

BTS & Partners has advised Revel Games on its USD 4.5 million fundraising from Garena as the lead investor. Latham & Watkins’ London office reportedly advised Garena on the deal.

Revel Games is a mobile gaming company. Garena is an online game developer and publisher of free games.

BTS & Partners’ team included Partner Okan Arican and Associate Zeynep Guldogan.