SIGNIFICANT CHANGES INTRODUCED TO TURKISH CAPITAL MARKETS LAW
Turkish Parliament has introduced significant changes to Capital Markets Law No. 6362 (the “Law’). The amendment law (the “Amendment”) has been published in the official gazette of February 25, 2020 and entered into force.
The following are the main changes introduced by the Amendment.
The Amendment foresees a new board for holders of debt instruments. The investors will be able to act jointly and negotiate the terms and conditions of the debt instruments with the issuer; the board will be able to appoint a representative. The offering document of the issuer will specify the principles for the board to convene and take decision. Pursuant to the Amendment, following the default of the issuer, if the bond holders and issuer agree on restructuring of the debt instrument, the pending execution proceedings and/or injunctions will cease.
Another new concept introduced by the Amendment is the security trustee. On behalf of the investors, the security trustee will oversee the collateralized assets, and be responsible for a range of transactions from liquidation of collateralized assets in the event of a default to distribution of the proceeds amongst the investors based on a written security trust agreement with the issuer.
In addition to equity-based crowdfunding which has been available under the Law, the Amendment paves the way for lending-based crowdfunding.
With an effort to attract foreign investment and finance long-term public infrastructure projects, the Amendment introduces project financing funds and project backed securities to Turkish capital markets legislation. The financing will be provided to the project, but not to the issuer. In other words, project backed securities will be a product based on the cash flow generated by the specific project and be safeguarded from the risks pertaining to the project contractors. The project revenues will be assigned to the project financing fund.
The Amendment changes the calculation of purchase price for the shares of the shareholder exercising their exit rights due to material transactions. Before the Amendment, the purchase price was calculated based on weighted average price in the stock exchange within 30 days period before the announcement of the material transaction. The Amendment, however, provides that the price will be determined based on “fair value” to be determined based on the principles set by the Capital Markets Board (“Board”). The draft law also authorizes the Board to determine the principles for the exiting shares to be offered to the remaining shareholders and investors before being acquired by the public company.
The Amendment limits the investors who can benefit from the mandatory tender offer triggered by change of control in a public company. Accordingly, only the investors holding shares on the date of public disclosure of the change of control will be able to bid their shares.