International ECM Listings Rules, Requirements & Obligations in Turkiye

Borsa İstanbul A.S. (“BIST” or “Borsa Istanbul”), which is regulated by the Capital Markets Board (the “CMB” or “Board”), brings together all the exchanges operating in the Turkish capital markets under a single roof.

Established on the basis of Capital Markets Law no. 6362, Borsa İstanbul is subject to private law.

Company shares trade on Borsa İstanbul markets under the Equity Market (EM).

Subject to approval of Borsa İstanbul as meeting certain criteria, company shares can be traded on BIST Stars Market, Main Market, SubMarket, Watch List, Equity Market for Qualified Investors/Institutional Buyers, Structured Products and Fund Market, and Pre-Market Trading Platform.

Companies applying to be listed on BIST Stars Market, Main Market and SubMarket may offer a part of their shares representing their current capital to the public and they may also prefer to structure the public offering through a capital increase by restricting the pre-emption rights of existing shareholders and offering the new shares to the public, or both methods can be applied together.

In the case of the Watch List (a sub-market of the EM) due to the Listing Directive of Borsa Istanbul, the equities of the corporations will be traded in BIST SubMarket subject to certain conditions that will result in exclusion from BIST Stars, Main Market or SubMarket.

On the Equity Market for Qualified Investors^1, equities issued by corporations for direct sale to qualified investors without being offered to the public, as well as other capital markets instruments approved by the Board of Directors are traded only among qualified investors. Non-qualified investors cannot trade in this market.

On the Pre-Market Trading Platform, shares of corporations that are not listed in the Exchange but count as publicly held within the scope of the Capital Market Law can be traded on this Platform if permitted/approved by the Borsa Istanbul/Exchange².

Joint stock corporations (Anonim Şirket/Ortaklık, A.Ş./A.O.) are the only type of companies whose shares can be admitted.

If shares are offered to the public, a prospectus must be prepared and approved by the CMB in accordance with the relevant regulations of the Board.

Minimum market value of shares offered to the public in relation to each of the markets set out below is:

BIST Stars: TRY 300,000,000 (€14,127,000)

BIST Main: TRY 75,000,000 (€3,500,000)     

BIST SubMarket: TRY 40,000,000 (€1,880,000).

The minimum public float (free float) in relation to each of the markets set out below is:

BIST Stars:15%

BIST Main: 20%

BIST SubMarket: 25%

A minimum period of 2 years must have passed since the foundation of the issuer.

The Shareholders’ Equity / Capital Ratio in the most recent financial statements audited by independent auditors approved by the relevant authorities and registered with the CMB, in relation to each of the markets set out below is:

For BIST Stars: Over 1

For BIST Main: Over 1

For BIST SubMarket: Over 1.25

Financial statements prepared within the framework of the Turkish Accounting Standards (“TMS/TFRS”) (that technically meet the International Financial Reporting Standards) as well as independent audit reports must be included in the prospectus. The financial statements and independent audit reports to be included in the prospectus according to the sales period of the shares are as follows:

• January 1 – February 15: Financial statements from the last three years or the three years before the current year and nine-month interim financial statements;
• February 16 – May 15: Financial statements from the last three years;
• May 16 – August 15: Financial statements from the last three years and three-month interim financial statements;
• August 16 – November 15: Financial statements from the last three years and six-month interim financial statements;
• November 16 – December 31: Financial statements from the last three years and nine-month interim financial statements.

Shares of the company must not be restricted by encumbrances precluding the shareholder from using its shareholding rights, and its articles of association must not contain provisions restricting the transfer and circulation of shares to be traded on the exchange.

Explanations need to be made in the prospectus about those who own or control the company, directly or indirectly, their names and source of control and the measures taken to prevent abuse of control. The source of the controlling power may differ such as the ownership of the shares, agreements such as shareholder agreements and voting agreements.

Also, in Turkey, if and when direct or indirect shares or voting rights of a natural person or legal entity in the capital of a listed company reach or fall below 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95%, this must be disclosed to the public via the Public Disclosure Platform (“PDP”).

Lock-in requirements are not required by applicable law or listing rules, but in practice underwriters to an issue generally require contractual lock-ins (more commonly known in Turkey as “lock-ups”) – usually lasting 6 months for existing shareholders/offering shareholders – and that the capital of the company is not increased.

There are no requirements that an issuer must appoint a Sponsor or other Financial Adviser.

Market making can be optionally applied to the equities on the BIST Main Group I, Group II and real estate certificates, participation certificates of venture capital investment funds and real estate investment funds on Structured Products and Funds Market (SPFM).³

In accordance with the Capital Markets Law, announcements, advertisements and statements regarding the listing have to be consistent with the prospectus and must not contain information that is not accurate or is exaggerated or misleading.

In addition, in accordance with the Communiqué on Prospectus And Issue Document, Information given in the advertisements and promotions, also including verbal statements must be accurate/correct and not misleading, groundless, exaggerated or deficient, and must not lead the investors to incorrect opinions or impressions about the company’s situation and must be consistent with the information given in the prospectus. If a public offering price is also given in advertisements and promotions, it should clearly be emphasised that the Board has no discretion or approval in determining the public offering price. Text needs to be drafted and designed so as to be easily recognised as an advertisement. The advertisements and promotions are required to contain a warning stating that the investment decisions must be made following a review of the prospectus.

Advertisements and promotions to be published after the date of application to the Board for approval of the prospectus, but before the date the prospectus is published, are required to be only about the sector in which the company operates, and its position in the sector, its fields of business, and the goods or services produced by it. In these advertisements and promotions, if the prospectus has not been approved, it should be clearly stated that the prospectus has not yet been approved, or if the prospectus has been approved, its place of publication should be stated.

In advertisements and promotions to be made with respect to a public offering after the prospectus is approved and published, it must be stated where copies of the prospectus may be obtained, and the internet websites, including the Public Disclosure Platform (“PDP”), on which the prospectus is published.

If only qualified investors are targeted, the advertisements and promotions must contain a definition of a qualified investor as included in the Board regulations, and it must be stated that the instruments will only be sold to qualified investors who meet the required conditions.

Although there are many factors that may influence the listing process – such as the size of the issuer company, the industry it operates in and its structure, the method used and market conditions, etc. – a typical public offering timeframe lasts around six months, including due diligence, prospectus preparation and applications to the CMB and Borsa Istanbul.

When existing shares not traded on the exchange, belonging to shareholders of listed companies and the shares representing the increased capital that are issued through complete restriction of pre-emptive rights are intended to be offered to the public, an application must be filed to the Board within thirty days following the date of resolution relating to a secondary public offering, together with certain documents and submissions listed in the Communiqué on Shares.

In accordance with the Communique on Shares, the issue of capital market instruments representing shareholding rights issued by foreign corporations in accordance with laws of their home country is subject to and governed by the provisions of this Communiqué (i.e. non-domestic issuers are subject to similar rules as Turkish issuers), and Communiqué On Foreign Capital Market Instruments and Depositary Receipts And Foreign Investment Funds.

The language of the prospectus, issue document, and other information and documents that must be submitted to the Board at the time of application must be Turkish. The prospectus must be written in clear and plain language and with comprehensible and easily understandable sentences.

If the documents used in the preparation of a prospectus but not made public in the attachment to the prospectus are written in a foreign language, the prospectus must clearly state to investors where they can access the relevant portions of such documents. If deemed necessary, the Board may require that these portions are translated into Turkish by a sworn translator.

Capital Markets Board (Sermaye Piyasası Kurumu):

https://www.spk.gov.tr/

Borsa Istanbul:

https://www.borsaistanbul.com/tr/

Borsa İstanbul A.Ş. is structured as a joint stock company subject to the provisions of private law and partially owned by the Turkish Treasury.

Under Turkish Law, the following is a list of key matters requiring shareholder approval:

1. changing the articles of association;
2. election and dismissal of the members of the board of directors, determination of their rights such as wages, attendance fees, bonuses and premiums, and deciding on their release;
3. election of the auditor;
4. making decisions on financial statements, the annual report of the board of directors, savings on annual profit, determination of dividends and profit shares, including the participation of the reserve fund in the capital or the profit to be distributed;
5. deciding on the dissolution of the company;
6. sale of the whole or substantially the whole of the company’s assets;
7. determining the term of office of the members of the board of directors;
8. unless otherwise stipulated by laws; issuance of all kinds of bonds, financing bills, asset-backed notes, other debt securities, including those issued at a discount, convertible bonds, or to authorise the board of directors in this regard;
9. making decisions about merger, division, or change;
10. approval or amendment of the internal directive regarding the working principles and procedures of the general assembly;
11. capital increase and decrease; and
12. approval of certain contracts made within two years of the date of registration.

II-17.1 The Communiqué on Corporate Governance of the CMB applies to the listed companies and determines corporate governance principles as well as principles and procedures on related party transactions.

Annual reports must include information as to whether corporate governance principles set forth in this Communiqué are implemented; if not, they must include a reasoned explanation in this regard, a list of any conflicts of interest that arise due to non-compliance with the principles, and explanations of whether the corporation has plans to change management practices in the future in line with the relevant principles.

Within the framework of the equal treatment principle applicable in Turkish law, all shareholders, including minority and foreign shareholders, are required to be treated equally.

In addition, shareholders who own five per cent (5%) of the capital in publicly traded companies are considered as "minority shareholders". The rights granted to those holding a minimum share of this amount are referred to as "minority rights". These minority rights include the right to call a general meeting and add an item to the agenda; the right to request the appointment of a special auditor; the right to request the adjournment of the general meeting; the right to sue for the dissolution of the company for just cause; the right to receive and review information; the right of certain groups to be represented on the board; preventing the release of members of the board of directors from liabilities arising from being a board member; demanding the printing of registered shares.

Issuers and related parties are subject to the provisions of the Communiqué on Material Events Disclosure from the date of approval of the prospectus or issuance document by the CMB. Issuers make disclosures when inside information and changes in previously disclosed matters regarding this information arise or come to light. The issuer may, at its sole responsibility, postpone the public disclosure of insider information in order to avoid damage to its legitimate interests, providing that it does not lead to investors being misled, and it ensures that such information is kept in strict confidence

In accordance with the Communiqué on Principles of Financial Reporting in Capital Markets (II-14.1), companies must prepare their financial statements on the basis of TMS/TFRS issued and published by KGK (Public Oversight, Accounting and Auditing Standards Authority). The companies are also under obligation to prepare interim financial reports at the end of every quarter.

Listed companies are required to disclose to the public their annual financial reports and their independent audit reports relating thereto:

• within 70 days following the end of their accounting periods, in the event that the listed company is a controlling company of any other subsidiary (with the obligation of preparing consolidated financial statements); or
• within 60 days following the end of their accounting periods, in absence of the obligation to prepare consolidated financial statements.

With regards to disclosure of interim financial reports these must be disclosed:

1. within 30 days following the end of the relevant interim period, in the absence of an obligation to prepare consolidated financial statements; or
2. within 40 days following the end of the relevant interim period, in the event of an obligation to prepare consolidated financial statements.

Companies must submit their financial reports to the Public Disclosure Platform for public disclosure.

Issuers and related parties are subject to the provisions of the Communiqué on Material Events Disclosure from the date of approval of the prospectus or issuance document by the CMB. In line with this Communique, all transactions executed by the directors of the company and any persons having administrative responsibility, and by the persons closely related to them, and by the issuer’s parent company in relation to the shares of the company must be disclosed to the public.

The prospectus.

The obligation to make a mandatory takeover offer/bid arises upon acquisition of control which is defined as:

1. holding more than fifty per cent of voting rights of a corporation, directly or indirectly, alone or jointly with persons acting in concert; or
2. regardless of such percentage, holding privileged shares enabling their holder to elect a simple majority of the total number of the members of the board of directors or to nominate the said number of directors in the general assembly meeting, is considered and treated as the acquisition of control.

In the following cases, the shares traded on BIST Stars, BIST Main, BIST SubMarket or Watchlist may be permanently delisted from BIST by means of a board resolution of Borsa İstanbul:

1. if it is identified that the corporation has not performed its public disclosure obligations;
2. if the corporation does not abide by the regulations issued or the decisions made by Borsa İstanbul, or does not give the information requested by Borsa İstanbul, or gives deficient or unreal information and documents;
3. if the activities of the corporation are suspended for a time longer than 1 (one) year due to reasons other than the cases which may be accepted to be valid by Borsa İstanbul;
4. if the corporation is adjudged bankrupt, or its legal entity terminates for any reason whatsoever, or a decision of liquidation taken in the general assembly is registered;
5. if the corporation’s financial structure deteriorated to such an extent that it is not able to continue its business activities;
6. if the corporation fails to pay all of the fees required to be paid to Borsa İstanbul within 1 year following the last payment date thereof; or
7. for businesses whose shareholders’ equity is negative in consideration of the total shareholders’ equity/capital ratio on its latest annual balance-sheet published on PDP, without prejudice to the process relating to capital increase/decrease, if any; in addition to the calculations to be made on the basis of total shareholders’ equity/capital ratio, if the total shareholders’ equity/capital ratio continues to remain below the above mentioned threshold following the revaluation of the assets at current values made upon the demand of issuers;
8. if its independent audit reports of the last three years published in PDP contain a negative opinion, or the independent auditor refrains from expressing any opinion in the said reports; or
9. if, in its balance sheets of the last three years published in PDP, it is identified that the ratio of its non-commercial receivables from related parties to total assets has exceeded 50%.

There is a Communiqué that regulates the foreign capital markets instruments. Under the said Communiqué, among others, the following rules are set forth for non-domestic issuers:

• application filed for listing in exchange or issuance of foreign capital market instruments to be offered to the public in Turkey must not have been refused by any other securities exchange platform or a capital markets authority for protection of investors or due to a similar other reason;
• foreign capital market instruments must have been issued in Turkish Lira or in foreign currencies the daily buying and selling exchange rates of which are published by the Turkish Central Bank;
• the country where foreign capital market instruments are issued must not have imposed any restriction on sales of them in Turkey, and on execution of transactions and making of payments with regard to fiscal rights associated thereto and use of administrative rights arising therefrom in Turkey;
• foreign capital market instruments must not have been encumbered by restrictions on transfer or circulation thereof or by restrictions on use of rights associated thereto by their holders and must not be subject to any rights in rem or liens or similar other restrictive rights;
• for their issues other than shares, foreign corporation must have received a long-term rating score equivalent to “investable” level according to the scoring and grading scale from a rating agency within one year prior to the date of application therein for;
• CMB may impose preconditions, other than and in addition to those enumerated hereinabove, depending on the kind of issuance or capital market instruments, for protection of investors or due to a similar other reason, providing that it informs the applicant beforehand;
• a representative is required to be appointed in public offering of foreign capital market instruments. In the case of public offering of foreign capital market instruments, a written agreement is required to be signed by and between the foreign corporation and the representative. In initial public offering of foreign capital market instruments by their holders in Turkey, the agreement is signed by and between that person and representative; provided, however, that the liabilities and obligations of foreign corporation are also included in the agreement, and the agreement is required to be signed by foreign corporation as well. Term of the agreement must be equal at least to the maturity of foreign capital market instrument, if any;
• all information and documents requested to be submitted, are required to be prepared originally in Turkish, and others are required to be translated into Turkish, and the resulting originals or translations are to be sent to the CMB. CMB may request the documents in foreign languages to be translated into Turkish by a sworn translator.

¹ According to Communiqué on Principles of Establishment and Activities of Investment Firms (III-39.1), "Intermediary institutions, banks, portfolio management companies, collective investment schemes, pension funds, insurance companies, mortgage finance corporations, asset management companies and their equivalent institutions residing abroad, pension and charity funds, funds established pursuant to temporary article 20 of the Social Security Law no. 506 dated 17/7/1964, public entities and institutions, and Turkish Central Bank, and such international organizations as World Bank and International Monetary Fund, other institutions which may be accepted by the Board to be similar to the aforementioned institutions due to their characteristics" can be qualified investors. Legal entities that can meet at least two (2) criteria in terms of total assets can be named as qualified investor. In art. 31/1-d, conditions are:

1. "Having a total assets more than 50.000.000 Turkish Lira,
2. Yearly net sales of more than 90.000.000 Turkish Lira,
3. Shareholders' equity of more than 5.000.000 Turkish Lira".

Apart from the conditions mentioned above, a person (regardless of whether it is legal or natural person) also can be a professional customer on demand in the case that person meets at least two conditions mentioned in art. 32. According to art. 32, these conditions are:

1. "Having executed at least 10 transactions and a minimum trading volume of 500,000 Turkish Lira in the markets where trading is requested for each quarterly period during the past one year,
2. Holding total financial assets, including but not limited to cash deposits and capital market instruments, excess of 1,000,000 Turkish Lira,
3. Having worked at any one of top managerial positions in the field of finance for at least 2 years or as specialized personnel in capital markets for at least 5 years or holding Capital Market Activities Advanced Level License or Derivative Instruments License

Within the scope of the definition of “qualified investors” in the determination of customers to be accepted as professional upon request, customers who only meet the criteria in subparagraph (b) from all the criteria listed above are accepted and treated as qualified investors.

² https://www.borsaistanbul.com

³ https://www.borsaistanbul.com/en/sayfa/3585/market-making