How to Build a Crowdfunding Platform in Turkey?
There are 4 types of crowdfunding: equity-based, debt-based, reward-based, and donation-based. The principles and procedures of equity-based and debt-based crowdfunding activities are set down by the Capital Markets Board, regulatory authority for capital market activities in Turkey, in Communiqué on Crowdfunding. Donation-based and reward-based crowdfunding types are outside the scope of capital market legislation in Turkey.
What is a Crowdfunding Platform?
To engage in crowdfunding activities in Turkey, you must create a crowdfunding platform. Platform is an organization acting as intermediary in crowdfunding and providing its services over electronic media. Entrepreneurs looking for a funding source for their projects and business ideas which bear the potential to be converted into a venture capital firm and are in need of funding sources for realization of the planned technology activity and/or production activity can raise funds from the public through these platforms. Investors who satisfy membership conditions and enter into a membership agreement with the platform can invest in projects announced and published on the campaign page of the platform.
Are There Any Investment Limits For Crowdfunding Investors?
Natural persons not categorized as qualified investors may make a maximum investment of 50,000 Turkish Liras in a calendar year through crowdfunding. However, this limit may also be applied as 10% of annual net income of the relevant investor declared to the platform up to maximum 200,000 Turkish Liras.
Natural persons not categorized as qualified investors may make a maximum investment of 20,000 Turkish Liras in a project through debt-based crowdfunding.
What Are The Eligibility Criteria To Become A Crowdfunding Platform?
In order to be eligible for listing by the Capital Markets Board as a crowdfunding platform, a platform:
- must be a joint-stock corporation,
- must have a minimum share capital of 1,000,000 Turkish Liras fully paid in cash, and its paid-in capital and shareholders’ equity must not be less than this threshold (Minimum shareholders’ equity condition shall be applied as half rate thereof for a period of two years following the date of listing of the platform by the Capital Markets Board),
- all of its shares must be registered shares,
- its commercial title should contain the phrase “Crowdfunding Platform” phrase,
- in its articles of association, the clause pertaining to its fields of business should specify that the platform will exclusively deal with crowdfunding activities based on equity and/or debt acting as an intermediary,
- its board of directors must be comprised of minimum 3 members,
- its (i) shareholders, (ii) directors and (iii) shareholders having significant influence of its legal entity shareholders must satisfy the conditions specified in Article 6 of the Communiqué,
- must have appointed at least one investment committee in accordance with the qualifications set down in the Communiqué,
- must have established an internal control and risk management system and accounting and operations units,
- must have established and activated information systems infrastructure as stipulated for the narrowly authorized intermediary institutions in the regulations of the Capital Markets Board pertaining to management of information systems,
- must have employed an adequate number of personnel in the unit in charge of documentation, recording and accounting operations,
- must enter into contracts with MKK, Central Securities Depository of the Turkish capital markets, and depository to ensure the performance of operational steps of crowdfunding activities, and must adapt its data processing systems and technological infrastructure within the frame of principles imposed by mentioned institutions,
- must build in the platform an infrastructure providing mutual data flow with MKK’s Investor Risk Monitoring System, limited to the entrepreneurs and venture companies applying for a campaign to the platform,
- must build in the platform an infrastructure allowing its members to establish communications over electronic media with the venture capital firm officers and/or the entrepreneur,
- must identify conflicts of interests that may arise among its own personnel, or between its personnel and the recipients of its services, or among the recipients of its services, and must formulate a written conflict of interest policy containing measures that may be taken for the prevention of conflicts of interests and procedures that may be pursued in case of failure in prevention of conflicts of interests, and must take a decision of its board of directors approving said policy.
At least one member of the board of directors is required to hold an individual participation investor license (a.k.a. angel investor license) as described in the Regulation on Individual Participation Capital published in the Official Gazette edition 28560 on 15/2/2013. This requirement shall not be applicable to participation banks and broadly authorized intermediary institutions.
Campaign applications presented to the investment committee may be published in the platform only with the approval of the investment committee. This approval shall be documented into a report containing assessments of the investment committee with respect to each criterion dealt with in the assessment policy.
The platform that does not apply to be included in the list within 6 months following the approval of the Board for the establishment will lose its right to be listed.
How Can We Help You?
Finwise Consulting provides consultancy services to the companies regarding
- Market entry,
- Company establishment process,
- License application,
- Business model and strategy development,
- Regulatory compliance,
- Operational process designs.
Please do not hesitate to contact us for more information.
by Hamit Boyraz