Introduction
Turkey’s capital markets have developed significantly over the past two decades, driven by regulatory reform, institutionalization of corporate governance standards, and the growing role of Borsa Istanbul as a regional financial hub. Public offerings (IPOs) have become a crucial financing mechanism for Turkish companies seeking capital expansion, visibility, and institutional credibility.
The Capital Markets Law in Turkey provides a structured regulatory framework governing securities issuance, public offerings, disclosure obligations, and investor protection mechanisms. Companies planning to go public must comply with strict procedural, financial, and corporate governance requirements.
This article provides a comprehensive overview of the Turkish capital markets regime, the IPO process, listing requirements, regulatory approvals, disclosure obligations, and legal risks.
1. Legal Framework
Capital markets in Turkey are primarily regulated under:
- Capital Markets Law No. 6362
- Secondary legislation issued by the Capital Markets Board (CMB)
- Borsa Istanbul Listing Regulations
- Turkish Commercial Code
- Corporate Governance Communiqués
The main supervisory authority is the:
- Capital Markets Board of Turkey (CMB)
Borsa Istanbul operates as the stock exchange platform.
2. What Is an IPO Under Turkish Law?
An Initial Public Offering (IPO) is the process by which a company offers its shares to the public and seeks listing on Borsa Istanbul.
Public offering occurs when:
- Shares are offered to an undefined number of investors
- Shares are sold through capital increase or shareholder sale
- Securities are publicly marketed
IPO allows companies to:
- Raise capital
- Increase liquidity
- Enhance corporate transparency
3. Types of Public Offerings
Under Capital Markets Law in Turkey, IPOs may occur through:
1️⃣ Capital Increase
Company issues new shares to raise fresh capital.
2️⃣ Secondary Offering
Existing shareholders sell part of their shares.
Often, IPO includes a combination of both.
4. IPO Process in Turkey
The IPO process typically involves the following stages:
Step 1: Corporate Restructuring
Before IPO, company must:
- Adopt joint stock company (A.Ş.) structure
- Amend articles of association
- Ensure compliance with corporate governance standards
Step 2: Appointment of Intermediary Institution
Licensed brokerage firm (investment bank) is appointed to manage offering.
Step 3: Due Diligence
Comprehensive legal and financial due diligence conducted.
Step 4: Preparation of Prospectus
Prospectus must include:
- Financial statements
- Risk factors
- Business model
- Management structure
- Shareholding structure
Step 5: CMB Approval
Capital Markets Board reviews and approves prospectus.
Step 6: Public Offering Period
Shares offered to investors.
Step 7: Listing on Borsa Istanbul
After successful offering, shares begin trading.
5. Prospectus and Disclosure Requirements
The prospectus is central to Capital Markets Law in Turkey.
It must:
- Be accurate and complete
- Disclose all material risks
- Include audited financial statements
- Explain use of proceeds
False or misleading information may trigger civil and criminal liability.
Continuous disclosure obligations continue after IPO.
6. Financial Reporting Requirements
Public companies must comply with:
- Turkish Financial Reporting Standards (TFRS)
- Independent external audit requirements
- Quarterly and annual financial disclosures
Financial transparency is a cornerstone of investor protection.
7. Corporate Governance Obligations
Public companies are subject to Corporate Governance Principles issued by CMB.
Key requirements include:
- Independent board members
- Audit committee
- Corporate governance committee
- Investor relations department
Certain principles are mandatory; others operate under “comply or explain” model.
8. Shareholder Rights in Public Companies
After IPO, shareholders benefit from:
- Equal treatment principle
- Right to information
- Pre-emptive rights
- Dividend rights
- Minority protection mechanisms
Public company status enhances minority shareholder safeguards.
9. Listing Requirements of Borsa Istanbul
Borsa Istanbul imposes additional requirements:
- Minimum paid-in capital
- Profitability or equity criteria
- Public float percentage
- Corporate governance compliance
Different markets (Main Market, Star Market, etc.) have varying criteria.
10. Ongoing Disclosure Obligations
After IPO, companies must:
- Disclose material events immediately
- Publish periodic financial reports
- Announce insider information
- Report related-party transactions
Failure to disclose may result in administrative fines.
11. Insider Trading and Market Abuse Rules
Capital Markets Law in Turkey strictly prohibits:
- Insider trading
- Market manipulation
- Dissemination of false information
CMB has investigative and sanctioning powers.
Criminal liability may apply in serious violations.
12. Public Offering of Debt Instruments
In addition to shares, companies may publicly issue:
- Corporate bonds
- Sukuk (Islamic bonds)
- Other capital market instruments
These issuances also require CMB approval.
Debt issuance is increasingly popular among large corporations.
13. Foreign Investors and Turkish Capital Markets
Foreign investors may:
- Participate in IPOs
- Acquire publicly traded shares
- Invest without special approval
Turkey maintains generally liberal foreign investment policy.
Capital inflows and outflows are largely unrestricted.
14. Liability Regime
Under Capital Markets Law in Turkey:
- Issuers
- Board members
- Underwriters
- Independent auditors
May be liable for misleading disclosures.
Investors may file compensation claims for damages.
15. Delisting and Exit from Public Status
A public company may be delisted if:
- Free float falls below required level
- Regulatory violations occur
- Voluntary delisting procedures completed
Delisting requires CMB approval.
16. Risks in IPO Process
Companies must consider:
- Market volatility
- Valuation risk
- Regulatory delay
- Ongoing compliance costs
- Reputational exposure
IPO transforms company into highly regulated entity.
17. Strategic Benefits of Going Public
Despite regulatory burden, IPO offers:
- Access to capital
- Enhanced credibility
- Liquidity for shareholders
- Corporate institutionalization
- Broader investor base
For growing Turkish companies, IPO remains powerful growth tool.
Conclusion
Capital Markets Law in Turkey provides a structured and internationally aligned framework for public offerings and securities regulation. Through strict disclosure rules, corporate governance standards, and supervisory oversight by the Capital Markets Board, the system aims to protect investors while facilitating capital formation.
For companies considering an IPO, compliance with regulatory obligations, accurate prospectus preparation, and corporate governance adaptation are critical success factors. While the IPO process introduces regulatory complexity, it also offers long-term financial and institutional advantages.
With proper legal and financial planning, Turkey’s capital markets continue to serve as a dynamic platform for corporate growth and international investment participation.
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