Introduction
Share issuance in Turkey is one of the most important legal mechanisms through which joint-stock companies raise capital, broaden their shareholder base, enter the public market, finance growth and improve institutional visibility. Under Turkish law, share issuance may occur in different forms, including initial public offering, capital increase, secondary public offering, bonus issue, rights issue, private placement, sale to qualified investors or issuance of shares to be traded on specific Borsa İstanbul markets.
The legal framework for share issuance in Turkey is primarily based on Capital Markets Law No. 6362, the Communiqué on Shares VII-128.1, the Communiqué on Prospectus and Issue Document II-5.1, the Communiqué on Sales of Capital Market Instruments II-5.2, Borsa İstanbul listing rules and the Turkish Commercial Code. The Capital Markets Board of Türkiye, known as the CMB in English and SPK in Turkish, is the main regulatory authority supervising share issuances, public offerings, prospectus approvals and capital market compliance.
Capital Markets Law No. 6362 expressly states that the law applies to capital market instruments, their issuance, issuers, public offerors, capital market activities, capital market institutions, exchanges and other organized markets; however, non-public share issuances of non-public joint-stock companies are outside the scope of the law. The same law requires a prospectus to be prepared and approved by the CMB for capital market instruments to be publicly offered or traded on the exchange.
For companies, share issuance is not only a corporate finance transaction. It is a regulated legal process that may trigger CMB approval, prospectus liability, public disclosure obligations, shareholder protection rules, Borsa İstanbul listing requirements, independent audit obligations and investor claims. For investors, share issuance rules are essential because they protect investors against misleading offerings, unlawful dilution, defective prospectuses and unfair sale practices.
Legal Framework for Share Issuance in Turkey
The central capital market regulation for share issuance is the Communiqué on Shares VII-128.1. The official English translation of the communiqué states that its purpose is to set out the procedures and principles concerning the issuance of shares and quasi-shares under Capital Markets Law No. 6362. The communiqué applies to transactions such as public offering of existing shares of shareholders of non-public companies, public offering of shares to be issued through capital increase, public offering of existing shares or newly issued shares of publicly held corporations, and sales without public offering of shares issued by publicly held corporations through capital increase.
The CMB’s capital market legislation page lists the Communiqué on Shares VII-128.1 under capital market instruments, together with the prospectus, sales, debt securities, lease certificates, warrants, certificates and foreign capital market instruments regulations. This confirms that share issuance must be evaluated together with other capital market rules rather than in isolation.
In practice, Turkish share issuance may require simultaneous compliance with several regulatory layers. The Turkish Commercial Code governs the corporate law aspects of share capital, general assembly decisions, board decisions, pre-emption rights and articles of association. Capital Markets Law No. 6362 and CMB communiqués govern the capital market aspects such as public offering, prospectus approval, issue documents, sale methods, public disclosure and investor protection. Borsa İstanbul rules govern admission to trading and listing criteria. KAP rules govern public disclosure for listed and public companies.
What Is Share Issuance?
Share issuance means the creation and sale or allocation of shares representing equity participation in a joint-stock company. Shares give investors certain rights, which may include voting rights, dividend rights, liquidation rights, information rights and participation in general assembly meetings. In publicly traded companies, shares also provide market liquidity through exchange trading.
A share issuance may occur in a private company or a public company. A private joint-stock company may issue shares within the framework of the Turkish Commercial Code. However, when shares are offered to the public, admitted to trading on Borsa İstanbul, issued by a public company, sold to qualified investors under capital market rules or otherwise brought within the capital market framework, CMB rules become decisive.
Share issuance should be distinguished from share transfer. In a share transfer, existing shares are sold by current shareholders. In a share issuance, new shares are created by the company, usually through capital increase. However, in public offering practice, these two methods may be combined. A company may issue new shares through capital increase while existing shareholders also sell part of their shares to the public.
Initial Public Offering and First Share Issuance to the Public
An initial public offering in Turkey occurs when a company offers its shares to the public for the first time. The IPO may be structured through capital increase, sale of existing shares or a combined method. Borsa İstanbul explains that, for shares of a company to be traded in the relevant Borsa İstanbul market, the prospectus detailing the offering must be approved by the CMB and the shares must subsequently be listed or registered with the relevant market.
The SPK’s application guidance states that companies whose shares will be publicly offered for the first time must first bring their articles of association into compliance with CMB regulations and the purposes and principles of the Capital Markets Law. In this context, an application for amendment of the articles of association must first be submitted to the CMB. After the general assembly approves the amendment, the company must then apply to the CMB for approval of the prospectus relating to the public offering.
This sequence is legally important. Before a company becomes public, its articles of association may contain private-company provisions that are unsuitable for a public company. Examples include transfer restrictions, special privileges, governance rules, pre-emption limitations or provisions inconsistent with investor protection. These must be reviewed and amended before public offering.
Capital Increase Through Share Issuance
One of the most common forms of share issuance is capital increase. A company may increase its capital by issuing new shares. In publicly held companies, capital increase may be conducted through cash contribution, bonus issue from internal resources, bonus issue from dividends, issuance below nominal value where allowed, or other regulated structures.
The SPK’s application guidance states that the procedures for capital increases of publicly held corporations are found in the Communiqué on Shares VII-128.1. It identifies several transactions covered by the application framework, including public offering or non-public sale of shares issued through paid capital increase, secondary public offering, bonus capital increases from internal resources and/or dividends, capital increase by issuing shares below nominal value, and capital reduction not requiring fund outflow.
A cash capital increase may raise new funds for the company. Existing shareholders may have pre-emption rights unless restricted under applicable law and corporate decisions. If pre-emption rights are restricted and shares are sold to new investors, dilution and investor protection issues become important. The company must ensure that the transaction is properly approved, fairly disclosed and structured in accordance with CMB rules.
Public Offering of Existing Shares
A public offering may also involve the sale of existing shares held by current shareholders. In this structure, the company does not issue new shares and does not receive the proceeds. Instead, the selling shareholders receive the sale proceeds. This method may provide liquidity to founders, private equity investors or controlling shareholders.
However, the public offering of existing shares is still regulated because the public is invited to purchase shares. The Communiqué on Shares VII-128.1 expressly covers public offering of existing shares of shareholders of non-public corporations and public offering of existing shares of shareholders of publicly held corporations.
From an investor perspective, it is important to know whether offering proceeds go to the company or to selling shareholders. If the proceeds go to the company, the capital increase may support growth, debt repayment or investment. If proceeds go to selling shareholders, the company’s balance sheet may not directly improve. The prospectus must clearly disclose the offering structure and use of proceeds.
Secondary Public Offerings
A secondary public offering may occur when a company whose shares are already public or traded offers additional shares to investors. This may involve existing shareholder sales, capital increase or a combination. Secondary offerings are common when public companies need new financing or when major shareholders seek partial exit.
Secondary offerings create legal risks if the market is not properly informed. The company must disclose current financial information, material risks, changes since the IPO, related-party matters, litigation, use of proceeds and the effect of the transaction on shareholder structure. Where a capital increase is involved, dilution must be clearly explained.
Because the company is already public, secondary offerings are also linked to ongoing disclosure obligations. If the company has undisclosed material information, conducting a share issuance without proper disclosure may create investor claims and CMB scrutiny.
Bonus Issues and Rights Issues
A bonus issue occurs when a company increases capital from internal resources or dividends and distributes shares to existing shareholders without receiving new cash. The SPK’s application guidance expressly refers to bonus capital increases from internal resources and/or dividends as transactions governed by the Communiqué on Shares.
A rights issue or paid capital increase allows existing shareholders to subscribe for new shares, usually in proportion to their existing holdings. This protects shareholders from dilution. However, rights may sometimes be restricted in accordance with applicable procedures, especially where shares are offered to the public or strategic investors.
Rights issues require careful disclosure because investors must decide whether to exercise their rights, sell them if tradable, or accept dilution. The company should clearly explain the purpose of the capital increase, subscription price, timetable, pre-emption rights, dilution effect and consequences of non-participation.
Issuance Below Nominal Value
Issuance below nominal value is an exceptional and regulated issue in Turkish company and capital market law. The SPK’s application guidance includes “capital increase by issuing shares below nominal value” among transactions governed by the Communiqué on Shares.
This type of issuance may become relevant where market value, financial distress, restructuring needs or special regulatory rules justify a structure different from ordinary capital increase. However, it is legally sensitive because nominal value rules and creditor/shareholder protection principles must be respected.
Companies considering issuance below nominal value should obtain specialized legal and financial advice. Such transactions may affect existing shareholders, creditor confidence, financial reporting and market perception.
Registered Capital System
Public companies and certain companies preparing to become public may operate under the registered capital system, which allows the board of directors to increase capital up to a registered ceiling without obtaining a separate general assembly decision each time, subject to legal conditions and CMB authorization.
The CMB’s capital market legislation page lists the Communiqué on Authorised Capital System II-18.1 under the issuers section. This indicates that capital structure and capital increase flexibility are separately regulated in Turkish capital markets.
The registered capital system can provide speed and flexibility, especially for listed companies needing timely financing. However, board authority must be exercised carefully. Directors must respect shareholder rights, disclosure obligations, use-of-proceeds explanations and market fairness. Abuse of registered capital authority may lead to shareholder disputes and CMB review.
Prospectus Requirement in Share Issuance
The prospectus is the core investor protection document in public share issuances. Capital Markets Law No. 6362 requires a prospectus to be prepared and approved by the CMB for capital market instruments to be publicly offered or traded on the exchange. The law also requires prospectus information to be presented in a manner that investors can easily understand and evaluate, and responsible persons must be clearly identified.
Borsa İstanbul explains that the CMB examines an IPO prospectus from a public disclosure standpoint and approves it once it is considered fit for purpose. This approval should not be misunderstood as a guarantee of investment performance. It is a regulatory approval of the disclosure document, not a promise that the share price will rise.
A share issuance prospectus should include information about the issuer, business activities, financial condition, risk factors, management, shareholding structure, capital structure, legal disputes, related-party transactions, dividend policy, offering terms, use of proceeds and rights attached to the shares. For investors, the risk factors and financial statements are especially important.
Issue Document for Non-Public Share Issuance
Not every share issuance is a public offering. In certain non-public sales, such as private placements or sales to qualified investors, an issue document or other CMB filing may be required instead of a full public offering prospectus, depending on the type of issuer and transaction.
The Communiqué on Shares covers sales without public offering of shares issued by publicly held corporations through capital increase. This means that even where the public is not targeted, a publicly held corporation cannot ignore CMB rules when issuing new shares.
The distinction between prospectus and issue document is significant. Public offerings are subject to broader disclosure because retail investors may participate. Non-public issuances may be more limited, but they still require proper authorization, investor classification, sale restrictions and legal documentation.
Sale to Qualified Investors and Venture Capital Market
Share issuance to qualified investors has become increasingly important in Turkey. Borsa İstanbul explains that non-publicly held corporations issuing shares through capital increase to qualified investors without public offering may apply for listing of their shares for trading in the Venture Capital Market, provided certain conditions are met. These include CMB approval of the prospectus, absence of transfer restrictions in the articles of association, lack of significant legal disputes affecting operations, a legal report from an independent lawyer confirming legal compliance, positive board assessment and positive independent audit opinions. The minimum ratio of shares issued through capital increase to qualified investors must be 10% of total capital.
This route is particularly relevant for growth companies and institutional investors. It allows companies to raise equity capital from qualified investors without a full retail public offering, while also enabling trading in a regulated market environment. However, it is not a shortcut around legal compliance. The company must still satisfy CMB, Borsa İstanbul, audit and legal report requirements.
For investors, qualified investor status means greater responsibility. Such investors are expected to understand risks better than ordinary retail investors. Nevertheless, regulatory safeguards remain in place.
Borsa İstanbul Listing After Share Issuance
Where shares are to be traded on Borsa İstanbul, the issuer must comply with listing and registration procedures. Borsa İstanbul states that an IPO candidate company should apply to the CMB for prospectus approval and simultaneously apply to Borsa İstanbul for listing in the relevant market; simultaneous filing is preferred to reduce processing times. The application may be filed by the company or by the authorized intermediary institution on its behalf.
Listing is not automatic. Borsa İstanbul evaluates whether the issuer satisfies the relevant market requirements. These may include financial criteria, public float, profitability, shareholders’ equity, operating history, legal status of shares, absence of transfer restrictions and legal due diligence reports.
A company preparing for share issuance should coordinate CMB and Borsa İstanbul processes carefully. A prospectus approved by the CMB is necessary, but listing also requires compliance with exchange rules. Conversely, Borsa İstanbul listing preparation should be consistent with CMB disclosure documents.
Articles of Association and Transfer Restrictions
Before public share issuance, the company’s articles of association must be reviewed. Private joint-stock companies often include share transfer restrictions, privileged share structures, family control provisions, veto rights, board nomination rights or other rules that may conflict with public trading.
The SPK’s IPO application guidance states that companies whose shares are to be publicly offered for the first time must bring their articles of association into compliance with CMB regulations and the purposes and principles of the Capital Markets Law before applying for prospectus approval.
Borsa İstanbul’s Venture Capital Market rules also require that the articles of association not contain clauses restricting the transfer and circulation of shares to be traded. This principle reflects the basic nature of listed shares: investors must be able to transfer and trade shares freely within the market rules.
Role of Intermediary Institutions
Share issuances, especially public offerings, usually require an authorized intermediary institution. The intermediary institution may assist with structuring, documentation, CMB and Borsa İstanbul applications, demand collection, sale and allocation.
Borsa İstanbul states that public offering applications may be filed by the company or by an authorized intermediary institution on its behalf. The intermediary institution’s role is legally important because public offering is a regulated investment service. The institution must comply with CMB authorization, sales, investor classification, marketing and recordkeeping rules.
If the intermediary institution misleads investors, violates sales procedures, fails to document investor orders or conducts unauthorized activities, liability may arise. Issuers should therefore select properly authorized and experienced institutions.
Public Relations and Marketing During Share Issuance
Marketing is an important but legally sensitive part of share issuance. Borsa İstanbul notes that the scope of public relations efforts in an IPO campaign is expected to be defined during the application stage, and that executive statements, press publications and other communication methods may be used to explain the company’s business activities.
However, marketing materials must not mislead investors. They must be consistent with the approved prospectus and CMB rules. Statements promising guaranteed returns, risk-free investment, inevitable price increases or CMB-backed investment quality are dangerous.
Social media campaigns require particular care. A tweet, video, interview or online advertisement may reach thousands of retail investors. If it contains exaggerated or incomplete claims, it may create regulatory and civil liability.
Shareholder Rights and Dilution
Share issuance may affect existing shareholders. New shares may dilute ownership percentage, voting power and economic rights unless existing shareholders participate proportionally. Therefore, Turkish law and CMB rules pay attention to shareholder rights.
Existing shareholders may have pre-emption rights in capital increases, subject to restrictions under applicable procedures. If these rights are restricted, the company must justify the restriction and comply with legal requirements. In public companies, dilution must be disclosed clearly so investors understand the impact.
Shareholder disputes often arise where controlling shareholders use capital increases to dilute minority shareholders. Such disputes may involve corporate law claims, CMB complaints, general assembly challenges and compensation actions. Directors must therefore ensure that capital increases are conducted in the company’s interest and with proper disclosure.
Investor Protection in Share Issuance
Investor protection is the central purpose of share issuance regulation. Capital Markets Law No. 6362 aims to ensure reliable, transparent, efficient, stable, fair and competitive capital markets and to protect investor rights and interests.
Investor protection in share issuance is achieved through prospectus approval, disclosure requirements, independent audits, CMB supervision, Borsa İstanbul listing review, authorized intermediary institutions, sale rules, KAP disclosures and liability provisions.
However, investor protection does not mean investment guarantee. Shares may lose value after issuance or listing. Market conditions may change. Company performance may deteriorate. The law protects investors against misleading disclosure and unlawful conduct, not ordinary market risk.
Legal Liability of Issuers and Directors
Issuers and directors may face liability if share issuance documents are false, misleading or incomplete. Prospectus liability is one of the most important risks. If investors suffer losses because the prospectus concealed material risks, misstated financial data or omitted important information, claims may arise against the issuer and other responsible persons depending on the circumstances.
Directors should not approve offering documents mechanically. They should review financial statements, risk factors, litigation, related-party transactions, use of proceeds, capital structure, privileges, shareholder rights and market communications. If directors ignore obvious errors or fail to ensure proper due diligence, liability risk increases.
Issuers must also update disclosures where material developments occur during the offering process. A prospectus that was accurate at approval may become misleading if a major event occurs before completion of the sale and is not disclosed.
Independent Legal and Financial Due Diligence
Legal due diligence is essential before share issuance. Borsa İstanbul’s Venture Capital Market framework requires a legal report by an independent lawyer confirming that the company’s establishment, operations and shares comply with applicable laws and regulations. Even where such a report is not expressly required for every issuance structure, legal due diligence is a best practice.
The review should cover articles of association, trade registry records, share ledger, capital increases, shareholder agreements, privileged shares, board and general assembly resolutions, material contracts, litigation, tax disputes, employment liabilities, regulatory permits, intellectual property rights, real estate assets and related-party transactions.
Financial due diligence should review audit reports, financial statements, cash flow, debt, profitability, working capital, contingent liabilities and use of proceeds. The goal is to ensure that the offering documents accurately reflect the company’s real condition.
Foreign Investors and Share Issuance in Turkey
Foreign investors may participate in Turkish share issuances, including IPOs, secondary offerings, private placements and qualified investor transactions. Foreign institutional investors should review the prospectus, offering structure, allocation rules, tax consequences, custody arrangements, foreign exchange issues and disclosure obligations.
Foreign issuers or foreign platforms targeting Turkish investors must also consider Turkish law. If shares or share-like instruments are offered to Turkish residents, CMB rules may apply depending on the structure. Turkish-language marketing, roadshows, digital advertisements and local intermediaries may create regulatory exposure.
Foreign investors acquiring significant shares in a public company should also analyze disclosure thresholds, mandatory tender offer rules, competition law, sector-specific approvals and market abuse restrictions.
Common Legal Mistakes in Share Issuance
Common mistakes include starting marketing before legal approvals, failing to amend articles of association, using misleading investor presentations, under-disclosing risks, ignoring related-party transactions, failing to obtain proper board and general assembly approvals, misunderstanding pre-emption rights, treating qualified investor sales as unregulated transactions, and assuming that CMB prospectus approval guarantees market success.
Another common mistake is failing to coordinate CMB and Borsa İstanbul processes. The CMB may approve the prospectus, but Borsa İstanbul listing requirements must also be satisfied. Early coordination reduces delay and legal inconsistency.
Companies should also avoid informal public fundraising through “partnership,” “share participation,” “pre-IPO opportunity” or similar language before receiving proper legal advice. Such activity may be treated as unauthorized public offering.
Practical Checklist for Issuers
A company planning share issuance in Turkey should follow a structured checklist.
First, identify whether the company is public, non-public, listed or preparing for IPO. Second, determine whether the transaction is a public offering, capital increase, existing share sale, secondary offering, bonus issue, rights issue, private placement or qualified investor sale. Third, review the articles of association and amend them if necessary. Fourth, obtain proper board and general assembly decisions. Fifth, determine whether a prospectus, issue document or other disclosure document is required. Sixth, prepare CMB application documents under the Communiqué on Shares. Seventh, appoint an authorized intermediary institution where required. Eighth, conduct legal and financial due diligence. Ninth, coordinate Borsa İstanbul listing if shares will be traded. Tenth, review marketing materials and public statements for compliance.
This checklist should be completed before investors are approached. Early legal planning prevents regulatory delays and liability.
Practical Checklist for Investors
Investors considering participation in a share issuance should review the prospectus or issue document, financial statements, risk factors, use of proceeds, shareholder structure, dividend policy, privileges, related-party transactions, litigation and post-issuance dilution.
Investors should not rely only on social media, rumors, influencer comments or unofficial price expectations. CMB approval of the prospectus does not guarantee investment return. Investors should also understand whether proceeds go to the company or selling shareholders.
Qualified investors should conduct deeper due diligence because they may participate in more complex and less liquid issuance structures.
Conclusion
Share issuance in Turkey is a regulated legal process governed by Capital Markets Law No. 6362, the Communiqué on Shares VII-128.1, prospectus and sales regulations, Borsa İstanbul listing rules and general corporate law principles. It may occur through IPO, capital increase, existing share sale, secondary public offering, rights issue, bonus issue, private placement or sale to qualified investors.
The Communiqué on Shares VII-128.1 sets out the procedures and principles for issuance of shares and quasi-shares and requires applications to the CMB for public offerings and certain non-public sales by publicly held corporations. The SPK’s application guidance confirms that first-time public offerings require articles of association amendments before prospectus approval, and that capital increases of publicly held companies are subject to the procedures in the Communiqué on Shares.
For issuers, share issuance requires careful legal preparation, proper corporate approvals, prospectus or issue document compliance, investor protection, accurate disclosure, due diligence and coordination with Borsa İstanbul where listing is intended. For directors, the process creates responsibility for accurate disclosure and lawful capital increase decisions. For investors, the rules provide transparency but do not eliminate market risk.
In conclusion, share issuance in Turkey is not merely a financing method. It is a legal transformation that may bring a company under public market scrutiny and create long-term obligations. Any company, shareholder, investor, intermediary institution or foreign participant involved in Turkish share issuance should obtain professional legal advice before taking action.
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