Early-stage startups frequently need external financing before they are ready to negotiate a full equity investment round. At the pre-seed or seed stage, determining the exact valuation of a company can be difficult. The startup may have developed a promising product but may not yet have significant revenue, audited financial statements or sufficient market data to justify a reliable valuation.

This is why financing instruments such as the SAFE (Simple Agreement for Future Equity) and Convertible Note have become extremely popular in international startup transactions.

Their commercial logic is simple:

The investor provides money today, while the exact equity ownership is determined later.

However, the legal position becomes more complicated when these instruments are used for a startup incorporated in Turkey.

A SAFE developed for a Delaware corporation cannot simply be downloaded, signed by a Turkish startup and expected to operate automatically in the same way. Turkish corporate law contains mandatory rules governing capital increases, issuance of shares, pre-emption rights, share transfers and registration procedures.

Convertible notes present similar challenges. Although the parties may contractually agree that debt will later convert into shares, a contractual conversion clause does not necessarily create the shares automatically. The corporate-law steps required to provide the investor with actual shareholder status must also be implemented.

Importantly, Turkey introduced a significant new development in 2026. Law No. 7582, published on 4 June 2026, added a special rule for certain non-public companies holding a Teknogirişim Rozeti (Tech-Startup Badge). Under the new provision, conditional capital increases based on share-convertible debt agreements of qualifying companies are exempted from the ordinary conditional capital increase provisions of the Turkish Commercial Code. The detailed implementation framework is to be determined by the Ministry of Industry and Technology after obtaining the opinion of the Ministry of Trade.

This development significantly increases the importance of SAFE-style and convertible investment structures in Turkish startup law.

Nevertheless, founders and investors should distinguish carefully between:

• a traditional SAFE,
• a convertible loan,
• a convertible note or security,
• an advance subscription agreement,
• and a direct equity investment.

This article explains whether SAFE and Convertible Note agreements can be used under Turkish law, how they may be structured, what changed in 2026 and which legal risks startups and investors should consider.

What Is a SAFE Agreement?

SAFE stands for Simple Agreement for Future Equity.

The instrument was originally developed by Y Combinator for early-stage startup financing.

In a traditional SAFE transaction, the investor provides money to the startup immediately but does not necessarily become a shareholder on the date the agreement is signed.

Instead, the investor receives a contractual right to obtain equity later when a specified event occurs.

Typical conversion events may include:

• the next priced equity financing round,
• a company sale,
• change of control,
• liquidation,
• or another event defined in the SAFE.

Unlike a traditional loan, a classic SAFE generally does not have:

• ordinary interest,
• a conventional repayment date,
• or a maturity structure requiring the company to repay principal in the same manner as a loan.

This distinction is fundamental.

A SAFE is generally designed to postpone the valuation discussion rather than create ordinary debt.

What Is a Convertible Note?

A Convertible Note is different.

A convertible note usually begins as debt.

The investor provides financing to the startup, and the startup becomes contractually obligated to repay that amount unless a conversion event occurs.

A typical convertible note contains:

• principal amount,
• interest,
• maturity date,
• conversion event,
• valuation cap,
• discount,
• repayment provisions,
• exit provisions,
• and default rules.

For example:

An investor provides EUR 500,000 to a startup.

The note has:

• an 18-month maturity,
• 6% interest,
• a EUR 5 million valuation cap,
• and a 20% conversion discount.

Six months later, the startup raises a Series A financing round.

Instead of receiving the EUR 500,000 back in cash, the investor converts the outstanding debt into shares based on the formula established in the agreement.

Therefore, the main conceptual distinction is:

SAFE = primarily a contractual right to future equity.

Convertible Note = debt that may later convert into equity.

SAFE vs Convertible Note: Main Differences

The two instruments may produce similar economic outcomes, but their legal characteristics are different.

For Turkish law purposes, this distinction matters because the legal framework applicable to a contractual future equity right may not be identical to the framework governing a debt instrument.

Are SAFE Agreements Legal in Turkey?

There is no traditional statutory contract expressly named “SAFE Agreement” in the Turkish Code of Obligations or Turkish Commercial Code.

This does not mean that every SAFE-style agreement is unlawful.

Article 26 of the Turkish Code of Obligations recognises the principle of contractual freedom. Parties may determine the content of their contracts within the limits established by law. Article 27 limits this freedom where the agreement conflicts with mandatory law, morality, public order or personality rights, or concerns an impossible subject.

Therefore, founders and investors can generally create an atypical or mixed investment agreement designed to generate an economic result similar to a SAFE.

The more difficult issue is not necessarily whether the contract can be signed.

The real question is:

How will the investor legally receive the shares when the conversion event occurs?

A SAFE Does Not Automatically Create Turkish Company Shares

This is perhaps the most important principle for startups considering a SAFE in Turkey.

Suppose a Turkish startup signs a contract stating:

“Upon the next Qualified Financing, the investment amount shall automatically convert into 10% of the company.”

The economic intention is understandable.

However, Turkish company shares do not necessarily come into existence merely because the contract states that conversion is automatic.

Depending on the company structure, obtaining equity may require:

• a capital increase,
• shareholder or general assembly resolutions,
• restriction or waiver of existing shareholders’ pre-emption rights,
• amendment of corporate documents,
• payment or set-off mechanics,
• trade registry procedures,
• issuance of shares,
• and updating shareholder records.

Therefore, founders should distinguish between:

the contractual obligation to provide equity

and

the corporate transaction through which that equity is legally created or transferred.

A properly drafted Turkish SAFE-style agreement must regulate both.

Conditional Capital Increase Under the Turkish Commercial Code

For Turkish joint stock companies, the Turkish Commercial Code contains a statutory mechanism known as conditional capital increase.

Article 463 provides that the general assembly may grant persons who are creditors because of newly issued bonds or similar debt instruments, or employees, the right to acquire new shares through conversion or subscription rights.

The capital increases automatically to the extent that the relevant rights are exercised and the capital contribution is satisfied through payment or set-off.

Historically, this mechanism was not designed specifically for modern startup SAFEs.

Its legal architecture is closer to instruments such as convertible debt securities and employee equity rights.

That created difficulties for startups attempting to reproduce a US-style SAFE transaction exactly under Turkish corporate law.

The Major 2026 Reform for Tech Startups

A particularly important development occurred on 4 June 2026.

Law No. 7582 added paragraph 15 to Article 3 of Law No. 5746 on Supporting Research, Development and Design Activities.

The new rule applies to:

• companies holding a Teknogirişim Rozeti issued by the Ministry of Industry and Technology;
• companies that are not publicly held; and
• conditional capital increases based on share-convertible debt agreements.

For these qualifying companies, the ordinary conditional capital increase provisions of the Turkish Commercial Code will not apply.

Instead, the procedures and principles governing these capital increases are to be determined by the Ministry of Industry and Technology after obtaining the opinion of the Ministry of Trade.

This represents a significant development in Turkish startup financing.

It demonstrates a clear legislative intention to facilitate convertible financing for technology startups.

Does the 2026 Reform Mean Every SAFE Automatically Works in Turkey?

No.

The new legislation should not be interpreted as meaning that every document labelled “SAFE” can now be downloaded from the internet and used without modification.

The wording of the legislation specifically refers to:

“paya dönüştürülebilir borç sözleşmeleri”

or share-convertible debt agreements.

A classic SAFE is intentionally structured not to constitute conventional debt.

Therefore, whether a particular SAFE falls within the new regime will depend on its legal structure and the secondary rules implementing the legislation.

The safer approach is to analyse:

• whether the agreement constitutes debt,
• whether the company qualifies for the Teknogirişim Rozeti regime,
• how the conversion mechanism is structured,
• and what implementation procedures are applicable at the date of the transaction.

The new provision itself expressly leaves important procedural details to secondary regulation. Startups entering transactions under this regime should therefore verify the latest Ministry rules before signing and closing.

What Is the Teknogirişim Rozeti?

The Teknogirişim Rozeti is an official certification system administered by the Ministry of Industry and Technology for qualifying technology and innovation-oriented startups.

The system was introduced through the Regulation on the Identification and Certification of Technology and Innovation-Oriented Startups, published on 3 July 2025.

The Ministry describes the badge as a mechanism designed to identify innovative, scalable technology ventures and help them access public support and the investment ecosystem.

Following the 2026 legislative reform, obtaining this status may become even more important for startups intending to use convertible financing structures.

Can Startups Without a Teknogirişim Rozeti Use Convertible Agreements?

Potentially yes, but they do not benefit automatically from the special 2026 statutory exemption.

For a startup outside the special regime, parties may still rely on contractual freedom to establish a convertible investment structure.

However, when the investor ultimately becomes a shareholder, the ordinary corporate-law procedures must be respected.

For an A.Ş., this may involve:

• an ordinary capital increase,
• the registered capital system where applicable,
• a conditional capital structure where legally available,
• or a transfer of existing founder shares.

The agreement should therefore contain obligations requiring founders and shareholders to cooperate with the future conversion.

Simply promising that “conversion shall occur automatically” may not be sufficient.

Convertible Loans Under Turkish Law

A bilateral convertible loan agreement is easier conceptually to analyse because it begins with a familiar debt relationship.

The investor lends money to the company.

The contract then provides that the debt may or must convert into equity when certain events occur.

Typical conversion events include:

• Qualified Financing,
• maturity,
• company sale,
• IPO,
• change of control,
• or investor election.

Such agreements may generally be structured under the freedom-of-contract principle, but the eventual conversion remains subject to applicable corporate rules.

In particular, founders should not assume that the contractual conversion automatically completes all corporate procedures.

Convertible Loan vs Convertible Security

An important distinction must also be made between:

a private bilateral convertible loan

and

issuance of a convertible debt security.

Article 504 of the Turkish Commercial Code separately regulates bonds, financing bills, other debt securities and securities containing subscription or conversion rights.

As a general rule, these instruments require the corporate resolutions contemplated by the Code.

If the instrument constitutes a capital market instrument or is offered to multiple investors through an issuance structure, Capital Markets Board regulations may also become relevant.

Therefore, calling every startup convertible investment a “note” can be misleading.

The legal analysis should determine what the instrument actually is.

Capital Markets Law Risks

Many early-stage founders assume that a private investment agreement can never create capital-markets-law concerns.

That assumption can be dangerous.

Turkey’s Capital Markets Board regulates public offerings and issuances of capital market instruments.

The Capital Markets Board states that capital market instruments offered publicly or admitted to trading require an approved prospectus, while non-public issuances of capital market instruments may require an approved issuance document under the applicable regulatory framework.

This does not mean that every bilateral SAFE or convertible loan between a startup and one investor requires Capital Markets Board approval.

However, the analysis changes where the arrangement is structured as:

• an issuance of securities,
• an offering to multiple investors,
• a debt instrument,
• a broadly marketed investment product,
• or another regulated capital market instrument.

Startup founders should therefore avoid offering “SAFE investments” publicly over websites or social media without analysing securities-law consequences.

Venture Capital Funds and Convertible Investments

Turkey’s venture capital regulatory framework has increasingly recognised hybrid debt-equity investments.

Capital Markets Board materials concerning Venture Capital Investment Funds recognise investments structured as combinations of debt and equity financing and permit specified investments involving non-listed venture companies within the regulatory framework.

The development of this framework, together with the 2026 Teknogirişim Rozeti reform, indicates a clear movement toward making convertible startup financing more practically usable in Turkey.

How Does Conversion Work in an A.Ş.?

A joint stock company is generally more suitable than a limited liability company for sophisticated startup financing.

Suppose a startup A.Ş. signs a convertible loan.

The agreement provides:

Investment: EUR 500,000.

Valuation cap: EUR 5 million.

Discount: 20%.

Conversion event: Next financing round of at least EUR 1 million.

The startup later raises Series A financing at a EUR 10 million valuation.

Under the contractual formula, the convertible investor may obtain a more favourable conversion price because of the valuation cap or discount.

However, the company still needs a legally effective mechanism for delivering the shares.

Depending on the structure, this may involve:

1. calculating the investor’s conversion price;
2. determining the number of shares;
3. adopting required corporate resolutions;
4. dealing with existing shareholders’ pre-emption rights;
5. increasing capital;
6. setting off the investor’s receivable against the capital contribution where legally appropriate;
7. completing registration procedures;
8. issuing or registering the shares;
9. and making the investor a party to the shareholders’ agreement.

The contract should anticipate each stage.

Pre-Emption Rights Can Affect Conversion

When new shares are issued, existing shareholders may have statutory pre-emption rights.

For an A.Ş., Article 461 of the Turkish Commercial Code gives each shareholder the right to acquire newly issued shares in proportion to the existing shareholding.

Restriction or removal of this right requires the conditions specified by law and cannot be used to unjustifiably benefit or disadvantage particular persons.

This is extremely important for convertible investments.

Suppose an investor has a contractual right to receive 15%.

If existing shareholders retain and exercise their statutory subscription rights, the contractual conversion may not work as expected.

The founders’ agreement, shareholders’ agreement and corporate approvals must therefore be coordinated in advance.

Can Founders Promise to Waive Their Pre-Emption Rights?

The investment documentation can contain contractual undertakings requiring founders to support the future conversion.

For example, founders may agree that when a Qualified Financing occurs they will:

• vote for the necessary capital increase;
• support restriction of their pre-emption rights where lawful;
• execute required documents;
• amend the articles where necessary;
• and admit the investor to the shareholders’ agreement.

These obligations can strengthen the investor’s contractual position.

However, a shareholders’ agreement cannot override mandatory corporate law.

The actual corporate resolutions must still satisfy the statutory requirements.

SAFE and Convertible Notes in an Ltd. Şti.

Using a SAFE-style arrangement in a Turkish limited liability company can be more complicated.

An Ltd. Şti. does not provide the same share architecture commonly preferred in institutional venture capital transactions.

A conversion may need to occur through:

• a capital increase,
• a transfer of existing capital interests,
• or another properly structured corporate transaction.

Share transfer formalities are particularly important.

Article 595 of the Turkish Commercial Code provides that a transfer of a limited liability company capital interest, and transactions creating the obligation to transfer, must be made in writing and signatures must be notarised. Unless otherwise provided in the company agreement, general assembly approval is also required.

This has direct implications for SAFE structures based on promises of future founder share transfers.

A simple electronic SAFE document may not satisfy the formal requirements applicable to an enforceable obligation to transfer Ltd. Şti. interests.

Should a Startup Convert From Ltd. Şti. to A.Ş. Before Institutional Investment?

In many cases, this deserves serious consideration.

There is no rule stating that an Ltd. Şti. cannot receive startup investment.

However, an A.Ş. generally provides greater flexibility for:

• multiple financing rounds,
• share classes,
• investor entry,
• share transfers,
• board representation,
• employee equity,
• convertible financing,
• and future exits.

For this reason, a startup initially established as an Ltd. Şti. may later convert to an A.Ş. before a significant venture capital round.

The need for conversion should be evaluated early rather than immediately before closing.

What Is a Valuation Cap?

A valuation cap protects the early investor from receiving too little equity if the startup’s valuation increases significantly before the next round.

Example:

SAFE investment: EUR 500,000.

Valuation cap: EUR 5 million.

Next round valuation: EUR 10 million.

Without the cap, the investor would convert based on the EUR 10 million valuation.

With the cap, conversion may instead be calculated using the lower EUR 5 million valuation, depending on the agreement.

The investor therefore receives more equity as compensation for investing earlier and taking greater risk.

What Is a Conversion Discount?

A conversion discount gives the early investor a lower share price than the new investors.

Example:

Series A price per share: EUR 10.

SAFE discount: 20%.

SAFE conversion price: EUR 8.

The SAFE investor therefore receives more shares for the same investment amount.

Some agreements contain both:

• valuation cap, and
• discount.

The contract should clearly state which mechanism applies if both are available.

Typically, the investor receives whichever calculation produces the more favourable result, but this should never be assumed without contractual language.

Pre-Money vs Post-Money SAFE

Founders should also understand the distinction between pre-money SAFE and post-money SAFE economics.

The distinction can materially affect founder dilution.

A post-money SAFE typically makes the percentage ownership created by the SAFE easier to determine before the next priced round.

If several SAFE instruments are issued over time, however, the cumulative dilution may become substantial.

For example:

SAFE Investor A: implied 5%.

SAFE Investor B: implied 7%.

SAFE Investor C: implied 8%.

Employee pool: 10%.

The founders may discover that a significant percentage of the company has effectively been committed before the institutional equity round even begins.

This is why every SAFE should immediately be reflected in a fully diluted cap table.

What Should a Turkish SAFE Agreement Include?

A properly structured Turkish SAFE-style agreement should normally address at least the following matters:

Investment Amount

How much is being invested?

Nature of the Investment

Is it debt, advance subscription money or a sui generis contractual investment?

Qualified Financing

What future financing triggers conversion?

For example:

“A bona fide equity financing in which the company raises at least EUR 1 million.”

Valuation Cap

What maximum valuation applies to the investor’s conversion?

Discount

What discount applies to the price paid by future investors?

Conversion Formula

Exactly how many shares does the investor receive?

Share Class

Does the SAFE convert into:

• ordinary shares,
• the same shares issued in the next round,
• or another class?

Liquidity Event

What happens if the company is sold before a financing round?

Dissolution Event

What happens if the startup fails?

Most Favoured Nation Clause

Does the investor benefit if a later SAFE receives better terms?

Pro Rata Rights

Can the investor participate in the next round to maintain ownership?

Corporate Cooperation

What must founders and shareholders do to complete conversion?

Accession to the SHA

Does the investor automatically become subject to the shareholders’ agreement at conversion?

Governing Law

Which law applies?

Dispute Resolution

Will disputes go to Turkish courts or arbitration?

These provisions should be tailored to the company’s actual corporate structure.

What Should a Convertible Note Include?

A convertible note usually requires additional debt-related provisions.

These commonly include:

• principal amount,
• drawdown date,
• interest rate,
• maturity,
• repayment,
• default,
• acceleration,
• conversion at Qualified Financing,
• optional or mandatory conversion,
• valuation cap,
• discount,
• treatment of accrued interest,
• exit event,
• liquidation,
• warranties,
• negative covenants,
• information rights,
• and subordination where relevant.

The contract should also explain what happens if the maturity date arrives and no financing round has occurred.

Possible alternatives include:

• repayment,
• automatic conversion,
• investor option to convert,
• maturity extension,
• or negotiation of a priced round.

Leaving this question unanswered can create a serious liquidity crisis for an early-stage startup.

Should Convertible Notes Carry Interest?

Traditional convertible notes commonly include interest because they are debt instruments.

However, the commercial purpose is usually not to create a high-interest loan.

The investor’s primary return is expected to come from equity appreciation after conversion.

The contract should state whether accrued interest:

• is paid in cash,
• converts into equity together with principal,
• or is treated differently.

Interest also creates potential tax and accounting consequences, so the parties should obtain current tax advice before closing.

Foreign Investors and Currency Regulations

Convertible financing becomes more complicated when the investor is located outside Turkey and provides financing in a foreign currency.

Foreign currency borrowing by Turkish residents is subject to rules under Turkey’s foreign exchange and capital movements regime.

These rules have changed over time and contain specific exceptions and conditions depending on the investor and transaction.

Accordingly, a foreign investor should not transfer USD or EUR to a Turkish startup under a document labelled “Convertible Loan” without verifying:

• whether the transaction qualifies as permitted foreign currency borrowing,
• banking documentation,
• reporting obligations,
• investor status,
• maturity conditions,
• and current Central Bank or Ministry rules.

The financing structure should be reviewed immediately before signing because foreign exchange regulations can change independently from company law.

Tax and Accounting Issues

A SAFE and a convertible loan can also receive different accounting and tax treatment.

Questions may include:

• whether the investment is recorded as debt or equity-like financing;
• how interest is treated;
• whether withholding applies;
• how conversion is accounted for;
• whether share premium arises;
• whether a receivable can be set off against capital contribution;
• and whether related-party financing creates additional tax consequences.

The legal documentation should therefore be coordinated with the startup’s accountant or tax adviser.

A commercially attractive conversion formula can become problematic if its accounting and tax implementation has never been considered.

Can the Investor Demand Repayment Under a SAFE?

Under a classic SAFE, the investor generally does not have the same maturity-based repayment right as a lender under a convertible note.

That is one of the reasons SAFEs are attractive to founders.

A startup that raises EUR 500,000 under a SAFE does not ordinarily face an 18-month repayment cliff merely because another financing round has not occurred.

However, the exact position depends on the agreement.

A Turkish contract described as a SAFE but drafted as repayable debt may legally and economically function more like a convertible loan.

The title of the agreement is less important than its actual provisions.

What Happens if the Startup Is Sold Before Conversion?

Every SAFE or convertible note should address a Liquidity Event.

Suppose an investor provides EUR 300,000.

Before the next financing round, a technology company offers to acquire the startup for EUR 10 million.

The agreement must determine whether the investor:

• receives the original investment back,
• converts immediately before the sale,
• receives a multiple of the original investment,
• or receives whichever amount is greater.

This can significantly affect founder proceeds.

The exit waterfall should therefore be modelled before the instrument is signed.

What Happens if the Startup Fails?

Early-stage startup investment is risky.

If the startup becomes insolvent or enters liquidation, the investor’s position depends partly on the legal nature of the instrument.

A convertible note holder begins as a creditor.

A SAFE investor may have a more complex contractual position depending on the agreement.

The document should therefore specify how the investment is treated in a dissolution event, while recognising that mandatory insolvency rules may override contractual priority arrangements.

No contract can guarantee that an investor will recover money from an insolvent startup with no assets.

Founder Risks in SAFE Financing

SAFEs are often described as founder-friendly.

They can be—but they also create risks.

The main founder risks include:

• excessive future dilution;
• issuing several SAFEs without updating the cap table;
• low valuation caps;
• aggressive MFN clauses;
• investor pro rata rights;
• unclear conversion formulas;
• promising equity that cannot be delivered through the existing company structure;
• committing founders to broad personal obligations;
• and failing to coordinate conversion with future institutional investment documentation.

The simplicity of a SAFE can therefore be misleading.

A five-page agreement can have a larger long-term dilution impact than a fifty-page shareholders’ agreement.

Investor Risks in SAFE Financing

The investor also assumes significant risks.

These include:

• never becoming a shareholder;
• no maturity date;
• lack of interest;
• company failure before conversion;
• founders refusing to implement corporate conversion steps;
• future shareholders blocking necessary decisions;
• unclear valuation calculation;
• dilution by later instruments;
• and insufficient information rights before conversion.

For this reason, Turkish SAFE-style agreements frequently need stronger corporate cooperation clauses than foreign standard forms.

Convertible Note Risks for Founders

Convertible notes provide greater creditor protection but create additional pressure on the startup.

If the note reaches maturity before the startup raises another financing round, the company may suddenly owe:

• principal,
• accrued interest,
• and potentially default amounts.

An early-stage company may not have enough cash to repay.

This can give the investor significant negotiating leverage.

Founders should therefore avoid agreeing to unrealistically short maturities.

Convertible Note Risks for Investors

Convertible note investors must also consider:

• startup insolvency,
• lack of security,
• subordination,
• enforceability of conversion mechanics,
• foreign exchange restrictions,
• tax treatment,
• corporate approvals,
• and whether other shareholders will cooperate with conversion.

A contractual right to receive shares is only valuable if the corporate structure allows those shares to be delivered effectively.

SAFE, Convertible Note or Direct Equity Investment?

There is no universally superior financing structure.

SAFE May Be Appropriate When:

• the startup is very early stage;
• valuation is difficult;
• founders want a fast financing round;
• the investor accepts equity risk;
• no maturity pressure is desired;
• and future conversion can be legally structured.

Convertible Note May Be Appropriate When:

• the investor wants creditor status before conversion;
• a maturity mechanism is commercially necessary;
• interest is acceptable;
• the parties expect a priced financing round soon;
• and the company can legally implement the future conversion.

Direct Equity May Be Better When:

• valuation is already clear;
• a substantial investment is being made;
• the investor requires governance rights immediately;
• board representation is important;
• liquidation preference and investor rights need to operate immediately;
• or avoiding future conversion complexity is more valuable than postponing valuation.

Sometimes a priced equity round is legally simpler than trying to force a foreign SAFE template into an unsuitable Turkish corporate structure.

Practical Structure for a Turkish Convertible Investment

A professionally structured transaction will often proceed as follows:

1. Determine whether the startup is an A.Ş. or Ltd. Şti.
2. Determine whether the company has a Teknogirişim Rozeti.
3. Analyse whether the 2026 special convertible-debt regime applies.
4. Confirm current implementing regulations.
5. Decide whether the investment is debt, SAFE-style future equity or direct equity.
6. Prepare a fully diluted cap table.
7. Determine the valuation cap and discount.
8. Identify the conversion trigger.
9. Determine which share class the investor receives.
10. Review existing shareholder pre-emption rights.
11. Obtain founder and shareholder undertakings.
12. Determine the corporate conversion procedure.
13. Review Capital Markets Board implications.
14. Review foreign exchange rules if the investor is foreign.
15. Review tax and accounting treatment.
16. Coordinate the investment agreement with the articles of association and shareholders’ agreement.
17. Prepare exit and liquidation mechanics.
18. Complete all corporate and trade registry procedures when conversion occurs.

This approach is safer than treating a SAFE as an isolated document.

Frequently Asked Questions About SAFE and Convertible Notes in Turkey

Is a SAFE legally recognised in Turkey?

There is no traditional statutory contract named SAFE. SAFE-style arrangements may be structured under contractual freedom, but their corporate conversion mechanics must comply with applicable Turkish law.

Did Turkey change the law concerning convertible startup investments in 2026?

Yes. Law No. 7582, effective from 4 June 2026, created a special rule for non-public companies holding a Teknogirişim Rozeti that conduct conditional capital increases based on share-convertible debt agreements. The ordinary Turkish Commercial Code conditional-capital provisions are excluded for qualifying transactions, with detailed procedures to be determined by the Ministry of Industry and Technology.

Is every SAFE covered by the 2026 rule?

Not necessarily. The statute expressly refers to share-convertible debt agreements. A traditional non-debt SAFE should therefore be analysed separately rather than automatically assumed to qualify.

Can a Turkish startup issue a convertible note?

Convertible financing may be structured under Turkish law, but the legal analysis depends on whether the transaction is a bilateral loan or an issuance of a debt/capital market instrument and on how conversion will be implemented.

Does signing the Convertible Note automatically make the investor a shareholder?

No. Before conversion, the investor is generally a creditor. Corporate procedures are required for the investor to obtain shares.

Can an Ltd. Şti. use a SAFE?

A SAFE-style economic arrangement may potentially be created, but conversion and share transfer are more formal. Article 595 share-transfer requirements and capital increase rules must be considered.

Is an A.Ş. better for SAFE investments?

For startups expecting institutional funding, multiple investors, employee equity and exits, the A.Ş. structure will frequently provide greater flexibility.

Does a SAFE have interest?

A traditional SAFE generally does not.

Does a convertible note have interest?

Usually, although the parties can negotiate the economic structure within legal limits.

What is a valuation cap?

It establishes a maximum valuation used in calculating the investor’s conversion price.

What is a discount?

It allows the early investor to convert at a lower share price than the investors participating in the later financing round.

Can a SAFE investor receive voting rights before conversion?

Normally the investor is not yet a shareholder and therefore does not automatically receive shareholder voting rights. Contractual information or consent rights may nevertheless be negotiated.

Conclusion: Can SAFE and Convertible Note Agreements Be Used Under Turkish Law?

SAFE and Convertible Note structures can play an important role in startup financing in Turkey, but they cannot simply be treated as foreign templates that operate independently of Turkish company law.

The key distinction is between the investment contract and the corporate conversion mechanism.

Turkish contract law gives founders and investors substantial freedom to design financing arrangements. However, corporate-law rules determine how the investor ultimately becomes a shareholder.

Historically, this created significant difficulties for classic SAFE structures because the Turkish Commercial Code’s conditional capital increase mechanism was designed primarily around specific conversion and subscription rights rather than modern Silicon Valley-style SAFE financing.

The legal landscape changed materially in 2026.

With Law No. 7582, Turkey introduced a special framework for non-public companies holding a Teknogirişim Rozeti and using share-convertible debt agreements. For qualifying companies, the ordinary Turkish Commercial Code provisions on conditional capital increases no longer apply, while the detailed system is to be established through rules issued by the Ministry of Industry and Technology with the involvement of the Ministry of Trade.

This reform has the potential to make convertible financing significantly more practical for Turkish technology startups.

However, it does not eliminate the need for careful legal structuring.

Founders and investors should still determine:

• whether the instrument is debt or equity-like financing;
• whether the startup qualifies for the special Teknogirişim regime;
• whether a SAFE or convertible loan is more appropriate;
• how conversion will take place;
• what valuation cap applies;
• whether a discount applies;
• how existing shareholders will be diluted;
• how pre-emption rights will be handled;
• which shares the investor will receive;
• what happens if no financing round occurs;
• what happens on an exit;
• what happens if the startup becomes insolvent;
• and whether Capital Markets Board, foreign exchange, tax or accounting rules become relevant.

Perhaps the most important mistake is to assume:

“We signed a SAFE, so the investor automatically receives shares later.”

That assumption can be dangerous.

A well-drafted Turkish startup investment should answer not only:

“When does conversion occur?”

but also:

“What exact legal steps make the conversion effective?”

Similarly, founders should not focus only on the simplicity of the first financing.

A SAFE that raises EUR 300,000 today may create substantial dilution during a Series A round several years later.

Every convertible instrument should therefore be included in the startup’s fully diluted cap table from the date it is signed.

For an investor, the contract should provide sufficient certainty that founders and shareholders will cooperate with the future conversion.

For founders, the agreement should ensure that investor rights do not produce unexpected dilution or debt pressure that could threaten the company.

The correct objective is therefore not merely to copy international startup financing terminology.

It is to reproduce the intended economic result through a legally enforceable Turkish corporate structure.

With the new 2026 legislation, Turkey has taken an important step toward creating a more startup-friendly environment for convertible financing. Startups planning to use SAFE-style or convertible instruments should nevertheless ensure that the investment agreement, shareholders’ agreement, articles of association, capital increase mechanism and regulatory compliance are designed as parts of a single legal structure.

When these elements are properly coordinated, SAFE-style financing and convertible notes can provide Turkish startups with a valuable bridge between early-stage capital and a later priced equity round.