Introduction

Turkey offers a broad range of investment opportunities for private equity funds, venture capital investors, family offices, strategic investors and institutional investment vehicles. Investments may be structured as acquisitions of existing shares, subscriptions to newly issued shares, convertible instruments, shareholder loans or combinations of equity and debt.

The appropriate structure depends on the maturity of the target company, the investor’s intended ownership percentage, the founders’ continued involvement, financing requirements, regulatory status and the expected exit strategy.

An early-stage technology investment, for example, will usually require different contractual protections from a controlling acquisition of an established manufacturing company. Venture capital investors may focus on liquidation preference, anti-dilution, founder vesting and future funding rounds, while private equity investors may prioritise control rights, management arrangements, financial covenants, warranties, indemnities and a defined exit timetable.

Turkish investments must be structured primarily under the Turkish Commercial Code No. 6102 (“TCC”), the Turkish Code of Obligations, competition legislation, tax rules and, where applicable, capital markets and sector-specific regulations.

Private Equity and Venture Capital Investment Structures in Turkey

The two most common Turkish company forms for investment transactions are joint-stock companies and limited liability companies.

For institutional investment, a joint-stock company (anonim şirket) is generally more flexible. It permits different share structures, easier share transfers, board-level governance mechanisms and more practical exit arrangements.

The current minimum capital requirement is TRY 250,000 for an ordinary joint-stock company and TRY 50,000 for a limited liability company. The minimum initial capital for a non-public joint-stock company adopting the registered capital system is TRY 500,000. (Ticaret Bakanlığı)

Private equity investors frequently acquire an existing stake from founders or existing shareholders. Venture capital investors, by contrast, often subscribe to newly issued shares so that the investment proceeds enter the company and fund its future growth.

Many transactions combine both methods. Part of the investment price may be paid to existing shareholders, while another part is contributed to the company through a capital increase.

This distinction should be clearly reflected in the transaction documents because the legal and economic consequences are different. Money paid for existing shares belongs to the selling shareholder, whereas capital increase proceeds belong to the company.

Primary and Secondary Investments

A primary investment occurs where the investor subscribes for newly issued shares. The company increases its capital, and the investor contributes funds directly to the company.

Primary investments are commonly used to finance:

• Expansion;
• New product development;
• Marketing;
• International growth;
• Acquisition of equipment;
• Recruitment;
• Working capital.

A secondary investment occurs where the investor purchases existing shares from one or more shareholders.

The company itself does not generally receive the purchase price. Secondary transactions may be used where founders, early investors or employees wish to realise part of their investment.

In larger deals, primary and secondary components are frequently combined so that the business receives growth capital while existing shareholders obtain partial liquidity.

Capital Increase Investments

Where an investor enters through a capital increase, the corporate procedure must comply with the TCC and the company’s articles of association.

Existing shareholders ordinarily have statutory pre-emptive rights to subscribe for newly issued shares in proportion to their existing holdings. Depending on the transaction, these rights may need to be restricted or waived so that the new investor can subscribe.

The investment documents should clearly determine the post-money ownership percentages and ensure that the corporate resolutions produce the agreed cap table.

Particular attention should be given to calculation of:

Pre-money valuation, meaning the agreed value of the company before the new investment, and post-money valuation, meaning the company’s value immediately following the investment.

Errors in capital increase calculations can result in an investor receiving a different ownership percentage from what was commercially agreed.

Investment Through Share Premium

A company’s nominal share capital does not necessarily have to correspond to its commercial valuation.

An investor may therefore subscribe for shares at an amount substantially above their nominal value. The difference between the nominal value and the investment amount may be treated as a share premium within the applicable corporate and accounting framework.

For example, a company commercially valued at EUR 10 million does not need to increase its registered capital by millions of euros merely to accommodate a new investment.

The capital increase documentation, valuation methodology, accounting treatment and corporate resolutions should be coordinated in advance.

Convertible Investment Instruments

Early-stage investments are sometimes structured through convertible loans or agreements intended to convert investment amounts into equity at a future financing round.

International investors may be familiar with instruments such as:

• Convertible loan agreements;
• SAFE-style instruments;
• Convertible notes.

These structures cannot simply be imported into Turkey from foreign templates without adapting them to Turkish corporate law.

A contractual right to receive future shares does not itself create shareholder status. The eventual issuance of shares must still comply with the required Turkish corporate procedures, including capital increase resolutions, subscription formalities and registration.

For this reason, conversion formulas should be drafted together with clear corporate implementation obligations.

Issues that should be addressed include valuation caps, discounts, qualified financing thresholds, maturity, repayment rights, conversion mechanics, liquidation events and treatment upon a sale of the company.

Investment Documentation

A private investment transaction may involve several documents rather than a single contract.

The principal agreement is commonly a Share Purchase Agreement, Share Subscription Agreement or combined Investment Agreement.

A separate Shareholders’ Agreement then governs the relationship between the investor and the existing shareholders after closing.

The investment agreement generally addresses the transaction itself, including investment amount, valuation, closing conditions, representations and warranties.

The shareholders’ agreement regulates the continuing relationship, including governance, voting, future financing, information rights, share transfers and exit.

The articles of association should also be amended where corporate effect is required for rights that can validly be reflected in the articles.

Due Diligence Before Investment

Institutional investors should conduct legal, tax and financial due diligence before acquiring shares.

Early-stage venture capital transactions may use a focused review concentrating on major risks, while private equity acquisitions generally involve considerably broader investigation.

Corporate due diligence should verify the target company’s incorporation, shareholders, capital, share ownership and corporate resolutions.

The investor should ensure that founders actually own the shares shown in the cap table and that no undisclosed options, pledges, attachments, convertible rights or third-party claims exist.

For technology companies, intellectual property ownership is particularly important.

Software, source code, trademarks or inventions may have been developed by founders or freelance developers without proper assignment to the company. An investor may therefore acquire shares in a technology company that does not legally own its core technology.

Employment, tax, data protection, litigation, material contracts and regulatory licences should also be reviewed.

Founder Intellectual Property

A recurring issue in start-up investments is technology developed before the company was incorporated.

A founder may have personally created the software, domain name, trademark, design or technical documentation. If these assets were never formally transferred to the company, the company may only have informal permission to use them.

Investment agreements frequently require founders to transfer all relevant intellectual property to the company before closing.

The transfer should include existing intellectual property and, where legally appropriate, rights relating to future developments created within the founders’ role in the company.

Confidentiality and invention-assignment provisions should also be reviewed in employment and consultancy agreements.

Corporate Governance After Investment

Investors usually require governance rights proportionate to the amount and strategic importance of their investment.

A private equity investor acquiring control may obtain the right to appoint the majority of directors.

A minority venture capital investor may receive one board seat or observer rights.

The governance structure may regulate board composition, meeting frequency, reporting obligations, appointment of senior executives and approval requirements for major decisions.

These arrangements must respect the mandatory division of authority established by the TCC. The board of directors remains responsible for the company’s statutory management duties even where individual directors were nominated by particular shareholders.

Reserved Matters and Investor Consent

Minority investors frequently negotiate reserved matters, meaning decisions that cannot be taken without their consent.

Typical matters include major acquisitions, disposal of material assets, significant borrowing, related-party transactions, material changes to the business, new share issuances, amendments to the articles, mergers, demergers, liquidation and sale of the company.

A venture capital investor may also require approval rights over changes to the annual budget, founder compensation or transactions involving intellectual property.

Reserved matters must be carefully drafted.

If the investor has veto rights over too many operational decisions, the company may become difficult to manage. Excessive veto rights may also have competition-law implications because they can contribute to a finding of joint control.

Information Rights

Institutional investors typically require contractual information rights beyond the minimum rights available under general corporate law.

These may include access to monthly management accounts, quarterly financial reports, annual budgets, cash-flow statements and information concerning material litigation or regulatory developments.

An investor may also require inspection rights and access to management.

These rights should be balanced against confidentiality, personal data protection and protection of commercially sensitive information.

This becomes particularly important where the investor also owns or controls a competing company.

Preference Rights

Venture capital investors commonly seek economic rights that give them priority over ordinary shareholders.

One of the most important is the liquidation preference.

A liquidation preference determines how proceeds will be distributed if the company is sold, liquidated or another specified exit occurs.

For example, an investor may negotiate the right to receive its original investment amount before remaining proceeds are distributed among shareholders.

International investment agreements commonly distinguish between participating and non-participating liquidation preferences.

A non-participating investor generally chooses between receiving its preference amount or participating in the proceeds according to its equity percentage.

A participating investor may receive its preference amount first and then participate in remaining proceeds.

Under Turkish law, these mechanisms must be structured carefully because contractual economic arrangements cannot automatically override mandatory corporate-law rules concerning share rights, capital maintenance and distributions.

Where possible, preference arrangements should be coordinated with valid share privileges and the articles of association.

Anti-Dilution Protection

Investors may request protection against future financing rounds completed at lower valuations.

This is particularly relevant where an investor acquires shares at a high valuation and the company later conducts a “down round.”

Common international mechanisms include full-ratchet and weighted-average anti-dilution protection.

A full-ratchet mechanism provides stronger protection by recalculating the investor’s effective price as if its original investment had been made at the lower new-round price.

A weighted-average mechanism takes account of both the price and number of newly issued shares.

Under Turkish law, anti-dilution protection cannot usually be implemented merely through a mathematical provision in the shareholders’ agreement. It must ultimately be translated into legally valid corporate steps, such as share transfers or capital increase arrangements.

The shareholders’ agreement should therefore impose clear obligations on founders and other shareholders to support the required corporate actions.

Founder Vesting

Investors frequently want founders to remain involved after the financing round.

Founder vesting mechanisms are designed to discourage a founder from leaving shortly after receiving investment while retaining a substantial ownership interest.

A common structure provides that founders’ shares become economically secured over a period of several years.

If the founder leaves early, some shares may become subject to a call option.

The agreement may distinguish between a good leaver and a bad leaver.

A good leaver may include a founder leaving due to death, disability or termination without cause, while a bad leaver may include voluntary resignation, fraud or serious contractual breach.

The transfer price may depend on the classification.

These mechanisms must be drafted carefully under Turkish law. Extremely punitive compulsory-transfer prices may face enforceability risks.

Employee Share Options

Technology businesses frequently use employee equity programmes to recruit and retain personnel.

An employee stock option plan may reserve a percentage of the company’s future equity for employees, executives or consultants.

The investment documentation should specify whether the option pool is included in the company’s pre-money or post-money valuation.

This point can significantly affect founder dilution.

For example, creating a 10% option pool immediately before an investment generally dilutes existing shareholders rather than the incoming investor unless the commercial terms provide otherwise.

The legal implementation of option plans must also account for Turkish corporate and tax rules.

An employee option does not automatically make the employee a shareholder. A valid share issuance or transfer must occur when the option is exercised.

Future Funding Rounds

The shareholders’ agreement should anticipate future capital requirements.

Investors may negotiate a pro rata right allowing them to participate in future rounds to maintain their ownership percentage.

Certain investors may also receive a right to invest more than their existing percentage.

The agreement should regulate the consequences if existing shareholders do not participate in a new round.

Future fundraising should not be structured so restrictively that the company is unable to attract new investors.

A balance must therefore be maintained between protection of existing investors and the company’s ability to raise additional capital.

Right of First Refusal

Investors commonly require a right of first refusal over transfers by founders.

If a founder receives an offer from a third party, the protected investors receive the opportunity to purchase the shares on equivalent terms.

The clause should regulate how the third-party offer is documented, how long the investor has to exercise its right and what happens if the third-party sale does not close.

It should also prevent artificial transactions designed to avoid the right.

Tag-Along Rights

A tag-along right protects minority investors when founders or controlling shareholders sell their shares.

If the majority shareholder receives an offer, the minority investor may require the buyer to purchase its shares on equivalent terms.

This protects the investor from remaining in the company under a new controlling shareholder it did not select.

Tag rights are particularly important for institutional minority investments.

Drag-Along Rights

Private equity investors frequently require drag-along rights to facilitate a future sale of the entire company.

Where the required majority accepts a bona fide third-party offer, the drag mechanism may compel remaining shareholders to participate in the transaction.

The clause should regulate the minimum approval threshold, transaction price, warranties required from minority shareholders and allocation of costs.

Minority shareholders should not ordinarily be required to give operational warranties about matters they did not control. Their warranties are usually limited to matters such as ownership of their own shares and authority to sell.

Founder Transfers

Investors commonly restrict founders from selling their shares during an agreed period.

The objective is to ensure that founders remain economically committed to the business.

The agreement may prohibit transfers completely during the lock-up period except for permitted transfers, such as transfers to a founder-controlled holding company or family trust-type structure, subject to Turkish law and accession requirements.

Any permitted transferee should normally be required to become a party to the shareholders’ agreement.

Representations and Warranties

Private equity investment documentation often contains extensive representations and warranties.

The company and founders may provide warranties concerning corporate records, financial statements, taxes, employment, material contracts, litigation, intellectual property, data protection and regulatory compliance.

The level of founder liability depends heavily on the transaction.

Institutional investors may seek joint liability from founders, while founders will seek financial caps, time limitations and knowledge qualifications.

A warranty should not replace due diligence where a material risk has already been identified.

Known risks are normally addressed through specific indemnities or pre-closing remediation.

Conditions Precedent

Investment funds are commonly released only after agreed conditions are satisfied.

Conditions may include completion of due diligence, amendment of the articles, corporate approvals, intellectual property assignments, execution of employment or founder agreements, removal of existing share pledges and receipt of required regulatory approvals.

A private equity acquisition may additionally require lender consent, restructuring of group companies or Competition Authority clearance.

Closing should be clearly distinguished from signing.

The investment agreement may be signed first, with the share issuance or transfer taking place only when the conditions precedent are satisfied.

Venture Capital Investment Funds in Turkey

Turkey also has a regulated venture capital investment fund framework under the Capital Markets Law and the Capital Markets Board’s Communiqué on Venture Capital Investment Funds (III-52.4). (https://spk.gov.tr)

A Turkish Girişim Sermayesi Yatırım Fonu (GSYF) is established by a portfolio management company or venture capital portfolio management company and does not have separate legal personality.

Its participation units are offered to qualified investors. The regulatory framework permits GSYFs to invest in venture companies through various structures, including direct or indirect equity investment and certain debt or hybrid financing mechanisms. (https://spk.gov.tr)

The regulatory framework provides a formal domestic structure through which institutional and qualified investors may pool capital for venture investments.

Investments by a GSYF must nevertheless comply both with the fund’s capital-markets obligations and with the ordinary corporate-law requirements applicable to the portfolio company.

Foreign Private Equity Investors

Foreign investors may generally acquire shares in Turkish companies under the principle of equal treatment, subject to sector-specific restrictions.

Foreign investment documentation may require apostilled or legalised corporate records, Turkish translations, tax numbers and authorised board resolutions.

The investor should also consider international payment mechanics, beneficial ownership disclosure, sanctions screening and anti-money-laundering compliance.

Certain regulated sectors may require prior approval for an acquisition or for a shareholder exceeding a specific ownership percentage.

These requirements may apply in banking, insurance, payment services, energy, telecommunications and other regulated industries.

Competition Authority Clearance

A private equity or venture capital investment may require notification to the Turkish Competition Authority if it results in a permanent change of control and applicable turnover thresholds are exceeded.

A minority acquisition may also constitute a change of control where the investor obtains veto rights over strategic matters and thereby acquires joint control.

Consequently, competition analysis should examine rights rather than merely the percentage of shares acquired.

Turkey revised its merger-control thresholds in February 2026. The individual Turkish turnover threshold was increased to TRY 1 billion, the combined Turkish turnover threshold to TRY 3 billion and the relevant worldwide threshold to TRY 9 billion under the applicable notification tests. (Rekabet Kurumu)

The Competition Authority subsequently updated its merger and acquisition guidelines in May 2026 to align them with the revised framework and clarify several control and transaction issues. (Rekabet Kurumu)

Where notification is mandatory, the investment should not be implemented before Competition Board clearance.

Minority Investments and Joint Control

An investor does not need to own 50% of the shares to acquire control for competition-law purposes.

Joint control may arise where a minority investor can veto decisions concerning matters such as the company’s budget, business plan, appointment of senior management or major strategic investments.

This creates an important drafting issue.

A veto right intended merely to protect the value of a minority investment may, depending on its scope, result in joint control.

Investor protection rights should therefore be reviewed by competition counsel during drafting rather than only after the shareholders’ agreement has been agreed.

Management Incentive Arrangements

Private equity transactions frequently include incentives for management.

Managers may receive equity, options or bonuses linked to the investor’s eventual return.

The purpose is to align management’s economic interests with growth in company value.

Management incentive arrangements should define performance targets, vesting, treatment upon termination and exit.

Tax consequences should be considered before equity or options are granted.

Exit Planning

The exit strategy should be considered when the investment is made rather than only when the investor wishes to sell.

Common exits include:

Trade sale: Sale of the company to a strategic buyer.

Secondary private equity sale: Sale to another financial investor.

Founder or shareholder buyback: Existing shareholders acquire the investor’s stake.

Initial public offering: Shares are offered to the public and potentially listed on Borsa İstanbul.

Merger or restructuring: The company is combined with another business before or as part of the exit.

Contractual exit rights may include drag-along rights, put options, call options and sale-process cooperation obligations.

An investor may also require founders to cooperate with due diligence, management presentations and transaction documentation during an exit process.

Put and Call Options

A put option allows one party to require another party to purchase its shares.

A call option permits one party to require another shareholder to sell.

Options may be triggered by:

• Deadlock;
• Founder departure;
• Material breach;
• Failure to complete an agreed exit;
• Change of control;
• Regulatory event.

The agreement should provide an objective valuation or pricing mechanism.

It must also accommodate mandatory Turkish share transfer procedures when the option is exercised.

Initial Public Offering as an Exit

An IPO may provide liquidity while allowing investors or founders to retain part of their ownership.

The company must be prepared for significantly greater governance, disclosure and regulatory obligations under Turkish capital markets law.

Pre-IPO restructuring may include conversion into an appropriate corporate structure, corporate governance enhancements, related-party transaction review, financial statement preparation and resolution of historical legal deficiencies.

Private agreements between shareholders must also be reviewed because certain transfer restrictions or special rights may be incompatible with a public-company structure.

Tax Considerations

Tax consequences should be analysed separately for the investment, holding period and exit.

Relevant issues may include the tax treatment of capital increases, share premiums, shareholder loans, interest payments, dividends and capital gains.

The treatment of an exit may differ depending on whether the seller is an individual, Turkish company, foreign company or investment fund.

The legal nature of the target shares and the holding structure may also affect the outcome.

Cross-border investments should be assessed together with applicable double-tax treaties.

Tax structuring should occur before the investment vehicle and acquisition method are finalised rather than immediately before exit.

Common Legal Risks in Investment Transactions

One of the most frequent problems is the use of investment documents copied directly from US or UK venture capital templates.

Concepts such as SAFE instruments, preferred shares, liquidation preferences, founder vesting and automatic conversion must be adapted to the Turkish corporate framework.

Other common problems include failing to confirm founder ownership, overlooking informal employee equity promises, inadequate intellectual property assignments, excessively broad investor veto rights, defective capital increase resolutions, failure to analyse competition clearance and unclear exit mechanisms.

A well-structured investment should combine the commercial terms agreed between investors and founders with corporate procedures capable of implementing those terms under Turkish law.

Practical Investment Checklist

Before completing a private equity or venture capital investment in Turkey, parties should generally:

1. Determine whether the transaction is primary, secondary or a combination.
2. Conduct legal, tax and financial due diligence.
3. Confirm the ownership and capital structure.
4. Agree on pre-money and post-money valuation.
5. Structure capital increases and share premiums.
6. Prepare the investment and shareholders’ agreements.
7. Establish governance and investor consent rights.
8. Regulate future financing and anti-dilution protection.
9. Review founder vesting and employee equity arrangements.
10. Protect intellectual property and confidential information.
11. Establish transfer restrictions and tag/drag rights.
12. Assess Competition Authority and sector approvals.
13. Complete all conditions precedent before releasing funds.
14. Implement corporate and registry filings.
15. Establish a clear exit strategy.

Conclusion

Private equity and venture capital investments in Turkey can be structured through share acquisitions, capital increases, convertible financing or combinations of these methods.

The central challenge is ensuring that the economic rights negotiated between investors and founders can be legally implemented within the Turkish corporate framework.

Investor consent rights, liquidation preferences, anti-dilution protections, founder vesting, share transfer restrictions and exit mechanisms should therefore be coordinated with the articles of association and mandatory corporate procedures.

For institutional investors, legal due diligence and regulatory analysis are equally important. Competition clearance, sector-specific approvals, intellectual property ownership and historical liabilities may materially affect both the value and feasibility of an investment.

A transaction structured correctly at the investment stage provides greater protection not only during the holding period but also when the investor ultimately seeks to sell, refinance or take the company public.

This article provides general information on Turkish law and does not constitute legal, financial, investment or tax advice. Each private equity or venture capital transaction should be assessed according to the target company, investment structure, investor rights, regulatory status and intended exit strategy.