The CMB clarified the legal background of equity crowdfunding at the end of 2019. However, crowdfunding platforms were not able to obtain a license from the CMB for a while. There were also some infrastructural gaps, such as the lack of an escrow agent.  Following the approval of crowdfunding platforms by the CMB, and Takasbank establishing the “Crowdfunding Escrow Agent System” last month, we can expect the crowdfunding activities to gain momentum going forward.

With the amendments made in the Capital Markets Law (Law) at the end of 2017, crowdfunding was introduced to the Turkish capital markets as a new financing method. The details of crowdfunding were clarified with the Communiqué on Equity Crowdfunding (Communiqué) published by the Capital Markets Board of Turkey (CMB) in October 2019; however, equity crowdfunding was not put on the fast track as a financing method, yet.

Authorization regime

Pursuant to the Communiqué, equity-based crowdfunding activities can be carried out by crowdfunding platforms. Crowdfunding platforms must to be authorized by applying to the CMB for such activities and be included in the “approved platforms list”. Although more than a year has passed since the publication of the Communiqué, the CMB had not authorized any crowdfunding platforms until recently. This situation has changed over the past month. The CMB has approved the application of two companies at the beginning of April and included these companies in the “approved platforms list”.

Appointment of escrow agent

The Communiqué foresees an escrow agent to be appointed so that the equity crowdfunding activity can be conducted. According to the Communiqué, it is necessary to keep the funds obtained in the fundraising campaign in the account of the escrow agent for a certain period and then transfer to the company once certain thresholds are exceeded. It was recently announced that Takasbank was authorized by the CMB as an escrow agent. Accordingly, Takasbank, which established and started to operate the “Crowdfunding Escrow Agent System” as the escrow agent last month, has registered 10 crowdfunding platforms as members in the system as of today.

Platforms, participation banks and broadly authorized intermediary firms

As per the Communiqué, crowdfunding platform activities can be conducted by joint stock companies using the expression “Crowdfunding Platform” in their trade names and are incorporated to operate exclusively as crowdfunding platforms, as well as by participation banks and broadly authorized intermediary firms without being subject to such conditions. Any of these players must be included in the “approved platforms list” by applying to the CMB and have an agreement with the escrow agent. Both the CMB’s approved platforms list and Takasbank’s member companies list include crowdfunding companies exclusively dedicated to the field of crowdfunding as well as broadly authorized intermediary firms that will operate crowdfunding platforms based on the authority granted under the Communiqué.

Following the CMB’s approval of crowdfunding platforms, the determination of Takasbank as the escrow agent and crowdfunding platforms becoming Takasbank’s members, we may soon witness companies providing financing with equity-based crowdfunding.