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Securities & Capital Markets |
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Subject |
Capital Markets Board of Turkey ("CMB") has announced Draft Legislations on principles of stock offerings and methods for sales of securities. |
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Legislation |
CMB Communiqué Serial I No. 26 and Communiqué Serial VIII No. 22 |
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Source |
CMB (Corporate Finance Department) |
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Attention |
Joint Stock Companies (listed or having intention to), Brokerage Firms and Investors |
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Impact |
The Drafts are announced -without any legal impacts- for consultation purposes to have the public comments at this stage. However the provisions should be considered to understand the approach of the CMB on the relevant matters which would have significant impacts in offerings of companies in the near future. |
CMB has announced Draft Legislations (the "Drafts") on principles of stock offerings and sale methods for securities and has invited comments from the market. The Drafts aim to revise the legal infrastructure in order to harmonize the local legislation with EU Directives and to bring solutions for the problems observed in public offerings.
The Drafts have been prepared with a liberal perspective in order to encourage IPOs. It is expected that the Turkish IPO market may regain its momentum in the second half of 2010 along with the recovery in the global economic atmosphere.
Below is a brief highlight of the key aspects of the Drafts:
- Firm Commitment Underwriting No Longer Required: In IPOs, brokerage firms may provide intermediary services to issuers on a best-effort basis, i.e. without firm commitment in full.
- Minimum Free Float Requirement: Draft provisions abolish the minimum free float requirement in IPOs and grant issuers the opportunity to determine the number of shares to be sold without any limitation.
- Insiders to Acquire Shares in Public Offerings: The restriction preventing insiders to acquire shares in public offerings is revoked. However disclosure is required in case of any potential acquisition.
- More Shares to Foreign Investors: The minimum allocation threshold envisaged for local individual investors is decreased to 10% (as of today, it is between 30-50% based on the volume of offering).
- Offerings to Qualified Investors: The term qualified investor is defined and the procedures for offerings to qualified investors are determined. In this respect and pursuant to the Drafts, issuers may invite qualified investors to stock offerings through advertisements and notices. However, such advertisements and notices shall clearly state that the offering is directed to qualified investors and thus shall not be considered as a public offering.
- Payment and Book Building Methods: Payment methods already applicable in Turkish IPO practice are clearly stated in draft provisions. Accordingly, issuers and brokerage firms may provide investors the opportunity to make payments either through depositing foreign exchange, government bonds, liquid investment funds or any other liquid instruments during the book building process. In addition, issuers and brokerage firms are granted the liberty to adopt any type of book building method in relation to IPOs and SPOs (secondary public offerings) provided that adopted methods do not violate principles of equal treatment.
- Incentives to Support the Marketability of Public Offerings: Under certain conditions, it is possible to provide cash or non-cash incentives to specific investor groups.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.