The Communiqué (III-48.3) applicable to Venture Capital Investment Trusts (“Communiqué”) has introduced certain regulations to ensure that the portfolio of a VCIT shall be formed in line with the terms and conditions set out therein, and accordingly, it has further introduced various restrictions to a VCIT’s portfolio. These restrictions as defined in Article 22 of the Communiqué are as follows:
- A VCIT may not invest in a company in which its shareholders with a control over its management, its board members or general member has the control over the latter’s management (Article 22/1-a)
- Venture capital investments by a VCIT must make up at least fifty-one percent of its total assets. Notwithstanding the foregoing, if the amount that is directly invested in a venture company meeting SME conditions as defined in the SME Regulation exceeds five percent of the VCIT’s total assets, the said ratio shall be applied as thirty-five percent (Articles 22/1-b and ğ).
- In the case of investments referred to in Article 20/1-b of the Communiqué and which may be made by a VCIT other than venture capital investments, the VCIT may invest maximum 10% of its total assets in capital market instruments issued by a single issuer (Article 22/1-b):
- A VCIT may invest maximum ten percent of its total assets in :
- a consulting company based in Turkey or abroad and engaged in consultancy services for venture capital operations in Turkey; or
- a portfolio management company based in Turkey, or such portfolio management company whose scope of business merely covers venture capitals based in Turkey even if it is based abroad (Article 22/1-ç)
- The value of a pledge, security or mortgage that may be provided by a VCIT in circumstances permitted in Article 20 of the Communique may not exceed 10% of the VCIT’s total assets, and the value of a pledge, security or mortgage created and provided in favour of a venture capital company may not exceed 25% of the venture capital investment amount injected to the said venture company (Article 22/1-d)
- Subject to the condition that the risks of a VCIT that may arise from its investments shall remain limited to the amount of the invested capital, this VCIT may invest forty-nine percent of its total assets in collective investment enterprises based abroad in order to only subscribe capital investment to a venture company as defined in the Communiqué, and this venture capital investment may not exceed twenty percent of the relevant enterprise’s capital (Article 22/1-e).
- The investment that a VCIT may make in the non-listed stocks of a publicly traded company operating in the form of a venture company may not exceed twenty-five percent of its total assets in maximum (Article 22/1-f).
- A VCIT may be a party to derivative instruments in order to hedge its portfolio against market risks or currency or interest risks –on the condition that a provision that allows such hedge is set out in its articles of association- (Article 22/1-g).
- Where a VCIT provides a venture capital with structured financing as a combination of debts and capital financing, it is permitted to invest twenty-five percent of its total assets in maximum (Article 22/1-h).
- A VCIT may invest 20% of its total assets in maximum in a Turkish lira or FX demand or term deposit or participation account (Article 22/1-ı).
A VCIT is required to comply with these portfolio restrictions above based on its total assets set out in its individual financial statement by the end of a given year. The VCIT’s board of directors, or if authorized so by the board of directors, the relevant corporate executive shall be responsible to fulfil and meet those liabilities arising from portfolio restrictions. Article 24 of the Communiqué lays down and defines measures to be adopted in the case of a violation of a portfolio restriction, and their durations as well as applicable sanctions.