The Capital Markets Law no 6362 (“CMLaw”) governs investment companies and establishes the terms for the incorporation and business of investment companies. According to the definition provided in article 48/1 of the CMLaw, “investment companies are joint stock corporations with fixed or variable capital established in order to issue their shares and with the purpose of managing portfolios comprised of capital market instruments, real estate, venture-capital investments and other assets and rights to be determined by the Capital Markets Board”.
The Communiqué on the Principles of Venture Capital Investment Companies (III-48.3) (“Communiqué”) as prepared by the Capital Markets Board (“CMB”) on the basis of articles 48 and 49 of the CMLaw to regulate the principles applicable to venture capital investment companies (“VC Investment Companies”) is in force and effect and contains detailed regulations on the issue.
What are VC Investment Companies?
Article 4 of the Communiqué defines VC Investment Companies as a capital market institution, which was incorporated, or has been converted through amendments to its articles of association, to issue its shares to manage a portfolio composed of venture capital investments, capital market instruments and other assets and rights to be determined by the CMB under the principles and procedures established in the Communiqué and which may engage in other activities allowed in the Communiqué within the limits established under Article 48 of the CMLaw, and holds the status of a joint-stock company subject to the registered capital system. Using this definition as a starting point, the fundamental elements that distinguish VC Investment Companies from other companies are that:
- VC Investment Companies may either be directly incorporated as or converted into joint stock corporations subject to the registered capital system,
- their purpose is to engage in venture capital investments; and
- they issue shares to fulfill this purpose.
Due to VC Investment Companies having been constituted as joint stock corporations, the investors of the VC Investment Companies hold the position of “shareholder” and may exercise the rights of shareholders (such as collecting dividends) with respect to the VC Investment Companies.
VC Investment Companies are only one type of company capable of venture capital investments. Since the decision to invest in venture capital is an investment decision, natural persons or other commercial enterprises may also utilize such opportunity.