What are the Conditions for Converting a Joint Stock Corporation into a VC Investment Company?

The transformation of the Joint Stock Company into a Venture Capital Investment Trust is also approved 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.

In order to convert a joint stock corporation into a VC Investment Company, an application must be filed with and approved by the CMB. For the CMB to deem the application suitable, the conditions for conversion specified under article 5 of the Communiqué must have been satisfied.

• The corporation must be a joint stock corporation with registered capital. If it is not a joint stock corporation with registered capital and is instead subject to the share capital system, it will be required to apply to the Board to switch to the registered capital system.
• During conversion, each of the joint stock corporation’s current paid-in capital or issued capital and shareholders’ equity as shown on the independently audited financial statements issued in accordance with the relevant CMB regulations must be no less than TL 100,000,000.
• For conversion the shares of the joint stock corporation must be issued for cash and the value of the shares must have been fully paid in cash.
• The trade name must include the term “Venture Capital Investment Company” (“Girişim Sermayesi Yatırım Ortaklığı”). (In line with this requirement, article 38 of the Communiqué prohibits institutions other than companies duly incorporated and active in line with the CMB and the Communiqué from using the terms “venture capital investment company”, “GSYO” or another term with the same meaning in their trade names, announcements or advertisements).
• The existing shareholders must meet the conditions stipulated in the Communiqué.
• The joint stock corporation must have applied to the CMB to amend its existing articles of association in line with the provisions of the CMLaw and the Communiqué.
• The members of its board of directors and its general manager must meet the conditions specified in the Communiqué.
• The joint stock corporation must undertake that shares corresponding to 25% of its initial/issued capital shall be offered to the public or sold to qualified investors within the time specified and principles set forth in the Communiqué.
• At least one of the existing shareholders must be a leading shareholder.

CMB approval is required for any amendments to be made in the articles of association once a joint stock corporation has been converted into a VC Investment Company.