Turkey Aligns Its Prospectus Rules With EU Standards

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By Muhsin Keskin and Berkay Ozludil

On January 12, 2016, the Capital Markets Board (the “CMB”) introduced new disclosure requirements to its equity offering prospectus format and specified disclosure requirements regarding taxation and material agreements to obtain equivalency from the European Securities and Markets Authority:

  •  Institutions preparing expert reports (e.g., audit reports, valuation reports and rating reports) must now include a declaration in the prospectus stating that (i) the information contained in the expert reports is true based on the information they have been given, and (ii) the institution has taken due care to avoid any material misrepresentations.
  •  The section numbering and format of the prospectus' summary is now fully aligned with European Securities and Markets Authority standards.
  •  Issuers must now disclose family relationships between shareholders holding 5 percent or more of its capital.
  •  The disclosure requirement under the material agreements section of the prospectus has been clarified to include all material agreements entered into within the last two years, except agreements executed during the course of ordinary business.
  •  The requirements for the prospectus' taxation section have been clarified to include taxation rules in relation to (i) the sale and/or disposal of shares, (ii) dividend distribution, (iii) withholding rules of income derived from shares and whether the issuer is liable for withholding to be applied if the issuer's headquarters and offering takes place in different jurisdictions.
  •  Selling shareholders and/or issuers are now required to specifically disclose the terms and conditions (e.g., duration, jurisdictional limitations) of the use of the prospectus and sale of shares following the offering.
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    The CMB's ongoing harmonization of its capital markets rules with the EU's demonstrate Turkey's efforts to attract international investors and strengthen and deepen its capital markets. The new prospectus rules also reflect the CMB's efforts to prescribe country-specific rules, such as the disclosure requirement for related shareholders.

    Muhsin Keskin is a partner at Esin Attorney Partnership, Istanbul, a member firm of Baker & McKenzie International. He can be reached at muhsin.keskin@esin.av.tr. Berkay Ozludil is an associate at Esin Attorney Partnership, Istanbul, a member firm of Baker & McKenzie International. He can be reached at berkay.ozludil@esin.av.tr.