CMB’s Amendments to the Communiqué on Principles Regarding Venture Capital Investment Funds

The Capital Markets Board (CMB) amended the Communiqué on Principles Regarding Venture Capital Investment Funds (II-52.4) (VCIF Communiqué) through the “Communiqué Amending the Communiqué on Principles Regarding Venture Capital Investment Funds (III-52.4)” (III-52.4.c) which was published in the Official Gazette dated 21.09.2024 and numbered 32669.

The key amendments introduced by the CMB to the VCIF Communiqué are summarized below:

• A definition of the most appropriate means of communication has been introduced, and notifications made through the Public Disclosure Platform (PDP) are now included within the scope of this definition.
• A definition of the fund issuance agreement, which is concluded individually or collectively between the fund and the participation shareholders and includes at least the matters specified in the annex of the relevant communiqué, has been added to the VCIF Communiqué. It is now mandatory to sign a fund issuance agreement with investors before selling fund participation shares to qualified investors; however, this requirement does not apply to investors purchasing their shares on the stock exchange. Funds already issued participation shares as of the amendment’s effective date have been given until 30.06.2025 to sign a fund issuance agreement with their investors.
• A copy of the fund issuance agreement will be made available on the fund’s PDP page, and another copy will be provided to the portfolio custodian to enable it to fulfill its responsibilities under the relevant communiqué on portfolio custodians. In the event of any changes to the terms of the agreement, it is mandatory to disclose the changes on the PDP and notify the portfolio custodian accordingly. 
• If the issuance document specifies that the fund’s activities and investments will be conducted by the participation finance principles, the term “participation” may be used in the fund’s title.
• Following the recent amendment, a majority of the committee members must be present for the fund’s investment committee to make decisions. 
• Regulations regarding umbrella funds and their affiliated sub-funds have been incorporated into the VCIF Communiqué. Accordingly, it is now possible to issue sub-fund participation shares under a single bylaw, based on the umbrella fund’s bylaw.
• The venture capital investment funds can now be established as fund-of-funds.
• VCIFs are now permitted to invest in venture companies established abroad, provided that at least 51% of its assets are located in Türkiye. Previously, at least 80% of the assets of venture companies established abroad, as stated in their most recent annual financial statements, had to be comprised of subsidiaries or affiliates established in Türkiye.
• The maximum investment limit for non-resident, unlisted companies with development potential has been increased from 10% to 15%. However, such investments will not be classified as venture capital investments.
• Investments made through agreements that grant or will grant the right to become a shareholder in venture companies in the future are now recognized as venture capital investments. Accordingly, investments made through Simple Agreement for Future Equity (SAFE) and similar agreements used in practice are now recognized as venture capital investments. 
• According to the most recent annual financial statements, companies in which at least 40% of their total assets consist of real estate or real estate-based assets, or whose primary business activity is construction, will not be classified as venture companies. However, companies operating as technology development zones, incubation centers, or R&D centers under the relevant legislation may be exempted from this restriction under certain conditions with the approval of the Ministry of Industry and Technology. 
• Under the amendment, up to 15% of the total fund value can be invested in non-listed foreign companies with development potential; however, such investments will not be classified as venture capital investments. The foreign investment limits have been determined incrementally based on the ownership ratios of participation shares in circulation. If the fund fails to comply with these investment restrictions and does not remedy the violation within the specified timeframe, an application must be submitted to the CMB for approval to terminate the fund’s investment activities and proceed with liquidation. Once approval is obtained, the fund’s internal bylaw will be deregistered from the trade registry.