Venture capital investment partnerships are joint-stock companies established with the permission of the Capital Markets Board (CMB) with the purpose of investing in startup companies. These partnerships operate in accordance with the Capital Markets Law and related communiqués. According to the CMB’s Communiqué No. III-48-3 on Venture Capital Investment Partnerships, a venture capital investment partnership is defined as: “A capital market institution established to operate a portfolio consisting of venture capital investments, capital market instruments, and other assets and rights determined by the Board, within the procedures and principles set forth in this Communiqué; established by issuing shares or through amendment of the articles of association, subject to the registered capital system, and operating within the activities limited by Article 48 of the Law, as well as permitted activities specified in this Communiqué.
Partnerships can either be established directly as venture capital investment partnerships, or joint-stock companies may convert into venture capital investment partnerships by amending their articles of association in accordance with the Law and this Communiqué.
Whether newly established or converted, Venture Capital Investment Partnerships must:
Venture capital investment partnerships are regulated under the Capital Markets Law No. 2499 in our legal system. Detailed regulations regarding all investment partnerships are set forth in the Board Communiqués. Since venture capital investment partnerships are established as joint-stock companies, they are also required to comply with the provisions of the Turkish Commercial Code related to joint-stock companies in all matters not specifically regulated by the Capital Markets Legislation.
Venture Capital Investment Funds are asset pools collected from qualified investors in exchange for participation shares, managed on behalf of the shareholders under a fiduciary ownership basis. These funds are established for a fixed term by portfolio management companies and venture capital portfolio management companies, do not have legal personality, and operate portfolios consisting of assets and transactions determined by the Capital Markets Board. In contrast, Venture Capital Investment Partnerships are established as joint-stock companies with unlimited duration and have legal personality. While the business activities of venture capital funds and partnerships are similar, there are differences in limitations specified in the related communiqués.
Venture capital investment partnerships:
a. Can invest in companies within the framework of principles specified in the related Capital Markets Board (CMB) Communiqué.
b. Can participate in the management of companies and provide consultancy services.
c. Can invest in capital market instruments and money market instruments traded in secondary markets to diversify their portfolios.
d. Can borrow up to half of their equity for short-term borrowing (less than one year) and up to twice their equity for long-term borrowing (one year or more).
e. Can invest in venture capital funds established abroad to invest in companies based in Turkey, provided that the risk arising from these investments is limited to the principal amount directed to the investment.
f. Can become partners in consultancy companies established domestically or abroad to provide consultancy services related to venture capital activities in Turkey.
g. Can become partners in portfolio management companies established in Turkey, and portfolio management companies established abroad whose activity scope is limited to venture companies established in Turkey.