• 2023 February 15
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Thresholds for Venture Capital Investment Companies Increased

Thresholds for Venture Capital Investment Companies Increased

With the Capital Markets Board Bulletin no. 2022/74 ["Bulletin"] [available only in Turkish] published by the Capital Markets Board ["CMB"] on 30 December 2022, the threshold amounts for the Venture Capital Investment Companies [“VCIC”], which are prescribed by the capital market regulations, have been updated. Accordingly,, the required minimum capital amounts, movable and immovable asset values for the VCICs as stipulated in the CMB’s Communiqué No. III-48.3 on Principles on the Venture Capital and Private Equity Investment Companies have been increased pursuant to the revaluation rate.

The New Threshold Amounts

In the Bulletin, the monetary limits to which VCICs are subject were updated as follows for 2023:  

(i) VCIC’s

  • minimum initial capital required during the establishment phase and the amount that the existing paid-in/issued capital and equity capital should separately have during the transformation to VCIC have been updated as 100 million TL (as opposed to 29 million TL prior to the update).   
  • if the stocks are acquired only by the qualified investors, minimum initial capital during the establishment phase and the amount that the existing or issued capital and equity capital during the transformation to VCIC must be at least 30 million TL each (as opposed to 7 million 250 thousand TL prior to the update).

(ii) In VCICs,

  • in case the leading shareholder is a sole real person, the minimum total and fair value that should be taken as basis in the real estate assets that the leading shareholder should own is now 30 million TL; in case there is more than one real person, the amount is 60 million TL. (These amounts were 14 million 500 thousand TL and 29 million TL respectively.)
  • if the leading shareholder is a legal entity, the equity capital to be taken into account in the calculation of the equity capital obligation of the legal entity must be 300 million TL and the asset size ceiling must be 600 million TL. (These amounts were 145 million TL and 290 million TL respectively).

Conclusion

The threshold amounts that were increased in consideration with the reevaluation rate certainly aggravated the conditions for the VCICs. Setting aside the new conditions of CMB, the fact that VCICs benefit from corporate tax exemption and the 0% withholding tax rate on their earnings still prove to be highly useful for VCICs.