[Last updated: 1 January 2024, unless otherwise noted]

Capital markets instruments representing shareholding rights or receivables which are considered securities by the CMB may be listed on Borsa Istanbul. There is no jurisdiction of incorporation or industry that would automatically be considered unacceptable for a listed company.

In order for a security to be listed on Borsa Istanbul, the issuer is required to prepare a prospectus (izahname) in case of a public offering, or, in the case of a private placement, an issuance certificate (ihraç belgesi). Both the prospectus and the issuance certificate are subject to the CMB's approval. The new law also facilitates subsequent offerings to be made by the same issuer by introducing a simplified approval procedure, which would be applicable for a term of 12 months from the approval of the original prospectus, unless a material change has occurred that may affect the investment decisions of the investors.

The role of the CMB

General. As the capital markets regulator, the CMB promulgates regulations relating to Turkish capital markets and the rules which participants in such markets are required to observe. CMB regulations issued under the former capital markets law required registration with the CMB of all securities to be offered in Türkiye or issued by an issuer domiciled in Türkiye. However, the Capital Markets Law abrogated this requirement to register with the CMB and the CMB has revised its regulations in accordance with the new statute. The Capital Markets Law requires that a prospectus (izahname) be submitted to, and approved by, the CMB for all securities to be publicly offered. The prospectus filed with the CMB for its approval must include all information reasonably necessary to enable a prospective investor to assess the merits of the issuer and the proposed investment. The CMB may refuse to approve the prospectus in the event that it is not satisfied with the quality of the issuer or the level of disclosure in the prospectus.

Requirements for CMB's approval. The provisions concerning the CMB's approval are stipulated separately depending on how the shares will be offered to the public. Such provisions, however, generally require that (i) the articles of association of the company be amended as set forth in the relevant CMB regulation, (ii) no rights restrict the transfer or circulation of the securities to be issued or prevent the securities owner from using his rights (such as rights in rem, of retention or other similar rights) and, (iii) a restriction of existing shareholders' pre-emption rights if the public offering will be realized through a capital increase.

In addition to the requirements set forth for public offerings of domestic securities, foreign securities are subject to the following restrictions:

• The application for listing or offering of foreign securities must not have been rejected by a stock exchange or any competent capital markets authority in order to protect investors or on any other similar grounds.
• The foreign securities must have been issued in Turkish Lira or in a convertible currency recognized by the Central Bank of Türkiye.
• The home jurisdiction must not impose any restriction on the sale of the foreign securities in Türkiye, the performance of transactions and payments in relation to the financial rights the securities grant in Türkiye, and the exercise of managerial rights arising therefrom.
• Where foreign securities other than shares are issued, the foreign issuer is required to obtain a long term grade confirming that such securities are adequate for investment according to the rating scale from a rating agency, within the year prior to the application to the CMB.

The CMB may set additional requirements for the purpose of protecting investors, provided that the CMB notifies the applicant of its decision.

If the securities are to be issued in a foreign convertible currency recognized by the Central Bank of Türkiye, the sale will be realized in Turkish Liras.

Depending on how the shares will be offered to the public (whether by way of a capital increase or by shareholder sale), the issuer and/or the shareholders are required to enter into an agreement with a representative in Türkiye. The representative performs certain transactions on behalf of the shareholders or the issuer, as the case may be, and ensures that the financial and managerial rights of the investors are exercised in compliance with the laws and regulations to which the shares are subject.

Application. The issuer or the shareholders intending to sell their shares in the public offering must enter into an agreement with a brokerage house/broker, which will execute the necessary transactions in relation to the public offering on behalf of the sellers.

The brokerage house applies to the CMB for the public offering of the shares with the required documents. These documents include, among others, the domestic prospectus (as explained in further detail below), the issuer's amended articles of association, a copy of the agreement executed with the brokerage house, written statements confirming the absence of restrictions on the transfer of the shares offered, the decision of the relevant body(ies) of the issuer approving the public offering, financial statements and independent audit reports and any other documents to be additionally requested by the CMB.

The listing application to Borsa Istanbul must be made simultaneously with the application to the CMB for its approval.

Listing on Borsa Istanbul

The listing and trading of foreign securities and depository receipts (issued by foreign entities in or outside Türkiye) sold (i) through public offering or (ii) to qualified investors by private placement without a public offering, are regulated by the Borsa Istanbul Listing Directive (Listing Directive). The requirements of the Listing Directive apply both to domestic and foreign securities, except in the instances outlined below.

Listing application requirement. Pursuant to the Capital Markets Law, all Turkish public companies whose shares are not traded on Borsa Istanbul must apply to Borsa Istanbul for listing within two years following the date they become subject to capital markets legislation. Otherwise, the CMB will decide whether the company will be listed or will lose its public status.

Shareholding requirements. For securities representing shareholding rights to be traded on Borsa Istanbul (except for securities of investment trusts), the companies whose shares have been sold to at least 500 real persons and/or legal entities are deemed public companies. However, there is no prerequisite for being a shareholder of a public company under Turkish capital markets laws. Domestic or foreign brokerage houses, banks, portfolio management companies, mortgage finance companies, mutual funds, private pension funds, insurance companies, asset management companies and other persons regarded as professional investors by the CMB are considered professional investors.

Type of legal entity. Under the Capital Markets Law, only joint stock companies (anonim şirket) may become public companies and be listed on Borsa Istanbul.

Financial and other requirements. To list and trade securities on Borsa Istanbul, the Listing Directive requires that the company:

• Submit financial statements and independent audit reports (which will be included in the prospectus for a public offering) in accordance with the CMB regulations (including balance sheets, income statements, cash flow statements and equity capital change statements for the previous three years prepared in accordance with TAS/TFRS (which are substantially in line with IAS/IFLR) and independent audit reports prepared in relation thereto; please see the chart included in Section 3 below, Listing Documentation and Process).
• Be operative for at least two calendar years.

Meet all the conditions of the group to which it belongs below:

Link to Table

• Obtain confirmation from Borsa Istanbul that the company's financial structure is sufficient for its operations.
• Confirm that its articles of association do not include any provision restricting the transfer and trading of the securities to be traded on Borsa Istanbul or preventing shareholders from exercising their rights.
• Not have any material legal disputes which might adversely affect the company's production or other commercial activities.
• Not have (i) suspended its operations for more than three months during the last year, or (ii) applied for liquidation, or concordat, or any other process regarding a similar situation specified by the Borsa Istanbul Board has occurred, except as the Borsa Istanbul Board may deem appropriate.
• An independent attorney's report confirming (i) the legal status of the company and its compliance with the applicable laws, (ii) that there are no restrictions on the shares to be offered, and (iii) that there are no material legal disputes which might adversely affect its activities.

Further, any company that has not generated any profits in the last two financial years and/or does not meet the equity to capital ratio as set out above can still be listed on BIST Star Market provided that:

• Such company (i) has recorded operating profits (Borsa Istanbul may decide to include the amortization and redemption costs that do not require any cash outflow when calculating the operating profits) in the preceding financial year and the relevant interim period and (ii) has a minimum TRY1.5 billion (approx. US$50.85 million) market value of the shares offered to public.
• The equity/capital ratio, calculated by adding (i) the emission premiums related to the shares to be offered to the public and (ii) the nominal amount of the capital increase to equity, is greater than 1.0.
• The public offering involves the issuance and offering of new shares (that is to say, the issuer receives all, or at least part, of the offering proceeds).
• The other requirements applicable to listing on the BIST Star Market are satisfied.
• The board of Borsa Istanbul approves the listing application through considering the issuer’s projections on operations, financial structure and use of proceeds to be generated from the offering.

Borsa Istanbul may impose additional requirements for securities granting extraordinary shareholding rights (such as non-voting shares or privileged share certificates) or require the company to provide missing information and/or documents not submitted to Borsa Istanbul. If the missing information or documents are not submitted in a timely fashion, Borsa Istanbul may reject the application. Borsa Istanbul may also waive any of the requirements indicated above.

Ongoing requirements. For a company to maintain its Borsa Istanbul listing, it must, among others requirements:

• Comply with Borsa Istanbul's regulations and decisions.
• Not have been declared bankrupt, nor have lost its status as a legal entity, nor have been liquidated.
• Not have been in financial distress at a level halting its operations.
• Comply with its public disclosure requirements.
• Have not suspended their operations for a period of exceeding one year.

Requirement specific to foreign companies. The Listing Directive allows dual-listing of capital markets instruments traded on foreign exchanges determined by Borsa Istanbul without seeking any further condition, provided that the relevant prospectus or issuance certificate is approved by the CMB.

Sponsor or broker requirement. Companies may only execute transactions relating to Borsa Istanbul-listed securities through Turkish-licensed brokerage houses or other duly-qualified Borsa Istanbul members. Moreover, the CMB requires that the foreign company appoint a representative in Türkiye as explained further above.

Corporate governance. The Corporate Governance Communiqué of the CMB No. II-17.1, dated 3 January 2014 (the Corporate Governance Communiqué), set out the Corporate Governance Principles. The Corporate Governance Principles are non-binding for public companies that are not listed on Borsa Istanbul. Publicly listed companies, however, are obligated to comply with certain of these rules, which are described in further detail below. The non-mandatory rules of the Corporate Governance Communiqué operate on a comply-or-explain basis. The CMB also published the Sustainability Principles Compliance Framework, which contains ESG principles that public companies are advised to follow, which also operate on a comply-or-explain basis.

Interview. Although the company is not required to submit to an interview with Borsa Istanbul, Borsa Istanbul may, and generally does, conduct a due diligence at the headquarters or production or service units of the company (or, as the case may be, of companies having a capital or control relationship with the company) to acquire information on the company's production technology, operations, investments, business plans and financial status, and ascertain the accuracy of the information provided in the application. The company (or the other companies) must enable the Borsa Istanbul to review all financial statements, transactions, accounts and other company records.

Trading prices. The trading prices listed on Borsa Istanbul are generally limited to a daily range established by Borsa Istanbul. Accordingly, traders on the BIST are not permitted to place orders at prices which are more than 10%-20% higher or lower than the base price of securities for the preceding trading session, depending on the market.

Restrictions on trading.  Shares need not be placed into escrow or otherwise restrained from trading through ''lock in'', ''lock up'' or other arrangements in connection with the listing. However, for the initial public offerings, investors that purchase shares are prohibited from selling those shares off-exchange, or through private order and/or wholesale transactions on the stock exchange for 90 days starting from the date of acquisition. For shares held by the existing shareholders of the company (except shares sold within the scope of the IPO), this restriction applies for 180 days starting from the date that the offering circular was approved, and also prohibits any sale on the stock exchange.

Additionally, shareholders (i)holding 10% or more of the share capital of the company, or (ii) controlling the company without regard to shareholding percentage, as of the date of the CMB's approval of the domestic prospectus (izahname), are prohibited from selling their shares at a price less than the offering price for one year following the shares' first trading date on the stock exchange.

Moreover, as a market practice, an issuing company may undertake not to realize a capital increase within a certain period following the completion of the public offering, and the existing shareholders may undertake more extensive lock-up undertakings than those that apply mandatorily under capital markets laws, on the basis of underwriter recommendations.

Before all readily available shares are fully sold, existing shareholders (i) holding 10% or more of the share capital of the company, or (ii) controlling the company without regard to shareholding percentage, are not permitted to sell any shares on the stock exchange as of the date of approval of prospectus for a period of one year following the date the prospectus is published on the Public Disclosure Platform (the PDP).

Currency denomination. Foreign capital market instruments must have been issued in Turkish Lira or in foreign currencies deemed convertible by the Central Bank of Republic of Türkiye (“CBRT”). In the event that foreign capital market instruments and depositary receipts are issued in any of these foreign currencies, such instruments and receipts must be sold in Turkish Lira. In this case, the sale exchange rate, effects of changes in sale exchange rates, expenses, the party that will cover such expenses, and other similar matters will be expressly explained in the prospectus.

Settlement and clearing system. Settlement is conducted through pool accounts and individual issuer accounts held with the Central Securities Depository (Merkezi Kayıt Kuruluşu) (the CSD). Information on daily transactions is sent to pool accounts at the CSD. The CSD then checks the accuracy of the information on the traded securities from its records. A central settlement agency concludes the settlement according to this information. The CSD then transfers the cash to individual issuer accounts (at the CSD) and electronically distributes securities from pool accounts to individual issuer accounts in line with the settlement.

Currently, the CSD is the only central depository institution operating in Türkiye. However, under the Capital Markets Law, securities other than stocks are to be retained by other central depository institutions, while stocks will continue to be held at the CSD accounts. Borsa Istanbul Settlement and Custody Bank (İstanbul Takas ve Saklama Bankası A.Ş.) is the only central settlement agency currently operating in Türkiye.

The CSD and Borsa Istanbul Settlement and Custody Bank systems are fully interlinked in real-time, so securities transfers are reflected in the CSD instantaneously.

Compliance adviser. A foreign company is not required to retain a compliance adviser in order to list its securities on Borsa Istanbul. As described above, however, a foreign company may only perform transactions relating to listing its securities on Borsa Istanbul through brokerage houses licensed in Türkiye or other Borsa Istanbul members. Moreover, the CMB requires that the foreign company appoint a representative in Türkiye as further explained below.