Download Venture Company

Venture Capital and Private Equity Investment
Models in CMB Regulations
Outline
 Venture Capital and Private Equity Concepts in CMB Regulations
 Investment Company Model
 Scope of Activities and Types of Models
 Establishment
 Conversion to an Investment Company
 Sale of Shares and Public Offering
 Portfolio Limitations
 Portfolio Management and Performance Fee
 Fund Model
 Scope of Activities and Features of the Model
 Establishment
 Issue and Sale of Units
 Portfolio Management and Performance Fee
 Tax Regulations
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Venture Company ( portfolio company)
concept in CMB Regulations
 No specific distinction between “private equity” and “venture capital”
concepts according to CMB regulations. Both terms can be used
interchangeably.
 These concepts are defined to cover both private equity and venture
capital investments, respectively.
 Definition of Venture Company in CMB Regulations:
Companies (joint stock companies and limited companies) established and
operating or to be established in Turkey, carrying a growth potential and in need
of resources
Venture Company: - private companies
- publicly held companies (non-traded shares)
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Private Equity and Venture Capital
Investments
Investments in Venture Companies
Indirect
Venture
Capital
Investment
Fund Units
Collective
Investment
Funds
established
abroad
Special
Purposed
Joint Stock
Companies
established
in Turkey
Direct
Securities of
other
Venture
Capital
Investment
Companies
Shares of
Venture
Companies
Debt
Securities of
Venture
Companies
Mezzanine
Finance
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Venture Capital Investment Company (VCIC)
Model
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VCIC Activities
PRIVATE EQUITY AND VENTURE CAPITAL INVESTMENT ACTIVITIES
INVOLVE in MANAGEMENT of VENTURE COMPANIES
INVEST in LIQUID ASSETS- Money market instruments and listed securities
PARTNER or FOUNDER of LOCAL and/or FOREIGN ASSET MANAGEMENT COMPANIES
(Max. %10)
PARTNER OR FOUNDER of LOCAL and/or FOREIGN CONSULTING COMPANIES
(Max. 10%)
RENDER MARKET CONSULTING SERVICES in Emerging Companies Market of ISE
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VCIC TYPES:
In terms of public and private offering
1) Public offering model
At least 25% of outstanding shares of VCIC shall be sold through public
offering and be listed on stock exchange
2) Private offering
Sales to qualified investors
Qualified Investors : Financial institutions, public administrations and
entities, natural persons and legal entities who have individual net
worth that exceeds TRY 1 milion and natural persons holding angel
investor license.
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Establishment of VCIC
Public Offering





Registered capital
Min. paid in/issued capital TRY 20 million
(approx. $ 9,25 million)
Min. shareholder’s equity TRY 20 million
Privileged shares regarding management
rights
At least one leading shareholder- general
partner
Sale to Qualified Investors



Registered capital
Min. paid in/issued capital TRY 5 million
(approx. $2,3 million)
Min. shareholder’s equity TRY 5 million
 Privileged shares regarding
management & dividend righst

No leading shareholder requirement
Sale of Shares
Public Offering
 Prospectus to be approved by CMB
Sale to Qualified Investors
 Issue document to be approved by
CMB
Establishment
18 Mo
18 Mo
18 Mo
Initial
Investment
Sales to
Qualfied
Investors
18 Mo
Build
Porftolio
1 Year
Portolio Limitations
Public Offering





Sale to Qualified Investors
Investments other than PE and VC: Max 49% 
Investments in Foreign CIS: Max. 49%

Pledges, mortgages and guarantees givenestablished on behalf of SME’s in the
portfolio: Max 10%
Participation in Management and Advisory
Companies: Max 10%
Unlisted shares of publicly held companies
Max 25%
Investments other than PE and VC:
Max 49%
Participation in Management and
Advisory Companies: Max 10%
Basis of the limitations is the total assets reported in audited annual
financial reports.
Portfolio Management & Performance Fee
Public
Offering
Performance 20%
Fee Max.
Base for
performance fee
calculation
Sales profit
gained on exits
Sale to
Qualified
Investors
No limit
Dividend and interest
revenues earned on VC
companies
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Venture Capital Investment Fund (VCIF)
Model
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VCIF Activities
PRIVATE EQUITY AND VENTURE CAPITAL INVESTMENT ACTIVITIES
(Min. 80% of Net Asset Value)
INVOLVE in MANAGEMENT of VC COMPANIES
INVEST in LIQUID ASSETS- Money market instruments and listed securities
 Basis of the limitations is the net assets value as reported in audited
annual financial reports.
 VC&PE investments are to be valued by independent appraisal firms
by the end of each calendar year at minumum.
 Net Assets Value is to be notified to qualified investors at least once
a year.
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VCIF Investment Model
Portfolio Man. Co &
Venture Capital
Portfolio Man. Co
Qualified Investors
Founder,
Manager
&
Fund Investor (General
Partner)
Qualified Fund Units
Fund Investor
Funds of Funds
VCIF
Venture
Company
Venture
Company
Foreign
VC&PE Fund
Venture
Company
Establishment of the Fund




Fund rules document to be approved by CMB
Authorised Portfolio Depositary to be determined
Min. Fund Commitment (initial closing): TRY 5 million (approx. $ 2,3 million)
Min. amount of TRY 5 million to be invested in eligible assets within
portfolio limitations defined in regulations and fund documents
 Investor Agreement - including the terms and provisions regarding fund commitment
payments, performance fee and regulates matters that are not included in fund rules and
issue document
Establishment
1 Year
Completing
Initial Closing of
fund
commitments
1 Year
Build Portfolio
Sale of Fund Units
Sale to Qualified Investors
 Issue document to be approved by CMB
 Issuance of Qualified Fund Units
• Priviledge on dividends and have management rights
 Up to 20% of the fund units can be invested by the founder (portfolio
management company)
 Fund units can be transferred among qualified investors upon approval of
the founder
Completing
Initial Closing of
fund
commitments
Establishment
1 Year
Build Portfolio
1 Year
Portfolio Management and Performance Fee
No
limit
imposed
Performance Fee
Base for
performance fee
calculation
Sales profit
gained on exits
on
Dividend and interest
revenues earned on VC
companies
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VCIC’s Statistics
 12 VCICs, # traded on Borsa Istanbul :6 and # sold to qualified investors :2
VCICs as of December 31, 2013
Name of VCIC
Net Asset Value
Portfolio Value
Gözde GSYO A.Ş.
TRY 350.554.790
USD 164.548.812
TRY 773.977.677
USD 362.637.715
TRY 727.501.591
USD 340.861.917
91,24
İş GSYO A.Ş.
TRY 258.979.564
USD 121.341.687
TRY 259.702.012
USD 121.680.181
TRY 172.633.860
USD 80.885.470
28,12
Rhea GSYO A.Ş.
TRY 76.767.962
USD 35.968.683
TRY 74.624.330
USD 34.964.311
TRY 28.669.500
USD 13.432.741
100,00
Egeli & Co. GSYO
A.Ş.
TRY 42.997.319
USD 20.145.864
TRY 14.254.565
USD 6.678.801
TRY 60.200.000
USD 28.205.969
62,30
Gedik GSYO A.Ş.
TRY 20.566.851
USD 9.636.344
TRY 16.205.456
USD 7.592.866)
TRY 5.250.960
USD 2.460.272
(in transition)
Egeli & Co. Tarım
GSYO A.Ş.
TRY 19.586.917
USD 9.177.208
TRY 13.525.094
USD 6.337.016
TRY 10.560.000
USD 4.947.758
74,42
Source: Public Disclosure Platform www.kap.gov.tr
Market Cap.
% of VC Investments
in Portfolio
Tax Regulations for VCIC’s and VCIF’s
 Taxation of VCIC’s and VCIF’s:
• VCICs and VCIFs are exempt from Corporate Tax
• Corporate Tax exempted incomes of VCIC’s and VCIF’s are
subject to 0% witholding tax.
 Taxation of VCIC’s and VCIF’s Investors
• Resident Corporations (including non resident corporate tax payers
that have a permanent establishment, such as a branch office, in Turkey)
• Resident Individuals
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Tax Regulations Cont’d
(Back-end incentives)
 Corporates
•
•
•
•
Sale of listed VCIC shares: Witholding tax rate: 0%
No Witholding Tax
Sale of VCIC shares are included in corporate tax base
Redemption of fund units : witholding tax rate : 0%
Capital gain from non-listed VCIC shares held min for 2 years is subject
to75% Corporate Tax exempt
• Dividend income from VCIC shares and VCIF unites are exempt from
Corporate Tax
 Individuals
• Dividend income from VCIC shares and VCIF unites : 0% witholding tax
• Dividend income from VCIC shares and VCIF unites : Half of their gross
dividend amounts are exempt from income tax. If the remaining amount
exceeds a threshold such amount shall be declared with the annual
income tax return.
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Tax Regulations
(Front-end incentive)
 Front end incentive regulation was introduced in 2012 to be put into effect by





1/1/2013.
Applicable for resident corporates (including non resident corporate tax payers
that have a permanent establishment, such as a branch office, in Turkey) and
resident individuals.
Venture Capital Reserve: Individuals and corporate tax payers are allowed to
reserve a special fund from their annual income to be invested in VCIC or VCIF, up
to 10% of their taxable annual income or corporate tax base of the relevant year
AND up to 20% of their equity.
Venture Capital Reserves can be deducted from the corporate or income tax base
as long as such investment is actually made in VCIC or VCIF.
Venture capital reserve cannot be used for any other purpose, withdrawn,
distributed to shareholders/unitholders.
In case of dispose of the venture capital reserve investment in VCIC or VCIF, such
amount shall be reinvested within six months following such disposal.
Tax Regulations Cont’d
 Non-Resident Corporates
• Sale of listed VCIC shares and dividends from VCIF’s are subject to
0% Witholding tax
• No further requirement for any filling
 Non- Resident Individuals
• Sale of listed VCIC shares and dividends from VCIF’s are subject to
0% Witholding tax
• No further requirement for any filling
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