the concept of business angels under turkish law

the concept of business angels under turkish law

L E G A L N E W S B U L L E T I N T U R K E Y
THE CONCEPT OF BUSINESS ANGELS
UNDER TURKISH LAW
Turkey has initiated, an attractive notion around the world, broadly called
“Business Angels” into its finance market. The legal framework relating to
the Business Angel Scheme was established and tax incentives norms were
introduced for the qualified persons with the Statute numbered 6327. The
Regulation on the Business Angel Scheme enlarging on the Statute has been
published in the Official Gazette dated 15th February 2013 and that time
came into effect. A significant amount of tax reliefs have been offered on
certain conditions. In this article, we will provide information about the
scheme in detail.
A Historical Synopsis of Business
Angels
successfully as a fundraising system in a
number of companies.
The Term originally stems from United
States of America, in 1980s, Professor
Wetzel conducted a pioneering research on
how entrepreneurs raised seed capital in
USA and subsequently “angel” has been
used to describe the investors that
promoted them. The concept of Angel
Investment
has
been
introduced
2. What is the meaning of “Business
Angels”?
1.
With reference to the Regulation,
Business Angels are defined that
investors, who are wealthy position or
have a certain level of knowledge,
investing their personal assets and/or
experience and know how to start-up or
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growing companies. Please note that
Business Angels are not entrepreneur just
invest their fund to private venture
company with tax advantages.
3. Tax Incentives Mechanism
According to Income Tax Statute
Transitory Article 82 and the Regulation
Article 4/2, investors, who have Business
Angels license, can deduct the cost of
75% of shares of eligible Turkish resident
private venture companies from their
annual income tax base in the year on
which the investment is made or following
calendar years under the condition that the
shares are held for at least two years.
Furthermore, if the licensed Business
Angels acquire the shares of private
venture companies who are supported by
Science, Industry and Technology
Ministry with some stipulations, they
make deduction amounting to 100% of the
cost of the shares from the annual income
tax base. Nonetheless, the total annual tax
relief amount cannot be exceeded TRY
1,000,000.
4.
What are the requirements for
becoming a Business Angel?
First of all, you should obtain a license
from the Treasury in order to benefit from
tax deduction.
There are two types of Business Angels
requirements in terms of the Regulation
Article 5.
a. Conditions for high income and
wealthy investors,
- Investors whose total gross
amount of income in their
income tax return is at least
TRY 200,000 in the last two
calendar years prior to getting
the license or,
-
Investors whose total amount of
personal assets is at least TRY
1,000,000. On the other hand,
the below mentioned assets
shall be excluded from the
calculation of personal wealth
amount: the house which is
habitually residence, the house
is acquired with a mortgage,
rights stem from insurance
contracts and pensions rights
and life insurance amounts
b. Conditions
for
experienced
investors,
- At least two years experienced
investors as a fund or portfolio
manager
in
financial
establishments or manager
and/or quasi or higher position
in corporate and project or SME
finance department of a bank
and financial establishments or
in private venture companies or,
- Investors who have been
employed at least two years as
deputy general manager or
equivalent or a higher position
in a corporation with the annual
turnover
TRY
25,000,000
within the last five years before
getting the license or,
- Investors have been members
of a business angels authorized
network at least one year before
obtaining the required license
and have been shareholders in
at least three private venture
companies.
- Investors who have at least 2
years practice in domestic
incubation center or technology
development center set up for
supporting the companies at the
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stage of start-up or growth
AND investors have invested
TRY 20,000 in at least three
companies at the stage of startup or growth in that centers.
5. How can be applied to the
Treasury for the license?
You need to apply for obtaining
license to the Treasury through an
accredited business angel network.
Accredited business angels network
is defined as an association
established with regard to Turkish
Civil Statute, Law of Obligations
and Turkish Commercial Statute,
which is licensed and regulated by
the Treasury.
6. Please pay attention limitations
provisions on investment
First limitation is that qualifying
investors can invest personally up to
twenty different eligible private
venture companies during their fiveyear license time. What is more, there
is minimum limit, TRY 20,000 and
maximum limit, TRY 1,000,000. It
means that you cannot invest less than
TRY 20,000 and more than 1,000,000
in each eligible private venture
company. On the other side of the coin,
your total investment as a business
angel can be exceeded 1,000,000. Also,
there is a chance a co-investment
scheme allows you to invest up to
2,000,000.
Business angels cannot make any
transaction, which is likely to put the
entrepreneur in debt. What is more,
business angels cannot give any
guarantee and cannot request for
guarantee of disposition and dividend
from the entrepreneur. It is distinctive
character of business angels in
comparison with banks and financial
institutions.
Furthermore,
invested
qualifying
private venture companies cannot be
controlled by investors individually or
with co-investors.
In addition, business angels can only
participate in the management of the
company as general board, board of
directors and advisory board and
cannot be employed as employee in the
company or receive any salary or fee.
7. Business angels have to apply to
Treasury for investment
With pursuant to the Regulation Article
15-21, business angels should apply to
the Treasury with the necessary papers
to obtain authorization before making
investments. Subsequently, business
angels can invest in a qualifying
venture company. However, please
note that the capital invested in the
private venture company is required to
use within 12 months comply with the
business plan. In order to benefit from
tax reliefs, the required documents
relating to the invested capital such as
bank receipt and a copy of the relative
trade registry gazette
8. Which conditions should be
satisfied to establish a private
venture company?
Business angels have to invest in
qualifying private venture companies
in order to benefit from the tax
advantages.
A qualifying private
venture company:
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-
-
-
It should be a joint stock
company in accordance with
Turkish Commercial Statute,
The number of employees
should not be exceed 50
persons,
It should not be under the
control of another company,
It should not deal with any
illegal business,
Its shares should not have been
presented to public,
Before the investment is made
by the business angels, net sales
-
-
of the company should not be
more than TRY 5,000,000 in
the last two years.
It should carry on in one of the
activities or sectors that are
determined by the Treasury.
It should not be under control
directly or indirectly of the
business angel or his some
relatives in accordance with of
its administration, supervision
or capital.
Erdem/Erdem Law Office Turkey. All Rights Reserved. No part of this bulletin may be reproduced, stored in a retriaval
system, or transmitted in any form or by any mean, without prior written permission of Erdem/Êrdem. This bulletin is not a
legal advice, please consult us for tailored information.
[email protected]