the concept of business angels under turkish law
Transkript
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 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. erdemanderdem@superonline.com 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 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. erdemanderdem@superonline.com 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: 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. erdemanderdem@superonline.com - - - 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. erdemanderdem@superonline.com