An Assessment of the Provisions on Venture Companies under Turkish Individual Participation Capital Legislation from the Perspective of the Turkish Commercial Code

Angel investment, or individual participation capital as it is called in Turkish legislation, is one of the alternative financing methods that plays an important role in meeting the financing needs of early-stage ventures. In Turkish law, the matter is regulated with a focus on granting support to angel investors in the form of a tax deduction in return for their investments in venture companies. For this reason, Turkish doctrine has mostly examined the subject within the field of tax law. However, a closer look at the legislation shows that, for the investor to benefit from such support, the venture company invested in must have certain corporate qualifications and characteristics. Therefore, individual participation capital legislation should be regarded not only as an incentive regime, but also as a set of provisions to be complied with in terms of the corporate order of the venture company, its capital structure, the relations of shareholders among themselves and with the company, and its management organisation. This study aims to examine the conditions prescribed in individual participation capital legislation with respect to venture companies from the perspective of the Turkish Commercial Code. Within this framework, it first evaluates the characteristics that a venture company must have as a joint-stock company, its scope of business, size, not being publicly held, independence, time elapsed since incorporation, privileges and veto rights. It then discusses the obligations that are expressly regulated or arise as a factual requirement for benefiting from the tax incentives, such as making the investment as cash capital, the type of capital increase, issuing shares with a premium, and holding the shares.