Turkish Renewable Energy Sector – IV


-What is the legal and regulatory framework applicable to distributed renewable energy?

Under the Turkish energy market, renewable energy projects are divided as (i) licensed, and (ii) unlicensed facilities.

Pursuant to the Law No. 6446, it is mandatory that the legal entities which will operate in the energy market must be incorporated either as a joint stock company or a limited liability company.  Furthermore, in order to conduct market activities legal entities are obliged to obtain the relevant licence.

However, renewable energy generation facilities with installed capacity of up to 5 MW and installed mainly for self-consumption purposes are exempt both from obtaining a licence and forming a company.  Along with the main aforementioned electricity legislation, Unlicensed Electricity Generation Regulation shall apply to distributed (unlicensed) renewable energy projects.

-Are there financial or regulatory incentives available to promote investment in distributed renewable energy facilities?

In 2019, fundamental amendments were made to the Unlicensed Electricity Generation Regulation and a monthly settlement mechanism was introduced for distributed renewable energy.

As the core of the unlicensed projects are the self-consumption principle, only the surplus energy is incentivised.

Furthermore, the Unlicensed Electricity Generation Regulation explicitly prohibits merchandising of such electric power to be generated.  Accordingly, any surplus electric power shall be purchased by the appointed supplier company that is to be handled within Renewable Energy Sources Support Mechanism determined under the Law No. 5346.

-What are the main sources of financing for the development of distributed renewable energy facilities?

Distributed energy facilities are generally financed through leasing of the facility components by the investor.  As mentioned, it is explicitly determined that the power generated under the Unlicensed Electricity Generation Regulation cannot be merchandised.  Furthermore, since the generation and the consumption facilities must be connected by the same connection point, the facilities cannot be owned by different persons and the investor has to bear the costs of such facility installation.

-What is the legal and regulatory framework that applies for clean energy certificates/environmental attributes from renewable energy projects?

Parallel to the developments in international markets, the Regulation on Renewable Energy Resource Guarantee Certificate in Electricity Market, issued by EMRA on the same subject, was published in the Official Gazette, dated 14th November 2020.  The Regulation entered into force on 1st June 2021.  It has been stated by EMRA that the guarantee of origin structure was taken as a model in order to facilitate compliance with the system used in the European Union while structuring Turkish renewable energy certificate system, YEK – G.

Currently, power consumers in Turkish market preferring to obtain green energy opt to follow the origin of the energy they bought with International Renewable Energy Certificate – I-REC.

-Are there financial or regulatory incentives or mechanisms in place to promote the purchase of renewable energy by the private sector?

There are no financial or regulatory incentives to promote the purchase of renewable energy by the private sector.  The purchase of green energy is mostly preferred by multinational companies.  Furthermore, the possibility that the EU will apply a carbon border tax leads companies to explore possibilities to procure renewable energy.


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Recent Developments on Crowdfunding in Turkey


 The Communiqué No.III-35/A.1 on Equity Based Crowdfunding (“Communiqué”), prepared by The Capital Markets Board (“CMB”), has been published on the Official Gazette dated 3 October 2019 No.30907.

This article will primarily focus on how the Communiqué regulates crowdfunding of companies and start-ups by investors on equity basis.

What does Crowdfunding mean?

In essence crowdfunding is a method of raising capital in small amounts from a large group of people using the Internet and social media (social platforms).

In line with the above explanation, under Article 3 (z), the Capital Market Law No.6362 (“Law”) also prescribes crowdfunding as raising capital from a large group of people through crowdfunding platforms in order to meet funding needs of a project or startup within the framework of terms and conditions set by the CMB.

How does Crowdfunding work in Turkey?

 Equity based crowdfunding is a strictly regulated matter and is only allowed to be done in compliance with Law and the Communiqué.  The main applicable rule here is to perform such activity only through crowdfunding platforms licensed by the CMB.  Any equity based fund raising activity of start-up companies occurring outside of the regulatory scope shall be invalid and subject to fine.

Article 35/A of the Law defines the crowdfunding platforms and sets the requirements for such establishments.  Companies seeking funds need a licensed platform in order raise funding from investors.  In other words, all activity shall be performed on a platform where all stages of the process (fundraising campaign) will be transparent and open to public knowledge.

According to the Law, crowdfunding platforms are intermediary institutions that operate online.  As mentioned, crowdfunding platforms are required to obtain operation license from CMB in order to start their activity.  Furthermore, the relevant article sets out some details for platform companies such as how their shareholding structure should be, what the requirements for their share transfer are needed, and moreover what the maximum fundraising limit of start-ups should be.

The Communiqué on the other hand provides detailed information regarding legal requirements for the platforms and procedures for running a crowdfunding campaign.

Requirements for Crowdfunding Platforms

 The Communiqué prescribes the conditions for companies that seek to perform as a crowdfunding platform and accordingly platforms must comply with the following requirements.

 According to the Article 5 of the Communiqué, platforms must apply to the CMB in order to obtain a license and to be accepted to the list of platforms to be published by CMB.  Some of the essential conditions that companies must carry in order to be enlisted as a crowdfunding platform are:

  • to be established as a joint stock company;
  • to have a paid in share capital minimum of 1,000,000 Turkish Liras;
  • to include “crowdfunding platform” in its trade name;
  • to undertake the commitment to operate solely within the scope of crowdfunding activities in its articles of association;
  • to have a board of directors consisting of at least three members.

The Communiqué lists also further requirements for founders and board members of platform companies. For instance founders and board members of a platform cannot be (i) bankrupt; (ii) convicted of any crimes listed in the relevant article i.e. embezzlement, bribery, extortion; (iii) involved in any activities / incidents that may lead or had led to cancellation of the license of an incorporation subject to CMB regulation.

In case of losing one of the above mentioned features, the crowdfunding platform must report such lack to the CMB within two days following occurrence of the incident.  If the relevant non-compliance is not to be cured within the given time period then the platform company shall be delisted by the CMB.

What activities do Crowdfunding platforms conduct?

 According to Article 11 of the Communiqué crowdfunding platforms are solely allowed to act within the scope of crowdfunding activity.  Moreover, the same article suggests that platforms are also allowed to provide consultancy service to start-up companies and to entrepreneurs as intermediary services.  Agreement to be executed between the start-up companies and crowdfunding platforms must be executed in written and in form provided in the Annex 2 of the Communiqué.

Platforms are expected and obliged to set up a web page that is to be dedicated to each start-up company or project seeking funds during and after their fund raising campaign for the following five years.  The website shall serve as an informative platform in relation to companies’ announcements and operations.  According to the Communiqué, information form on the fund raising campaign as approved by the investment committee and any other information that may affect investors’ decision must be disclosed to investors on the relevant web page during and following the fund raising process.

Every start-up company that needs to raise fund through crowdfunding must apply to these platforms.  Applications to run such campaign must be approved by the investment committee of the crowdfunding platform.  In case of rejection, the start-up company must be informed of the disapproval reason.

Information such as the fund amount targeted and collected at each fundraising campaign, investors’ number and remaining fundraising process must be disclosed on daily basis by the platform.  Fundraising results must be announced to the public on the next day following the end of each campaign even if the outcome of the fundraising process is not successful.

What activities Crowdfunding platforms cannot perform?

 Subject to article 12 of the Communiqué, platforms are not allowed to act as an intermediary for activities involving loan or borrowing money and not allowed to conduct fundraising activities through any other capital market instruments but equity based.

It is not allowed to provide fundraising service to start-ups located abroad which are seeking funds from Turkish investors.

Moreover, platforms are prohibited from providing investment consultancy both to companies and to investors that intend to engage with crowdfunding activity.  Founders, board members and members of the investment committee of the platform are not allowed to provide investment to start-up companies and to projects running fundraising campaign.

How does Crowdfunding Process work?

 In order to raise funds through crowdfunding, as a prerequisite, start-up companies must firstly apply to licensed platforms in order to become a member to act as intermediary platforms to operate funding flow between start-ups and investors.

There is maximum limit amount for a real person investor for equity based crowdfunding activity. Real person investors who are not deemed as qualified investors cannot invest more than 20,000 TL in a year on platforms as crowdfunding activity.  Scope and definition of qualified funders are to be determined by the CMB.

Start-up companies must already be established in advance of seeking funds through equity based crowdfunding method.  Otherwise funds shall not be transferred to the respective company.  Funds can only be raised by way of capital increase and can only be transferred to the company in the form of equity that are to be subscribed by capital increase.  No funds can be raised by sale of existing company shares.  Shares that are issued by way of capital increase may be non-voting shares.  Equity based funds must be paid all in cash and if investors are to be granted any shareholding right or privilege these must be indicated explicitly in the information form.

Start-up companies or entrepreneurs are allowed to raise fund by crowdfunding maximum twice a year.  Should fund need exceeds 1,000,000 Turkish Liras, at least 10% of such amount has to be paid by qualified investors during fundraising campaign.

Fundraising activity (campaign) starts once the information form (upon its approval by the investment committee) is published on the respective website dedicated for the relevant start-up that needs funding.  Start-up companies are not allowed to start a second fundraising campaign before completing the first process. Investors who wish to provide funding to the respective start-up must be apply to crowdfunding platforms.  Platforms transfer investors’ funding request to the Central Registry Agency (CRA) at the end of each day during the time of campaign. Money collected from investors are escrowed by the CRA in a blocked account to be opened in the name of the start-up company and CRA is the sole authority to transfer the accrued funds to the start-up company that needs funding.

Once an investor decides to provide funding, investors must make the proposed payment upon receiving payment order.  Investors may use their right of withdrawal with no excuse within 48 hours following the receipt of such payment order by informing the crowdfunding platform.

If fund amount exceeds funding need of the start-up company, the exceeding amount shall be delivered among investors by considering equality principle.  Companies must have a capital increase corresponding to the amount raised during the course of campaign latest within 30 days upon completion of the fundraising campaign.  CRA is responsible to register the equities subscribed following the capital increase and these are to be transferred to investors’ accounts at the end of the whole process.

 Where the Funding can be used by Start-ups?

Start-ups companies must issue a report on where the fund will be used and this report must be published on the respective website during the course of fundraising campaign.  Companies are not allowed to use the funding on real estate related transactions such as purchase of real estate projects or real estate project financing.  An independent audit company is responsible for controlling whether the company uses its funding in accordance with the allowed purpose of use as indicated on the report issued for this purpose.

Requirements for Start-up Companies

Start-ups that are seeking equity based funding must

  • engage with technology and/or production activities,
  • be established within last two years as of the publication of information form
  • have a website that is examined and maintained regularly.

Companies that are listed below are not allowed to engage with equity based fundraising activity:

  • publicly held corporations,
  • companies which are controlled by another legal entity,
  • companies where publicly held companies and capital market institutions are shareholders with minimum of %50.1 shares.

Furthermore, in case of circumstances such as (i) if a legal action is taken against the start-up company, (ii) if any of the dissolution reasons stated in the articles of association occur for the start-up company, (iii) if a dissolution decision is taken by the General Assembly of the start-up company, (iv) if the start-up company applies for bankruptcy or (v) management of the start-up company changes, then a public disclosure must be made for each.


Commercial Arbitration in Turkey


Commercial arbitration, as an alternative dispute resolution method, is a means of settling commercial disputes by referring them to a neutral person, an arbitration tribunal which might consist of a single arbitrator or several arbitrators.  The parties agree in advance that the decision or award will be accepted as final and binding.

In Turkey, the modern legal framework for commercial arbitration was laid down when the Law on International Arbitration number 4686 (the “Turkish Law on International Arbitration”) was enacted in 2001.  The Turkish Law on International Arbitration is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, also known as the UNCITRAL Model Law.  Moreover, Turkey is a contracting party to the 1958 New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), the European Convention on International Commercial Arbitration and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”).  Another Turkish law which governs commercial arbitration in Turkey is the Civil Procedure Law number 6100 (the “Turkish Civil Procedure Law”) that is also based on the UNCITRAL Model Law.  Several other Turkish laws which contain provisions pertaining to arbitration exist.

Benefits of Commercial Arbitration:

Arbitration can offer several advantages as an alternative to litigation:

  • Flexibility – The form and type of arbitration can be tailored to suit the parties.
  • Speed – The process can be started and resolved quickly, without waiting for court dates. Discoveries and preliminary processes are kept to a minimum.
  • Efficiency – Although the parties must pay the costs of the arbitration, it is often more efficient than litigation in the courts.
  • Confidentiality – With few exceptions, proceedings take place in private and awards are not published without the consent of the parties.
  • Voluntary – Arbitration takes place only by the parties’ mutual consent.  This consent may be given when the parties enter a contract, or later when the dispute arises.
  • Final – The arbitrator’s decision is final and binding, and court appeals are rare.

Types of Arbitration:

Institutional Arbitration:

An institutional arbitration is one where a specialized institution is appointed and takes on the role of administering the arbitration process and case management.  In institutional arbitration, the arbitrators follow the arbitration rules and procedures of that particular arbitration institution when carrying out the arbitration process.  Each institution has its own set of rules which provides a framework (such as timelines


for the filing of documents or procedures for making applications etc.) for the arbitration and its own form of administration to assist in the process.

Common international arbitration institutions include the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the American Arbitration Association, the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) and the International Centre for Settlement of Investment Disputes (ICSID).

The most prominent Turkish arbitration institutions are the Istanbul Arbitration Centre (İSTAC), the Istanbul Chamber of Commerce Arbitration and Mediation Center (İTOTAM) and the arbitration institution of the Union of Chambers and Commodity Exchanges of Turkey (TOBB).

Ad Hoc Arbitration:

In the case of ad hoc (or non-institutional) arbitration, the rules and procedures that are to be followed in an arbitration process are not determined by an arbitration institution, but by the parties themselves.  Ad hoc arbitration means that the arbitration should not be conducted according to the rules of an arbitral institution.  Since, parties do not have an obligation to submit their arbitration to the rules of an arbitral institution; they are free to state their own rules of procedure.

Domestic Arbitration:

In a Turkish context, domestic (or national) arbitration is an arbitration process where all the parties to an arbitration process are Turkish nationals and the place/seat of arbitration is in Turkey, i.e. arbitration processes which do not contain a so-called “foreign element” are deemed as domestic arbitration processes.  In Turkey, domestic arbitration is usually carried out in accordance with the Turkish Civil Procedure Law.

Pursuant to Article 407 of the Turkish Civil Procedure Law, the provisions of the arbitration section (Articles 407 – 444) of the Turkish Civil Procedure Law are applicable to legal disputes which do not contain a “foreign element” as defined in the Turkish Law on International Arbitration and where the specified seat of arbitration is located in Turkey.

International Arbitration:

Again in a Turkish context, international arbitration is an arbitration process which contains a “foreign element”, as defined by Turkish law and where the seat of arbitration is located in Turkey.  In Turkey, international arbitration is governed by the Turkish Law on International Arbitration

According to Article 1 of the Turkish Law on International Arbitration, “[t]his Law shall be applicable where a dispute has a foreign element and the place of arbitration is determined to be in Turkey or where this Law is chosen as the governing law [of arbitration] by arbitrating parties or their sole arbitrator or arbitral tribunal.

Article 2 of the Turkish Law on International Arbitration defines the term “foreign element” as follows:

The existence of any of the following circumstances demonstrates that the dispute has a foreign element and, under such circumstances, arbitration is considered as international:

  1. where the parties to the arbitration agreement have their domiciles or habitual residences or places of business in different States;
  2. where one of the following is situated outside the State in which the parties have their domiciles or habitual residences or places of business;
  3. the place of arbitration, which is determined in, or pursuant to, the arbitration agreement; [or]
  4. a place where a substantial part of the obligations arising from the underlying contract is performed or a place where the dispute has the closest connection;
  5. where a shareholder of the company which is a party to the underlying contract that constitutes the basis for the arbitration agreement has brought foreign capital [into Turkey] in accordance with the laws concerning the encouragement of foreign capital or where a loan and/or guarantee agreement needs to be signed for the execution of the underlying contract;
  6. where, in accordance with the underlying contract or with the underlying legal relationship, the movement of capital or of goods shall be made from one country to another.

Legal Disputes Which Cannot Be Arbitrated:

Pursuant to Article 408 of the Turkish Civil Procedure Law, disputes which arise from real rights (rights in rem) pertaining to immovables (immovable property, i.e. real estate) or which arise from matters/affairs/businesses that are not at the parties’ disposal cannot be subject to arbitration.

Article 1 of the Turkish Law on International Arbitration defines the same subject in a very similar manner and states that the Turkish Law on International Arbitration “shall not be applicable to disputes related to real rights concerning immovables and to disputes that are not within the parties’ disposal.[1]

Arbitration Agreement/Clause:

An arbitration agreement is a written contract in which two or more parties agree to settle a dispute outside of court and by means of arbitration.  The arbitration agreement is ordinarily a clause in a larger contract, in which case, it is referred to as an arbitration clause.

An arbitration agreement or clause must be in written form.  Both the Turkish Civil Procedure Law in (Article 412) and the Turkish Law on International Arbitration (in Article 4) specify that an arbitration agreement or clause must always be in writing.  A written arbitration agreement or clause is a legal requirement for the validity of such arbitration clause/agreement.

Recognition Enforcement of Foreign Arbitral Awards in Turkey:

In Turkey, the recognition and enforcement of foreign arbitral awards is subject to the relevant provisions of the Act on International Private Law and Procedure Law number 5718 (the “MÖHUK”) (Article 1 and Articles 60 – 63) and to the New York Convention.  Moreover, Turkey has also signed various bilateral and multilateral agreements pertaining to the recognition and enforcement of foreign arbitral awards.

As a rule of thumb, in Turkish legal practice, the recognition and enforcement of a foreign arbitral award shall be carried out in accordance with the New York Convention if the country where the relevant arbitral award originates from has ratified the New York Convention.  However, if the country where the relevant arbitral award originates from has not ratified the New York Convention, the recognition and enforcement of a foreign arbitral award in Turkey should be carried out in accordance with the MÖHUK.

In both cases, the recognition and enforcement of a foreign arbitral award in Turkey requires a ruling by the Turkish court with jurisdiction in the relevant matter.

[1] Legal proceedings which require a ruling by a state court, such as criminal proceedings or divorce proceedings or bankruptcy proceedings can be named as examples of matters that are not subject to the parties’ disposal.




Under Turkish Commercial Code (“TCC”) the liability of shareholders of a joint stock company is limited with the payment of the contributed share capital (“single dept principle – tek borç ilkesi”). According to this principle, Save for exceptions stipulated under the TCC, no obligation shall be conferred upon the shareholders by the articles of association, other than the premium exceeding the share price or nominal value of the shares. (TCC 480). The payment obligation of the shareholder is to the company (TCC 329).

A shareholder, who does not pay the contributed share capital in due time will be in default without needing to serve a notification to that end (TCC 482).

In the event that a shareholder is in default in paying its share capital the company is entitled to initiate (i) enforcement proceedings for the payment, or (ii) expulsion procedures against the defaulting shareholder.

This brief note will only analyse expulsion of shareholders in general terms.

Requesting the Outstanding Share Capital

Who is entitled to request the payment?

In the event a shareholder of a joint stock company is in default for paying its share capital, the board of directors of the company is entitled to deprive this shareholder of its rights arising out of its partial payment and expel the shareholder from the company (TCC 482). The board of directors’ decisions regarding expulsion of a shareholder are subject to TCC 390 with regards to quorum.

How to request the payment?

In order to request the payment, the board of directors must issue a notification, addressed to the defaulting shareholder, for the payment. This notification has to be published in Trade Registry Gazette in accordance with Article 35 of TCC.

The content of the notification is also determined under TCC. Accordingly, the board of directors must notify the defaulting shareholder that the payment must be made within a month and inform the consequences of the non-payment.

Consequences of non-payment of the share capital despite notification?

If the defaulting shareholder insist on not paying the share capital within the notified one month, the board of directors deprives of the shareholder’s right arising out of its partial payment and the defaulting shareholder can be expelled from the company in accordance with the decision of board of directors (TCC 390).

The board of directors should find a potential acquirer for transferring the shares of the defaulting shareholder. The shares of the defaulting shareholder will not be transferred to any other shareholder or the company automatically.

Legal Consequences of Expulsion

Upon expulsion the defaulting shareholder will lose its shareholder title for the shares for which he is in default. The board of directors cannot deprive of the shareholders rights for the shares which the shareholder has already paid its contribution amount. The shareholder title of the defaulting shareholder continues for these shares.

Statute of Limitation for Due Share Capital Payments

The Court of Appeal has different decisions regarding statute of limitation on payment of share capital. However in its latest decision the Court ruled that share capital contribution shall not be subject to any statute of limitation unless the company still exists. On the other hand, the interests and secondary payments arising out of the non-payment of the contributed share capital are subject to general statute of limitation terms.

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