Turkey: Public Disclosure Requirement Of Public Joint Stock Companies

Public Joint Stock Companies (the ''PJSCs'') are essentially obliged to disclose information that may affect the investors' investment decisions as per the public disclosure principle. Article 14 and Article 15 of Capital Markets Law numbered 6362 regulate the principles regarding public disclosure. The purpose of this regulation is to protect current shareholders, creditors and potential shareholders or bondholders of PSJCs from deceptive and fraudulent activities as well as to ensure the markets operate in a secure and transparent way. Another important aspect is that investors who aren't institutional or qualified investors should access the information in a timely fashion in order for the market to operate fairly and thus PSJCs are required to provide information which aren't easily accessible to such investors in a way that is accurate, timely, and easily understandable.

In addition to the above-mentioned articles of the Capital Markets Law, the public disclosure requirement of PSJCs is determined under the sub-regulations of the Capital Markets Board (the ''Board'') in a more detailed way. The 'Communiqué on Material Events (II-15.1) (the "Communiqué") and the Guideline on the Procedures and Principles with respect to Disclosure of Material Events (the "Guideline"), both of which are published by the Board, are the sub-regulations that PSCJs should take into consideration while disclosing material events.

Which information is disclosed to the public?

According to the Communiqué the information that triggers the public disclosure requirement is defined as "insider information'" and "continuous information'". In the Communiqué, while information, events and developments which might affect the value and price of capital market instruments or the investors' investment decisions are defined as "insider information", any other information that is fallen out of the scope of insider information definition but required to be disclosed to the public is defined as "continuous information''. Changes in the capital structure and management control of PJSCs (e.g., exceeding or falling below the shareholding thresholds set forth by the Communiqué), general information about the PJSC (e.g., the company's headquarters, capital, free float ratio, subsidiaries, financial fixed assets, financial investments, field of activity), and information related to the general assembly (e.g., the agenda, date and time of the general assembly meeting, voting rights, profit distribution decisions, board resolutions regarding new share issuances) fall under the scope of continuous information.

The Guideline explains the events and developments that PJSCs are obliged to disclose to the public within the framework of insider information and continuous information. The examples provided under the Guideline are not listed in a limited manner (i.e., numerus clausus), but these are considered important to give guidance and recommendation to the PSJCs for their consideration. In this respect, regardless of the examples provided under the Guideline or the issues arisen other than the examples under the Guideline, PJSC should make its own assessment as to whether the information in question has an impact on the value and price of the capital market instrument or the investor's investment decisions and decide on making the public disclosure accordingly.

According to Guideline, information, events, and developments which are classified as insider information should carry the following characteristics:

(i) It should be related to an actual event.

(ii) It should be considered important for a rational investor when making an investment decision.

(iii) It should not be publicly disclosed yet.

(iv) It should cause an advantage position to the person who possesses that information compared to other investors who are unaware of such information.

(v) It should have the potential to affect the value and price of the relevant capital market instrument or the investors' investment decisions in the event of disclosure to the public.

On the other hand, the Board has granted an important exception to the PJSCs regarding the disclosure requirement of insider information. If the insider information would potentially harm the interests of the PJSC or mislead the public, the board of directors of the relevant PJSC may decide to postpone disclosing such insider information via a board decision in order to protect the confidentiality of such information. If the PJSC decides to postpone disclosing such an insider information, it should take necessary measures to protect the confidentiality of the insider information during the postponement period. It is mandatory for the PJSC to make a public disclosure about the insider information that is postponed once the relevant interest causing the postponement no longer exists and the further disclosure should include an explanation as to why the board of PJSC take a postponement decision in the first place.

Who has access to insider information?

PJSCs are obliged to notify the Central Registry Agency with a list of individuals who have regular access to the insider information. These individuals are defined under the Communiqué as those who are employed by the PJSC with an employment contract or another capacity and have administrative responsibility towards the PJSC (such as members of the PJSC's board of directors or individuals who directly or indirectly access the PJSC's insider information and have decision-making authority). With this, it is aimed to ensure that the capital market operates in a reliable environment by tracking and recording who has access to insider information.

When is public disclosure made?

The timing of the public disclosure requirements of PJSCs should be taken into consideration as per "continuous public disclosure" and "immediate public disclosure". PJSCs should regularly disclose their annual and quarterly financial statements and independent audit reports and other similar reports to the public within the scope of continuous public disclosure obligation. The requirement of immediate public disclosure is the obligation of PJSCs to simultaneously disclose the information and developments considered as insider information.

As a principle, unless otherwise specified, any material events or changes in such material events should be immediately disclosed to the public as soon as they arise or become known. Material event disclosures regarding the capital structure and management control that fall within the scope of the PJSC's continuous information should be made available to the public by 09:00 on the third business day following such material event at the latest.

How and by whom is the public disclosure made?

Public disclosures should essentially be made by PJSC. However, if the insider information is become known without the knowledge of the PJSC by a person(s) who directly or indirectly owns 10% or more of the total voting rights or 10% or more of the capital of the company or regardless of the such percentage, 10% or more of the privileged shares that give the right to elect or nominate board members, the relevant person(s) should disclose the insider information to the public.

Furthermore, in the event that a real person's or legal entity's direct shareholding in a PJSC reaches or falls below 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95%, the required disclosure is made by the Central Registry Agency in lieu of the relevant persons. "Public disclosure" is made electronically through the Public Disclosure Platform. Disclosing such information on the company's website or through a press release is not considered as a "public disclosure" within the scope of the regulation.

Apart from insider information and continuous information, which other types of information are disclosed to the public?

Confirmation of news or rumours: Apart from the information disclosed by the PJSC to the public, in case a news or rumor is spread to the public which might affect the value, price, or investment decisions of capital market instruments, the PJSC is obliged to make a clear public statement regarding the accuracy or adequacy of such information.

Future Projections: As a principle, PJSCs are not obliged to disclose their future projections (plans and forecasts that constitute insider information about the future or projections about the future activities, financial position and performance of the company). However, if the PJSC wishes to disclose its future projections to the public, it may do so in accordance with the principles set forth in the Communiqué.

Transactions of persons with administrative responsibility: Transactions of individuals with administrative responsibilities (PJSC board members, individuals who have direct or indirect access to PJSC's insider information and have authority in making administrative decisions), as well as transactions of persons closely related to these individuals (e.g., spouse, children), and transactions of PJSC's parent company, transactions related to shares and share-backed capital market instruments of the PJSC, shall be disclosed to the public by the relevant party executing the transaction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.