The Communiqué on Material Events (II-15.1) (“Communiqué”) introduced by the Capital Markets Board of Turkey and entered in to force on January 23, 2014 (“CMB”) sets out certain procedures and principles for companies which fall under the scope of the said Communiqué as issuer of the capital markets instruments (i.e. “issuers”).

The Communiqué mainly regulates disclosure of material information, events and developments which may affect the value of their capital market instruments or investment decisions of the investors, and the Communiqué aims to provide a reliable, transparent, efficient, fair and competitive capital market to investors. For the same purpose the Communiqué regulates specific rules with regards to the forward looking statements of the issuers.

This article is focused on how the forward looking statements should be processed by issuers as per the Communiqué.

I. What is a “Forward Looking Statement”?

Article 4/1(d) of the Communiqué describes “forward looking statements” as statements, including future plans and projections that are in the nature of insider information or assessments that provide an idea to investors with regard to the future activities, financial position and performance of the issuer.

In addition to the Communiqué, the Material Events Guideline (“Guideline”) published by the CMB shows the way for the issuers and provides detailed information on specific procedures and principles with regard to the forward looking statements.

In a nutshell, as per the Guideline, a forward looking statement may have the characteristics of evaluations, projections, predictions, assumptions, plans, expectations, intentions, targets and/or strategies. The foregoing is not provided in numerus clausus (limited in number) basis.

In terms of the Guideline, the forward looking statements should also comply with the three principles listed below:

- Forward looking statements should be prepared by taking into account the economic, financial and legal position of the issuer.

- If a forward looking statement includes numerical data, its calculation method should be explained.

- Explanations regarding general and ordinary advertisement and marketing activities are not considered as forward looking statements. Therefore, an issuer should not make any forward looking statement related to its ordinary advertisement and marketing activities.

II. How to Process Forward Looking Statements?

The Communiqué obliges issuers to set forth a method to handle and disclose a forward looking statement under its information policy that is also publicly announced.

The Communiqué stipulates that the issuers are not required to disclose forward looking statements and that it is optional. Nevertheless, if an issuer intentionally decides to disclose a forward looking statement to the public, it will be subject to five principles as listed below:

- A forward looking statement may be disclosed to the public provided that there is a board of directors’ resolution or written approval of any other individual authorized by the board of directors on this matter.

- An issuer may disclose forward looking statements four (4) times within a year at most. Such statements can be made in the form of material event disclosure, through the activity reports of the company or by a presentation to investors.

- In the event that any material change occurs with regard to a forward looking statement previously disclosed, the relevant forward looking statement should be updated accordingly and the updated version should be duly disclosed to the public in each case.

- If there are major differences between the forward looking statements, formerly disclosed matters and the realized events, the reasons behind such differences should also be disclosed to the public.

- If an issuer prefers to disclose any forward looking statement through a press release, other communication tools or in any public meeting, it is also liable to make a disclosure on the matter via the Public Disclosure Platform (“KAP”).

III. Conclusion

It could be said that the CMB has granted flexibility to the issuers in terms of disclosure of the forward looking evaluations, predictions, assumptions, plans, and targets etc., collectively the forward looking statements. In this regard, an issuer may opt to keep such information confidential rather than making it publicly available. However, if the issuer wishes to disclose forward looking statements, then it must comply with the relevant rules of the Communiqué and the Guideline.

As per the records of KAP, there were only 67 forward looking statements made by public companies during the year of 2018. Given that there are approximately 515 public companies whose shares are traded in Borsa Istanbul, it could be also concluded that public companies usually and intentionally do not make forward looking statements since such statements are optional and the Communiqué imposes further rules and requirements if the statement is made even once.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in September 2019. A link to the full Legal Insight Quarterly may be found here

Authors: Gönenç Gürkaynak, Esq., Damla Doğancalı and Selen Sakar