1) PREVIEW
The Official Gazette published on June 4, 2026, has paved the way for companies holding the Teknogirişim badge issued by the Ministry of Industry and Technology to execute conditional capital increases through “convertible debt instruments” (SAFE and convertible notes), without being subject to the Turkish Commercial Code’s (TCC) standard conditional capital increase provisions.
This revolutionary decision gradually transfers these instruments, which hold a critical place in US law, into the Turkish legal landscape. For years, the mismatch between how these instruments work in practice under US law and what Turkish corporate law allowed has caused delays and friction in early-stage venture capital deals.
Not yet finalized, this framework is a promising starting point rather than a complete solution, serving as a clear indicator of Türkiye’s commitment to advancing its startup ecosystem. In fact, this regulation functions merely as an enabling preliminary framework. The Ministry of Industry and Technology, in consultation with the Ministry of Trade, will determine the detailed procedures and principles to establish the final framework.
2) WHAT ARE THE SAFE AND CONVERTIBABLE NOTE?
In its simplest terms, a Convertible Note is a type of debt instrument issued by companies. This instrument is an easy way for seed investors to invest in a startup that is not yet ready for a formal valuation. It is initially structured as a short-term debt instrument and is later converted into equity in the issuing company through a capital increase. Investors loan money to the startup and, instead of receiving principal and interest back in cash, they hold an option to be repaid in company equity. Generally, a trigger is set to activate upon reaching a specific milestone, at which point the convertible bond is automatically converted into equity. Thus, through a Convertible Note, an investor finances a startup under specific repayment and conversion conditions.
Like a Convertible Note, a SAFE (Simple Agreement for Future Equity) is a financing instrument used by startups or early-stage companies to raise capital from investors. While it shares similarities with a Convertible Note, which is a form of debt that converts into equity at a future date, a SAFE is typically simpler and less expensive to execute.
The primary purpose of a SAFE is to allow an early-stage company to raise capital without having to go through a full equity round. This can be particularly beneficial for companies that are not yet ready for formal equity financing, or for those looking to raise relatively small amounts of capital quickly and efficiently. Indeed, SAFEs are frequently used in practice as a bridge round between major investment rounds.
Furthermore, a SAFE offers flexibility to both the company and the investor. It allows companies to raise capital without establishing a specific pre-money valuation or immediate dilution, which is highly advantageous when valuations are uncertain, especially in the early stages. For the investor, it provides an opportunity to invest in a company at an early stage, offering higher return potential if the company's valuation increases significantly over time.
3) HOW WERE SAFES AND CONVERTIBLE NOTES REGULATED UNDER TURKISH LAW BEFORE THE AMENDMENT OF JUNE 4, 2026?
Under Turkish corporate law, it is not possible to implement a classic SAFE or Convertible Note as outlined above. However, under the principle of freedom of contract, parties can execute atypical (innominate) contracts that reflect an intent similar to these instruments. Subject to certain critical conditions, an amendment was made to the Circular on Capital Movements on May 11, 2020, laying the groundwork for the concept of 'convertible debt' in Türkiye.
Separately, although it has been suggested that the 'Conditional Capital Increase' method regulated under Articles 463 to 472 of the Turkish Commercial Code (TCC) could serve as a basis for SAFE or Convertible Note agreements, the current wording of TCC Article 463/1 strictly limits conditional capital increases. It restricts this mechanism to creditors of the company or its group companies, or to employees, who acquire new shares by exercising conversion or option rights granted due to newly issued bonds or similar debt instruments. Consequently, utilizing this mechanism still requires the issuance of a security, preventing the direct implementation of the self-executing, automatic conversion features of SAFEs and Convertible Notes in Türkiye.
As a result, when drafting a SAFE, or Convertible Note like contract in Türkiye, the structuring of the contracting parties must differ from their counterparts in the US.
4) WHAT CHANGED WITH THE AMENDMENT OF JUNE 4, 2026?
1. Scope of the New Regulation
Article 11 of the Official Gazette introduces a highly specific yet structurally significant regulation. For a designated target audience, namely non-public companies holding the Teknogirişim Badge, the article deactivates the standard conditional capital increase regime of the Turkish Commercial Code (TCC) for convertible debt processes. Instead, it delegates the design of a distinct, and presumably lighter, procedure to the Ministry of Industry and Technology.
The primary eligibility filter here is the Teknogirişim Badge itself. This badge is granted for a three-year period to technology companies established in Türkiye that are independent, hold SME status, and are no more than 15 years old. Consequently, this exemption is not open to every company; it is strictly limited by a specific eligibility criterion. This shift means that the badge is no longer just an identity marker, but has effectively transformed into a strategic financing asset, significantly increasing its importance.
2. The Current Lacuna and the Need for Secondary Regulation
While this innovation is highly promising, it has not yet fully permeated active practice. For now, it serves merely as an announcement heralding that further regulation is on the way and that the path for startup ecosystems in Türkiye will be cleared even further.
Thus, while the framework is gradually being drafted, a practical lacuna (regulatory gap) remains until the Ministry of Industry and Technology issues the detailed "procedures and principles." Currently, the standard TCC regime no longer applies to SAFEs and Convertible Notes, yet the distinct, specialized regime has not yet been established. Because of this, the true essence and success of the reform still lie within the upcoming secondary legislation. Until then, SAFEs and Convertible Notes will continue to be structured using previous market practices.
3. The Shadow of Criminal Law: The Risk of Usury
On the flip side, close attention must be paid to the criminal law implications of this matter. A corporate law exemption that removes formal requirements does not, on its own, eliminate criminal law risks. For this reform to be genuinely usable in practice, the secondary regulation must do far more than merely outline a registration procedure: it must draw a clear, secure line so that founders and boards of directors using a compliant convertible instrument are not left exposed under criminal law provisions. Until this boundary is clarified, prudent legal advisors will continue to approach these instruments with utmost caution.
The sharpest manifestation of this risk is the prohibition against usury (lending money for profit) under Article 241 of the Turkish Criminal Code (TCC m. 241). Until they convert into shares, convertible instruments are legally considered debt; meaning the investor is not yet a shareholder, but a creditor. While the legal standing of an existing shareholder funnelling resources into their own company is inherently different, a third-party investor who has not yet become a shareholder providing money in exchange for interest may formally appear to be "lending money with interest for profit", which is precisely the conduct the crime of usury aims to penalize.
In conclusion; any convertible debt regime to be designed for Türkiye must definitively eliminate this risk. This can only be achieved by placing the instrument on an equity (share) track from the very outset, by structuring the interest and conversion mechanics accordingly, or by introducing an explicit statutory exemption. This risk is by no means a theoretical concern; it is one of the very first questions any diligent advisor well-versed in the Turkish market will bring to the table.
5) CONCLUSION
This transformation and innovation have once again demonstrated that implementing financing instruments like the Convertible Note and SAFE, which are products of foreign legal systems and highly beneficial for both investors and tech startups, involves highly technical and intricate legal nuances in Türkiye. Agreements drafted without considering the place of these instruments in US law, as well as the varying statutory provisions governing the matter under Turkish law, can trigger potential disputes between the investor and the tech startup, or between the startup and its current or future shareholders. Such disputes could ultimately lead to irreparable damages for the technology company. Therefore, obtaining support from legal professionals who are well-versed in both legal systems is of paramount importance for both investors and companies. At Igniters Tech Law we have helped thousands of tech entrepreneurs navigate such challenges. We are pleased to offer the expertise of Igniters Tech Law to assist you with this matter or any other legal needs your company may have.
The amendment dated June 4, 2026, may well incentivize us to secure the Teknogirişim Badge, and our attention will naturally remain fixed on the upcoming secondary regulations promised to shape the future of this new framework.