Authors: Capital Markets Law Department, Att. Mustafa Şahin

Introduction

Interest-free financing methods have, particularly in recent years, gained an increasingly strong foothold in global capital markets. Lease certificates (sukuk), which constitute an alternative to conventional debt instruments and enable the raising of funds through an asset-based structure, have become a strategic financing tool for both the public and private sectors.

This development is driven not only by investors’ growing tendency to avoid interest-based return mechanisms, but also by issuers’ preference for more flexible, transparent, and asset-backed funding opportunities in terms of balance sheet management. Indeed, sukuk structures are widely utilized in international markets not only by participation finance institutions but also by large-scale companies operating across various sectors. Similarly, in Türkiye, sukuk have found an increasingly significant area of application in parallel with the deepening of capital markets and the expansion of the participation finance ecosystem.

The legal infrastructure governing lease certificates under Turkish law is regulated by the Communiqué on Lease Certificates (III-61.1) issued by the Capital Markets Board of Türkiye (“Communiqué”). The Communiqué sets forth in detail the types of lease certificates, the principles governing their issuance, and the establishment and operational regime of asset leasing companies, which constitute the mandatory vehicle of this structure.

The primary objective of the Communiqué is explicitly stated in Article 1 thereof as ensuring market confidence in the issuance of lease certificates and establishing an institutional framework for the protection of investor rights (III-61.1, Article 1).

In this context, lease certificates are regarded not merely as instruments compatible with interest-free finance principles, but also as a regulatory domain that diversifies asset-based funding opportunities and strengthens investor protection within Turkish capital markets.

The Role of Asset Leasing Companies within the Capital Markets Framework

Asset leasing companies (“ALCs”), which lie at the core of the lease certificate structure, are capital markets institutions incorporated exclusively in the form of joint stock companies for the sole purpose of issuing lease certificates, pursuant to Article 61 of the Capital Markets Law (III-61.1, Article 3/1-ö).

The restriction of the ALC’s scope of activity aims to segregate the assets and rights underlying the issuance of lease certificates from the issuer’s other commercial operations and to secure investors’ rights under a special protection regime.

Accordingly, the ALC functions not merely as a technical intermediary in the issuance process, but also as an institutional safeguard mechanism that isolates the underlying asset portfolio and prioritizes investor interests.

The Communiqué explicitly provides that, until redemption of the lease certificates, the assets and rights held within the ALC portfolio may not be disposed of for purposes other than collateralization, may not be pledged, may not be subject to attachment—including for the collection of public receivables—and may not be included in the bankruptcy estate (III-61.1, Article 4/3).

This regulation ensures that the asset portfolio underlying lease certificates is protected independently from the issuer, thereby demonstrating the distinctive security mechanism of sukuk within capital markets.

Restriction on the Incorporation of Asset Leasing Companies through the Concept of the Originator

Another significant dimension of the strategic function of ALCs is that they are not general-purpose joint stock companies that may be freely incorporated by any party. Rather, under the Communiqué, they may only be established by certain qualified institutions.

The Communiqué limits the incorporation of ALCs through the concept of the “originator,” providing that the lease certificate issuance mechanism may only be operated through institutions enumerated therein.

Originators include banks, participation banks, mortgage finance institutions, financial leasing companies, factoring companies, financing companies, intermediary institutions, portfolio management companies, entities authorized to issue mortgage-backed and asset-backed securities, as well as other institutions deemed appropriate by the Capital Markets Board (III-61.1, Article 3/1-h).

This framework ensures that the lease certificate issuance regime remains confined to institutions possessing sufficient corporate capacity and operating under financial supervision, thereby enabling the ALC structure to function within a controllable framework in terms of market confidence and investor protection.

Therefore, this restriction constitutes one of the fundamental pillars ensuring that the lease certificate market develops under institutional discipline.

The Legal Nature of Lease Certificates

Under the Communiqué, a lease certificate is defined as a capital markets instrument issued by an ALC for the purpose of financing any type of asset or right, granting its holders rights proportionate to their shares over the income generated from the underlying asset or right (III-61.1, Article 3).

This definition highlights the essential characteristic distinguishing lease certificates from conventional interest-based debt instruments such as bonds or notes. It reflects an asset-backed financing model in which the investor’s entitlement is linked not to the issuer’s general credit risk but rather to the income stream derived from a specific asset or right.

Accordingly, lease certificates provide a structure compatible with interest-free finance principles while diversifying alternative funding opportunities in capital markets.

Types of Lease Certificates and Structural Flexibility

The Communiqué permits the issuance of lease certificates based on various legal structures and envisages several types, including those based on ownership, management agreements, purchase and sale, partnership, and construction (work) contracts (III-61.1, Article 4/1).

This diversity demonstrates the adaptability of sukuk structures to different financing needs, creating a broad application area ranging from real estate financing to the management of commercial assets, from project-based investments to joint venture models.

In particular, with respect to lease certificates based on management agreements, the Communiqué regulates that issuance is carried out for the purpose of transferring to the ALC the revenues obtained through the management of assets or rights belonging to the originator, and mandates the execution of a management agreement without requiring a transfer of ownership (III-61.1, Article 6).

Issuance Process, CMB Approval, and Dematerialization Mechanism

The issuance of lease certificates is subject to the formal and institutional requirements set forth in the Communiqué. Such issuance may be carried out through public offering or, alternatively, through private placement or sale to qualified investors without a public offering (III-61.1, Article 10/1).

The CMB approval process and the issuance ceiling system occupy a central role. The Communiqué explicitly provides that lease certificates may be sold in tranches within an issuance ceiling to be approved by the Board (III-61.1, Article 10/3). Furthermore, the Communiqué includes provisions regarding the dematerialized issuance of lease certificates and requires that they be monitored through the Central Securities Depository of Türkiye (“MKK”) (III-61.1, Article 17).

This serves as a complementary mechanism ensuring that lease certificates are traded within the transparency and registration order applicable to capital markets instruments.

Valuation and Transparency Obligations

Given that lease certificates are asset-backed financing instruments, accurate valuation of the underlying assets and rights is indispensable.

Accordingly, the Communiqué requires valuation assessments to be conducted for the assets and rights subject to issuance and provides that, in certain types of issuances, the issuance amount may not exceed a specified ratio of the fair value determined in the valuation report (III-61.1, Article 11).

Thus, the determination of issuance amounts disconnected from the value of the underlying assets is prevented, strengthening investor protection.

Board Supervision and Investor Reporting

The Communiqué establishes reporting obligations designed to ensure that investors are adequately informed and explicitly regulates the supervisory authority of the Board (III-61.1, Articles 15 and 18). In this respect, the lease certificate regime sets forth a holistic framework that aims to sustain investor protection not only at the issuance stage but also throughout the post-issuance period.

Conclusion

In conclusion, lease certificates have found an increasingly expanding field of application within Turkish capital markets as an asset-backed financing method compatible with interest-free finance principles and prioritizing investor interests.

The ALC structure lies at the center of this system and constitutes a strategic vehicle ensuring the legal reliability of lease certificates through its exclusive issuance function, portfolio isolation mechanism, dematerialization framework, and investor protection provisions envisaged under the Communiqué.

Accordingly, the lease certificate regime represents a significant regulatory domain contributing both to the deepening of capital markets and to the institutionalization of the participation finance ecosystem in Türkiye.