To boost morale and performance, multinational companies often offer eligible employees the option to purchase common stock shares at a discounted price. Unfortunately, the legal position of such an offer and sale of foreign securities to employees in Turkey is far from clear.
Conflicting regulations are the main source of this ambiguity. Under the relevant communiqué of the Capital Market Board (CMB), any foreign capital market instrument that is traded in the country where it is issued should be registered with the CMB - a lengthy and burdensome process - if allocated for purchase by certain persons in Turkey. The number of eligible employees is of no significance, and there are no exemptions.
However, pursuant to a Council of Minister's Decree, Turkish residents may freely purchase and sell securities trading in foreign stock exchanges through banks, financial institutions and brokerage houses without being subject to registration. Some argue that employee offerings could be implemented in Turkey pursuant to this decree instead of the CMB communiqué, and a registration of the shares would not be necessary since they would never be traded in Turkey. However, the CMB does not interpret the provisions of this decree to cover the employee offerings.
The solution is for the CMB to introduce new legislation under which certain employee offerings would qualify as a private placement exempt from registration. Although CMB officials have long ignored this issue, they now seem to be inclined to resolve it. In the meantime, although multinational firms may be discouraged when trying to place their global employee stock offerings in Turkey, several have gone forward without a CMB registration.
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