Following the completion of an acquisition, the aim of new shareholders – especially private equity investors – is to boost the acquired company's profitable growth in the short term. For this reason, investors often offer the acquired company's key employees' stock option plans in addition to their salaries. A stock option plan is an effective alternative which:

  • aligns the personal interests of key employees with those of the company;
  • incentivises their performance; and
  • results in the company's financial growth.

Stock option plans

A typical stock option plan entitles the employee to:

  • acquire a portion of the company's shares; or
  • receive share proceeds within a set period, provided that certain conditions determined by the stock option plan agreement are achieved, such as annual profit and revenue targets.

If an employee achieves the contractual targets within the period established in the stock option agreement (granting), the employee will be entitled to claim his or her right to acquire shares (vesting) and will accordingly acquire the relevant amount of shares or receive share proceeds (exercising).

The Commercial Code introduced a conditional capital increase method as a stock option scheme. By inserting a call option in the articles of association, a company enables its employees to subscribe to a capital increase and acquire newly issued shares. The articles of association regulate the terms and conditions applicable to this option right. On fulfilment of these conditions, the company increases its capital and grants newly issued shares to its employees. However, the conditional capital increase subscribed to by employees cannot exceed 50% of the company's total share capital.

This type of stock option scheme may have the following downsides for investors:

  • The company must grant this right to all employees and not only chosen key employees. Therefore, after the capital increase, all employees may become company shareholders and the company cannot differentiate between employees based on seniority;
  • The company's shareholding structure may change and employees may enjoy certain shareholding rights, including voting and dividend rights, which may affect the corporate governance structure; and
  • Despite some contractual transfer restrictions, as the legal owners of the shares employees may transfer them to any third party.

In order to prevent these possibilities, investors usually prefer to keep a stock option plan at a contractual level, without granting any shareholding rights to employees. Under such a plan, an employee is entitled to remuneration equivalent to the value of a certain amount of shares as determined in the stock option agreement after completion of a vesting period. Under this mechanism, the employee will not acquire the shares; rather, he or she will be entitled to a bonus payment only. Although this may provide less incentive to employees, it prevents the potential implication of them being shareholders of the company. As a result, investors typically grant stock options to key employees on a contractual basis.


Following an acquisition, investors should carefully choose the stock option method that best suits the shareholders' goals. A well-structured stock option agreement can ultimately benefit the company and its key employees.

For further information on this topic please contact Zeynep Buharali or Riza Yücel at Kolcuoglu Demirkan by telephone (+90 212 355 9900) or email ( or The Kolcuoglu Demirkan website can be accessed at

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.