Venezuela recently reformed its exchange control rules such that employees now are able to purchase and hold shares of a foreign company via equity compensation vehicles (such as stock options and ESPPs).

Previously, the exchange control rules prevented the purchase and transfer of foreign currency abroad for any investment purpose, including the acquisition of foreign securities under an employee equity plan.

Under the new rules, individuals and legal entities domiciled in Venezuela can convert local currency into foreign currency for any purpose whatsoever under the “Alternate Currency Exchange System for Foreign Currency” (“SICAD II”), which is supervised, administered and controlled by the Central Bank of Venezuela and the Ministry of the People’s Power for Economic, Finance and State Banking Matters.  The amount of foreign currency that can be purchased apparently is not subject to minimum / maximum amounts and is not limited to any specific purpose.

Despite the relaxation of the rules, employees in Venezuela seeking to purchase shares of its U.S. parent still face some obstacles.  First, the use of inter-company netting for the transfer of funds from a subsidiary in Venezuela for the purchase of shares under a non-Venezuelan issuer's ESPP (or other equity plan) remains impermissible.  Also, although no governmental registrations or approvals are required, the individual or entity converting local currency must open a foreign currency account and make a sworn statement to the local bank stating the purpose of the acquisition of the foreign currency. 

To this end, companies wishing to offer an ESPP in Venezuela should require each participant to sign (in writing) a hard-copy agreement authorizing their employer in Venezuela to open a bank account to acquire the foreign currency necessary to purchase shares under the ESPP.  Such agreement may be included as an appendix to the enrollment form for an ESPP.