The flip-up closes, the Delaware topco exists, the SAFEs are signed, and then someone asks the question that stalls the champagne: what happens to the Turkish team’s options? ESOP migration is the least-planned workstream of every flip we see, and the one where retroactive fixes cost the most. Here is the map.
What actually migrates
Nothing migrates automatically. Options granted over Turkish A.Ş. shares do not transform into Delaware topco options at closing; they must be cancelled-and-reissued, exchanged, or left in place over a subsidiary that no longer reflects group value. Each route has different consent, tax and morale consequences, and doing nothing is the worst of the three, because employees end up holding paper on the wrong entity.
The three routes
- Exchange into the topco plan. Cleanest end state: a new US-style equity incentive plan at Delaware level, Turkish employees receive replacement grants calibrated to preserve economic value and vesting credit. Watch: exchange mechanics need employee consent; vesting continuity should be explicit, not assumed.
- Fresh grants, old plan retired. Simpler documents, but resets create real fairness debates; early employees who carried startup risk notice when their cliff restarts. A vesting-credit bridge is the usual peace treaty.
- Phantom/cash-settled at the Turkish level. Sometimes right for small pools or imminent exits, but phantom rights are compensation, with the labour-law and withholding profile that implies.
The Turkish tax layer
Türkiye’s 2024 reform introduced a meaningful income-tax exemption for equity granted to employees of qualifying tech startups, with holding-period conditions that scale the benefit. Two flip-specific traps: (1) whether grants over a foreign parent’s shares preserve the benefit depends on structure; this is precisely where bespoke advice earns its fee; (2) the exchange itself must be structured to avoid crystallising a taxable benefit on day one. Model the after-tax outcome per employee band before choosing a route, not after.
The checklist that prevents the year-one mess
- Inventory every promise: signed option agreements, offer-letter sentences, founder WhatsApp commitments; all of it.
- Decide the route in the flip term sheet, not after closing; investors will ask anyway.
- Board approvals on both levels, with a topco plan sized for the next two rounds (10–15% is the working norm).
- Employee communication in Turkish, with worked examples per band; silence converts a retention tool into an attrition driver.
- Paper the vesting credit and acceleration triggers; align with the founder vesting architecture.
- File the tax position with worked analysis, so the next diligence reads it instead of reopening it.
Related reading: the anatomy of a flip, ESOP in Türkiye: legal and tax, and the Flip-Up Guide hub.
This article is for general information only and does not constitute legal or tax advice. It reflects the position as of July 2026.
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