Share Option Plans
Foster Employee Commitment Through Ownership Opportunities
The concept that employee participation in a company's capital is in the best interests of the company itself is now recognized as a promising idea. The Employee Stock Ownership Plan (ESOP), for example, achieves this effect. Thus, such option plans have long been recognized as an effective instrument for fostering loyalty, stimulating employee productivity as well as aligning the interests of employees with the company's long-term success.
01
Employee Incentive
ESOPs provide a significant incentive for retaining and rewarding top talent by granting ownership interests.
02
Flexible Terms
Companies have the ability to customize ESOPs according to specific needs, including vesting schedules, stock valuation and performance targets.
03
Increased Engagement
ESOPs motivate employees to enhance their performance since their success is directly linked to the company’s growth and profitability.
Support We Offer
Our services include drafting comprehensive ESOP policies tailored to UAE legal requirements. From establishing key objectives to executing share allocation agreements, we ensure seamless implementation and regulatory compliance.
ESOP Implementation and Fulfillment
In addition, we provide professional assistance in the full implementation and realization of the ESOP, covering all stages of implementation:
- preparation of relevant share transfer agreements
- issuance of additional shares
- transfer of shares.
Whether it is a gift agreement, share transfer agreements or other legal constructions, the handling of these relations requires careful organization and appropriate legal documentation.
ESOP Implementation & Legal Framework
Mainland
Difficulties may arise in the UAE mainland because the law is developing more slowly here than in free zones. In 2015, there are more opportunities to implement ESOPs as a result of the legislative novelty, the abolition of the pre-emption rights for shareholders of a public company. Thus, the employees of the company were able to join the participation in the company's share capital through the ESOP mechanism and current shareholders can't prevent it now. Nevertheless, it has to be stated that the legislative framework still requires further development and improvement with regard to ESOPs.
Free Zones
The DIFC and ADGM are the only jurisdictions that provide legal framework for ESOP structures. Companies are not required to follow a specific ESOP scheme, giving them the freedom to create and implement their own plans based on their preferences.
For example, ADGM ESOP Regulations establish the following key provisions:
01
Pre-emption Rights Exception
An exception to the right of pre-emptive redemption is contained in ADGM Companies Regulations. This enables companies to issue equity securities under an employee share program without having to offer them in advance to existing shareholders.
02
Off-Market Share Purchases
According to the ADGM Regulation, companies are allowed to purchase their own shares off-market for ESOP purposes. However, such transactions must be made on the basis of a resolution of the competent body of the company, defining the upper limit on the number of shares and the set price ranges.
Not all free zones regulate the ESOP mechanism in the same way and some do not recognize it at all. In such cases, ESOPs must be appropriately structured to ensure that the intended outcome is achieved effectively.
We are equipped to draft all essential legal documents and instruments to guarantee full compliance and the smooth execution of your ESOP, providing you with a fully functioning mechanism.
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