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A Stock Option Agreement gives employees the right to buy company shares at a set price within a specific timeframe - a popular way UAE companies attract and keep top talent. These agreements spell out when and how employees can exercise their options, usually after working at the company for a certain period (called vesting).

Under UAE Commercial Companies Law, these agreements must follow specific rules about share transfers and ownership, especially for mainland companies where foreign ownership restrictions may apply. The agreement typically includes the strike price, vesting schedule, expiration dates, and what happens to the options if the employee leaves the company.

Use a Stock Option Agreement when building long-term incentives for key employees in your UAE company. This document becomes essential during recruitment of senior executives, launching employee retention programs, or creating performance-based compensation packages that align with UAE labor laws.

The agreement proves particularly valuable for UAE tech startups and growth-stage companies looking to conserve cash while offering competitive packages. It's also crucial when preparing for future funding rounds or IPOs, as investors often expect clear documentation of all outstanding equity promises. Companies operating in free zones frequently use these agreements to attract international talent.

• Employee Stock Option Agreement: Standard form used for most UAE employees, covering basic vesting schedules and exercise terms
• Phantom Share Agreement: Offers cash bonuses tied to share value without actual equity transfer, popular in UAE mainland companies
• Stock Option Award Agreement: More detailed version for executive compensation, including performance conditions
• Employee Share Agreement: Direct share ownership structure, commonly used in free zones
• Employee Share Option Agreement: Tailored for startups with specific exit-based vesting triggers

• Company Board: Approves the stock option plan and authorizes share allocations under UAE Commercial Companies Law
• Legal Counsel: Drafts agreements in compliance with UAE mainland or free zone regulations and securities laws
• HR Department: Manages implementation, tracks vesting schedules, and maintains employee records
• Eligible Employees: Receive and exercise options according to vesting terms and company policies
• Company Secretary: Updates share registers and maintains corporate records of option grants
• External Auditors: Review and value stock options for financial reporting and tax compliance

• Company Details: Gather current share structure, authorized capital, and any foreign ownership restrictions under UAE law
• Option Terms: Define exercise price, vesting schedule, and expiration dates aligned with UAE labor regulations
• Employee Information: Collect recipient's employment details, position, and eligibility status
• Board Approval: Secure necessary corporate authorizations and shareholder consents
• Compliance Check: Verify agreement meets free zone or mainland company requirements
• Documentation: Prepare share register updates and option tracking system
• Tax Implications: Review UAE tax considerations and reporting requirements

• Grant Details: Number of options, exercise price, and grant date aligned with UAE Commercial Companies Law
• Vesting Schedule: Clear timeline for option availability and any performance conditions
• Exercise Terms: Process, payment methods, and share transfer procedures under UAE regulations
• Termination Provisions: Impact of employment ending on vested and unvested options
• Company Rights: Share repurchase terms and transfer restrictions
• Shareholder Rights: Voting, dividend, and pre-emptive rights specifications
• Governing Law: UAE jurisdiction and dispute resolution mechanisms
• Compliance Clauses: Free zone or mainland regulatory requirements

A Stock Option Agreement differs significantly from a Stock Purchase Agreement in several key aspects under UAE law. While both deal with company shares, they serve distinct purposes in corporate transactions.

• Timing of Transfer: Stock Option Agreements grant future rights to purchase shares at a preset price, while Stock Purchase Agreements execute an immediate sale
• Price Mechanism: Options lock in today's price for future purchases, whereas Purchase Agreements reflect current market value
• Vesting Requirements: Option agreements typically include employment-linked vesting conditions; Purchase Agreements complete the transaction immediately
• Legal Structure: Options require UAE regulatory compliance for both grant and exercise phases; Purchase Agreements need one-time transfer approval
• Target Users: Options primarily serve employee incentivization, while Purchase Agreements suit immediate investors or business sales