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UAE allows share options scheme for employees

Issac John (associate Business Editor)
Filed on April 30, 2015
UAE allows share options scheme for employees

Commercial Companies Law permits companies to issue shares pursuant to an employee share incentive scheme on such terms as are approved by the shareholders and pursuant to regulations.

Dubai - Companies in the UAE can make their employees stakeholders in the firm in line with an employee share incentive scheme, according to the new Commercial Companies Law (CCL) that will come into effect on July 1.

“The new CCL permits companies to issue shares pursuant to an employee share incentive scheme on such terms as are approved by the shareholders and pursuant to regulations that will be issued by the Securities and Commodities Authority in this regard. A similar provision did not exist under the previous CCL,” international law firm Allen & Overy said in a note.

“The employee incentive share scheme is a welcome change, particularly for the employees. Many progressive companies in the UAE do want to offer stock options to their staff members or at least key personnel which was so far done through investment vehicles which many a times lacked clarity and legal recourse in case of dispute was limited,” pointed out Atik Munshi, Managing Partner, Horwath Mak.

 “Under the new CCL, companies can provide stock options to staff members which will definitely provide a strong incentive to the said employees to not only perform better but also to have a long-term plan. In many Western countries, including the USA, such practice is common,” said Munshi.

The stock options are part of the package offered to the employee and on meeting the conditions such entitlement will accrue to the staff member, he explained. “We need to see how the UAE government will build the model for such stock options incentive for employees though undoubtedly this is a step in the right direction. More and more people want to make the UAE as a long-term home or permanent home, this incentive scheme will provide a boost for such persons,” said Munshi.

All companies are required to amend their memorandum to comply with the new law by July 1, 2016. Any companies that do not make the necessary amendments to their memorandum by July 1, 2016, will be deemed to be dissolved, the law stipulates. issacjohn@khaleejtimes.com


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