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A Stock Option Agreement gives employees the right to buy company shares at a fixed price during a specific time period - a valuable benefit that aligns with Saudi Arabia's Vision 2030 push for employee ownership. These agreements spell out key details like the exercise price, vesting schedule, and how long the options remain valid.

Under Saudi Capital Market Authority regulations, companies must carefully structure these agreements to comply with Sharia principles and local securities laws. The agreement protects both employer and employee interests by clearly stating conditions for exercising options, especially important rules around leaving the company or transferring option rights.

Use a Stock Option Agreement when bringing key talent into your Saudi company, especially for leadership roles or specialized technical positions. This agreement becomes essential during recruitment negotiations to offer competitive compensation packages that include both immediate salary and future equity participation.

The timing often aligns with company milestones like funding rounds, expansion plans, or preparing for an IPO under CMA regulations. Many Saudi tech startups and family businesses use these agreements during their transition to professional management structures, helping retain valuable employees while maintaining Sharia compliance and proper corporate governance.

• Time-Based Options: Standard in Saudi companies, these agreements vest over 3-5 years, following CMA guidelines for gradual employee ownership
• Performance-Based Options: Tied to specific business milestones or KPIs, popular among growth-stage companies in alignment with Vision 2030 goals
• Executive Stock Options: Tailored for C-suite positions with longer exercise periods and special Sharia-compliant provisions
• Early Exercise Options: Allow immediate purchase of unvested shares, common in tech startups seeking talent retention

• Company Board/Management: Approves and oversees the stock option program, ensuring alignment with CMA regulations and corporate strategy
• HR Directors: Manage implementation, track vesting schedules, and coordinate with legal teams on agreement terms
• Employee Recipients: Key personnel who receive options as part of their compensation package, subject to vesting and exercise conditions
• Legal Counsel: Draft and review agreements to ensure Sharia compliance and protection of company interests
• Capital Market Authority: Regulates and monitors stock option programs within Saudi listed companies

• Company Details: Gather current share value, total authorized shares, and shareholder approval documentation
• Option Terms: Define exercise price, vesting schedule, and expiration dates in line with CMA guidelines
• Employee Information: Collect recipient's employment status, position, and eligibility under Sharia principles
• Performance Metrics: Specify any performance conditions or milestones tied to vesting
• Compliance Check: Review agreement against Saudi labor laws and corporate governance requirements
• Documentation: Prepare board re����ֱ��s and shareholder approvals required for option grants

• Grant Terms: Precise number of options, exercise price, and grant date following CMA guidelines
• Vesting Schedule: Detailed timeline of when options become exercisable, including any cliff period
• Exercise Conditions: Clear procedures for exercising options and payment methods aligned with Sharia principles
• Termination Provisions: Rights and obligations upon employment ending or company exit
• Shareholder Rights: Voting rights, dividend eligibility, and transfer restrictions
• Compliance Statement: References to relevant Saudi securities laws and corporate governance requirements
• Dispute Re����ֱ��: Saudi jurisdiction and applicable dispute settlement mechanisms

A Stock Option Agreement differs significantly from a Stock Purchase Agreement in both purpose and timing. While both documents deal with company shares, they serve distinct functions in Saudi Arabia's corporate landscape.

• Time of Transfer: Stock Option Agreements grant future rights to purchase shares at a predetermined price, while Stock Purchase Agreements facilitate immediate share transfers
• Payment Structure: Options typically involve a vesting period and exercise price, whereas Purchase Agreements require immediate payment under CMA regulations
• Primary Users: Options are commonly used for employee incentives and retention, while Purchase Agreements serve direct investors and strategic buyers
• Sharia Compliance: Option Agreements need specific structuring to meet Islamic finance principles, while Purchase Agreements follow more straightforward ownership transfer rules