Our client, a tech SME, was in the final phases of negotiating the employment of top tech talent in Saudi Arabia. Knowing that such high-end talent may seek to start their own business unless the company earns their loyalty to remain with it, the Client sought to utilize a solution commonly deployed in the U.S., which is offering shares to its employees to spur retention. The issue that arose is that the transfer of Saudi LLC shares is not as easy as U.S. corporate stock.
SME Law and Hammad & Al-Mehdar deployed a share participation plan that calls on the Saudi LLC to transfer a certain percentage of its shares to a plan trustee who would administer plan benefits (i.e. share dividends and shareholder rights) to employee beneficiaries. The company would assign contractual participation rights to its employees according to its compensation schemes, and such participation rights would be satisfied by the underlying share rights administered by the trustee
- The Company only had to transfer the share pool to the name of the trustee once, therefore avoiding lengthy and costly repetitive share transfers for each employee allotment.
- Holding the shares in the name of a trustee allowed the Company to customize the benefits granted to its employees because contractual participation rights can vary from the legal share entitlements.
- Appointing a Saudi trustee avoids foreign share ownership procedural requirements while affording the company the flexibility to offer participation rights to foreign employees.