My company is being acquired what happens to my stock options dubai
In situations where there are multiple sellers or buyers, all parties must provide the documents referred to above. To obtain this approval, a standard form application Application for the transfer of shares will need to be submitted. Both the Seller Documentation and Buyer Documentation should be attached to the Application, which needs to be signed by the representatives of the Seller, Buyer and any remaining shareholders, if applicable.
Initial approval will then be issued by the DED for the proposed transfer. However, in a recent significant move, HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai has issued a new licensing law that aims to, amongst other things, organise the conducting of economic activities in the Emirate of Dubai and streamline the licensing process by facilitating coordination between the various government entities in Dubai.
For further details on the new law please see the eighth of our local law series which can be accessed here. At the same time as issuing the initial approval, the DED will also provide a copy of an advertisement that must be published in a local daily Arabic newspaper in the format provided by the DED.
Seven business days after publication of the DED required advertisement 2 — and assuming that no objections have been lodged — the parties will be required to appear before a notary public in the applicable Emirate to execute the documents mentioned below. Originals of the Seller Documentation and the Buyer Documentation, together with all relevant notarised and translated copies, should be available for inspection by the notary public.
As a final step, the commercial licence of the company will need to be amended to reflect the change of ownership. Depending on the complexity of the share transfer, the buyer s and seller s may choose to enter into a long form share purchase agreement, in addition to the STA. This may include extensive representations and warranties and any bespoke conditions relating to such share transfer.
The preparation and negotiation of such share purchase agreement would usually be dealt with before starting step 1 above. It is also usual to find that the agreed form STA is included as a schedule to the long form share purchase agreement. Various fees arise during this process. Any proposed foreign Buyer will need to present documents for authentication at the foreign ministry of the country in which it is incorporated and subsequently to the UAE consulate.
Before they can be presented to the authorities in the UAE, they must also be translated into Arabic by an official translator. The notarisation process should be commenced as early as possible as it can take a significant amount of time. Where the responsible UAE embassy is not located in the country of incorporation, the process can be delayed further. The complexity of an asset sale in the UAE will largely depend upon the nature of the assets which are to be sold and, most importantly, whether the commercial licence of the company comprises one of the assets to be sold.
In addition, a summary of the sale contract must be published in two Arabic daily newspapers in the UAE with an interval of one week between them. This advertisement period is intended to provide creditors time to object to the sale.
We understand that, if the commercial licence of the company forms part of the assets to be sold, the procedural requirements of the Commercial Code must be met. Providing an extended period to exercise vested stock options is not a new idea. In the past, employers have considered this approach, typically on a case-by-case basis, if the employee was in good standing and unique circumstances were present upon termination or if the employee has some degree of leverage in negotiating his or her departure.
What is new is the trending consideration to provide an extended post-termination exercise period to employee option holders generally. Due to certain tax and securities laws, as well as accounting rules, it is very common for stock options issued by private companies have a term of up to ten years from the date of grant.
Recognizing that there is flexibility in how long a stock option can remain outstanding following termination of employment, some technology companies have considered providing a longer post-termination exercise period. This Alert outlines some advantages and disadvantages of providing an extended exercise period. The considerations for both employer and employee are slightly different if the extended exercise period is added by amendment rather than included in the original award. Current employees and future hires may view an extended post-termination exercise period as highly favorable because the decision of choosing to exercise and pay the purchase price for their vested stock options can be delayed if the employee leaves the employer before the option has expired.
Less pressure on the employer to gain liquidity: In the current economic and capital markets environment, many private companies are delaying their IPOs until much later in their business lifecycle and considering mergers and acquisitions. Providing an extended period to exercise allows an employee to terminate and still potentially enjoy the liquidity of a later IPO or sale of the company.
There may be less administration involving stock option exercises when employees terminate employment because questions regarding deadlines to exercise, loans and secondary sales to third parties to facilitate financing the exercise of stock options may be avoided or postponed.
However, if a terminated employee is able to retain vested stock options for an extended period, the underlying shares will necessarily continue to be reserved for a potential future exercise and more shares will be needed to grant awards to new hires or for refresh grants. As a result, common stockholders will face added dilution from a larger number of outstanding equity awards. Increasing the likelihood of employee terminations: Employees who cannot pay the exercise price for their vested stock options will not feel financially handcuffed to their employer out of fear of forfeiting vested stock options immediately after termination.
Incentive stock option limits will still apply: Incentive stock options ISOs generally convert to nonstatutory stock options NSOs three months and one day after an employee terminates his or her employment except in the case of death or a disability. As a result, an employee who wants to keep his or her ISO status for tax purposes would not benefit from an extended exercise period.