In connection with the offering of equity compensation to employees in Saudi Arabia, local securities laws require issuers to obtain prior approval from the Capital Markets Authority ("CMA") via an "Authorized Person" (that is, an entity licensed to engage in securities activities in Saudi Arabia). Typically, the CMA's approval remains valid for one year and upon expiration, issuers are required to seek a new approval from the CMA. Further, issuers are required to submit a post-offering report to the CMA on an annual basis.
Because of the high costs associated with obtaining CMA approval and submitting the required post-offering report (due to the exorbitant service fees charged by the Authorized Persons), issuers are often hesitant to grant stock options, restricted stock units and other forms of award to employees in Saudi Arabia. However, in a recent application, the CMA granted one U.S. multinational a three year approval through a particular Authorized Person and further provided that a single post-offer report was due upon expiration of the three year approved period (rather than annually). Based upon informal discussions, we understand that the term of the CMA's approval was a point of negotiation with the CMA based upon the terms of the award and the applicable equity compensation plan.
In light of this particular application, we are hopeful that the CMA now may be willing to approve an extended offering period in certain circumstances. Companies that are contemplating granting equity compensation awards to employees in Saudi Arabia as part of their upcoming annual grants should contact their GES attorney to discuss the possibility of seeking extended approval from the CMA.