Employee options in an ADGM company

An employee share option plan is how most startups promise future equity without issuing stock on day one. ADGM’s common-law company framework can support options, restricted shares, or growth shares if the articles and the board paperwork exist. The jurisdiction does not write the plan for you.

Pool, grant, vest, exercise

• Pool: a percentage reserved on the cap table, still unissued.
• Grant: a named person, a number of options, a strike price, and a grant date.
• Vest: usually a one-year cliff then monthly, unless you have a reason not to.
• Exercise: the employee pays the strike and becomes a shareholder — which has KYC and register consequences.

Market practice is not a statute

Reserving 10% to 15% for hiring is common in venture-backed companies. It is not an ADGM requirement. Investors in a priced round will often ask you to top the pool up before they come in, which dilutes founders first. Model that, in writing, before you celebrate the pre-money.

Tax and cross-border employees

Option tax depends on where the employee is resident, whether they perform duties in the UAE, and how the instrument is characterised. There is no safe sentence that starts with “ESOPs are tax-free in ADGM.” Get advice for the people you are actually hiring. This page is not that advice.

Paper that should exist

• Board authority and, if needed, shareholder approval to create the pool.
• A plan document and a grant letter the employee can keep.
• Leaver terms: good leaver / bad leaver, and what happens to unvested options.
• An updated cap table that shows reserved vs granted vs vested.