Advisory Shares Agreement Template for Saudi Arabia

An Advisory Shares Agreement is a specialized legal document that allows your company to compensate advisors with equity rather than cash payments. Under Saudi Arabia's legal framework, this agreement must comply with the Companies Law 2015, Capital Market Law 2003, and relevant Ministry of Commerce regulations to ensure proper share issuance and transfer procedures.

When do you need this document?

You need an Advisory Shares Agreement when your company wants to attract experienced professionals who can provide strategic guidance, industry connections, or specialized expertise in exchange for equity compensation. This is particularly common for startups and growth companies that need to conserve cash while accessing high-quality advisory services. The agreement is also essential when you're expanding into new markets, developing innovative products, or navigating complex regulatory environments where advisor expertise can significantly impact your business success. Many companies use this structure during pre-IPO phases or when seeking investment, as advisors often bring valuable networks and credibility to support fundraising efforts.

Key legal considerations

Your Advisory Shares Agreement must address several critical legal aspects to protect both parties and ensure enforceability. The vesting schedule is crucial, typically structured over 2-4 years with cliff periods to ensure advisor commitment and performance. You must clearly define the scope of advisory services, performance expectations, and time commitments to avoid disputes later. Confidentiality and non-disclosure provisions are essential to protect your company's proprietary information and trade secrets. The agreement should specify share transfer restrictions, including right of first refusal clauses and restrictions on transfers to competitors. Termination provisions must outline what happens to unvested shares if the advisory relationship ends early, whether due to performance issues, breach of agreement, or mutual consent. Tax implications for both parties should be addressed, particularly regarding the timing of income recognition and capital gains treatment under Saudi tax law.

Legal requirements in Saudi Arabia

Under Saudi Arabian law, your Advisory Shares Agreement must comply with specific regulatory requirements enforced by multiple authorities. The Companies Law 2015 governs share issuance procedures, requiring proper board resolutions and shareholder approvals for equity grants. If your company has foreign shareholders or advisors, you must ensure compliance with the Foreign Investment Law regarding ownership restrictions and approval requirements. The Capital Market Authority may require registration or disclosure if your company is publicly listed or if the share arrangement constitutes a securities offering. Your agreement must also comply with Labor Law provisions to ensure the advisory relationship doesn't inadvertently create an employment relationship with associated obligations. All documentation must be prepared in Arabic for official registration with the Ministry of Commerce, and any foreign advisors must meet visa and residency requirements. The agreement should also consider Sharia compliance requirements, particularly regarding profit-sharing arrangements and prohibited business activities, to ensure the equity structure aligns with Islamic finance principles that may apply to your business operations.