Management Equity in Gulf Private Capital: The Exit Question

Management equity in Gulf private capital is built on a UK template: sweet equity for the management team, an incentive plan around it, and leaver terms that assume the sponsor sells within about five years. Bain's Global Private Equity Report 2026 puts the average hold at exit at around seven years, and many Gulf holders, from family offices to sovereign-anchored platforms, never plan a sale date. This report, the twenty-first in JOH Partners' Gulf leadership series, asks what happens to the template when the hold runs long, the shares sit in a Gulf company and the leaver clause meets Gulf employment law. JOH's reading, drawn from public rules and its own mandates, is that Gulf company law now offers the share classes the template needs, and that the harder questions are the hold, the leaver terms, the issuing entity and the executive's route to cash. Each needs a decision before a chief executive signs.

What management equity is, and why the template travels

A private equity sponsor buying a company puts most of its money in as preference shares or loan notes, which pay a fixed return and are repaid first. It puts a small amount in as ordinary shares. The management team buys ordinary shares too, usually at the same price per share. Because the sponsor's ordinary shares are a small part of its total investment, the managers can own a large share of the ordinary equity for a modest cheque. The ordinary shares take what is left once the fixed instruments are repaid, so a company that grows leaves most of the gain to them. The market calls that sweet equity.

Around it sits the rest of the plan. A ratchet lifts management's share if the sponsor's return passes agreed levels. Vesting makes the shares earned over time. Leaver terms say what the executive keeps if they go early, and are usually split into a good leaver, who keeps most of the value, and a bad leaver, who forfeits much of it.

The template travels because it works and because the people who write it are used to writing it. A Gulf sponsor, a family office with a fund-style platform or a sovereign-anchored holding company that hires an international chief executive will usually hand the plan to a London adviser. In JOH Partners' own research, direct co-investment in the platform was the largest single long-term incentive mechanism among the sixty-four operating chief executives in The 2026 Gulf Operator-CEO Index, at 28 per cent of the cohort, ahead of carry-pool participation and listed equity plans. Management equity is no longer a fringe feature of Gulf portfolios. That is why its design matters.

Figure 01FIG-01

The parts of a management equity plan

Part	What it is	What it needs to work
Sweet equity	Ordinary shares bought by managers, usually at the sponsor's price per share	A price the executive can afford and a company that grows
Ratchet	A clause that raises management's share if the sponsor's return passes set levels	Clear return measures and an agreed way to calculate them
Vesting	Shares earned over a period of service	A period that matches the real hold
Leaver terms	What the executive keeps or forfeits on leaving	Terms that hold under the law governing the job
Exit route	How managers turn shares into cash	A sale, or a stated alternative if there is none

The UK reference point: what the template was built for

The UK version of the plan carries a tax logic that is easy to miss from outside. HMRC's Employment Related Securities Manual, at ERSM70010, explains that where an employee acquires shares for less than their market value, a charge can arise on the difference. A private company's ordinary shares are hard to value, and managers' ordinary shares are cheap because the sponsor's money sits above them in fixed instruments. So in July 2003 the British Private Equity and Venture Capital Association agreed a memorandum of understanding with the then Inland Revenue, now reproduced in HMRC's manual at ERSM30520.

The memorandum works as a safe harbour. It sets conditions under which the price the managers pay is accepted as market value, and one of them is that managers pay no less than the price the sponsor pays for the same shares. It accepts that leaver provisions and tag-along and drag-along rights do not by themselves reduce what the shares are worth, provided the conditions are met. HMRC can set it aside where avoidance is a significant purpose or the structure departs materially from the model.

The point for a Gulf deal is not that the UK rule applies. It does not. The point is that much of the standard structure was shaped to fit a particular tax agreement, and that a structure shaped for one purpose can arrive in another jurisdiction with its reasons left behind. An executive's own tax position depends on where they live and are paid, and a board should take tax advice on it. A sponsor should ask which parts of the template are there for tax reasons, which are there to motivate the executive, and which are simply habit.

A plan that was written to fit a UK tax agreement does not carry its reasons with it to the Gulf. The deal team has to decide which of its terms are still doing a job.

The holding period problem

The UK template settled in a period when buyouts were held for five to six years. Bain's Global Private Equity Report 2026 says that holding periods at exit are now hovering around seven years, up from an average of five to six years between 2010 and 2021, and that almost 40 per cent of companies are held for more than five years, up from 29 per cent in 2019.

Figure 01FIG-01

How long private equity holds have run

Measure	Earlier reading	Bain 2026 reading
Average hold at exit	Five to six years (2010 to 2021)	Around seven years
Share of companies held more than five years	29% (2019)	Almost 40%

For the Gulf the evidence is thinner. A report by MAGNiTT on private equity in the Middle East and North Africa, as reported by Arab News in February 2025, cites an expected exit timeline of six to ten years. That is a region-wide expectation reported second-hand, not a measured average, and this report uses it only as a pointer. JOH's own observation across private equity, family office and portfolio mandates is directional and carries no count: the holders it sees include sponsors who plan a sale, family offices that hold for a generation and sovereign-anchored platforms that build for a strategic purpose and name no sale date at all.

For management equity the arithmetic is plain. Sweet equity pays when the sponsor sells. A plan that vests over four years and assumes a sale in year five leaves the executive with vested shares and no date for cash if the hold runs to year eight. The retention hook is gone, the executive can see the market, and the sponsor has no tool left except a leaver clause that may be hard to use.

What Gulf company law allows

The share classes the template needs are more widely available than they were. Law-firm summaries of the December 2025 amendments to UAE Federal Decree-Law No. 32 of 2021 report that limited liability companies can issue different classes of shares, with different voting, redemption and priority rights, if the memorandum allows. Baker McKenzie's note and Cleary Gottlieb's note say the same, and expect detail to follow in implementing regulations. Neither says private joint stock companies can issue several classes, so that point is unverified here. A law-firm note reports that Article 228 of the 2021 law provides for a share incentive scheme for employees, set by the general assembly, in which directors may not take part.

In the Abu Dhabi Global Market, a law-firm summary says there is no statutory cap on the number or type of share classes, preference shares are allowed where their rights are set out in the articles, and redeemable shares must be fully paid on issue. In the Dubai International Financial Centre, Clifford Chance's briefing on the 2018 Companies Law refers to employee share schemes only as exceptions to the rules on paying up shares and on pre-emption.

In Saudi Arabia, Charles Russell Speechlys reports that the 2022 Companies Law names ordinary, preference and redeemable shares and removes pre-emption rights on shares allocated to employees, and BSA Law points to a provision for shares set aside for employees or options to acquire them. For a listed company, the Capital Market Authority's guidance note on listed joint stock companies says an employee share plan needs a bylaw basis and extraordinary general assembly approval, and that non-executive board members cannot take part.

Figure 02FIG-02

Share-class and employee-share tools in four Gulf regimes, as summarised

Regime	Share classes	Employee share schemes
UAE onshore	LLCs may issue different classes if the memorandum allows (December 2025 amendments, as summarised)	Article 228 scheme set by the general assembly, as reported by a law firm
ADGM	Preference and redeemable shares permitted; rights set in the articles	No mechanics found in the sources reviewed
DIFC	Not addressed in the briefing reviewed	Exceptions for shares allotted under an employee scheme
Saudi Arabia	Ordinary, preference and redeemable shares named in the 2022 Companies Law, as summarised	Shares for employees without pre-emption; listed plans need assembly approval

None of this settles the question a deal team actually has, which is whether the entity that issues the executive's shares can issue the class the plan needs, and where the register sits. That is a choice to be made on purpose, with counsel, before the term sheet is agreed.

Leaver terms meet Gulf employment law

Leaver terms are drafted as share terms, and they run into employment law. Under UAE Federal Decree-Law No. 33 of 2021, Article 25 allows deductions from a worker's wage only in listed cases, each with its own cap, and the total may not exceed 50 per cent of the wage. Article 10 allows a non-compete clause only where the job exposed the worker to clients or work secrets, requires it to be limited in time, place and type of work, and caps it at two years from the end of the contract.

In the DIFC, the consolidated text of the Employment Law allows deductions only where the law permits, the employee has agreed in writing, an overpayment is being recovered or a court orders it. It defines remuneration as wages plus additional payments, and law-firm commentary says the 2021 amendment made additional payments include bonuses and incentives. The law has no restrictive-covenant provision, and Pinsent Masons says English law is highly persuasive there. In Saudi Arabia, a law-firm summary of Article 83 of the Labor Law says a non-compete must be in writing, limited in time to two years, and specific on place and type of work.

Figure 03FIG-03

Employment-law limits that touch a leaver clause

Regime	Deductions from pay	Non-compete
UAE onshore	Only in listed cases, each capped; 50% overall	Up to two years; limited in time, place and type of work
DIFC	Only where permitted, agreed in writing, recovering an overpayment or ordered by a court	No provision in the statute; English law persuasive
Saudi Arabia	Not reviewed from a primary source	Written; up to two years; specific on place and type of work

None of this means a bad leaver clause cannot work. JOH did not find authoritative commentary on whether a bad leaver forfeiture of shares is enforceable in the UAE, and has not seen the point tested in the mandates it works on. The answer depends on the entity, the contract and the facts. What it does mean is that a clause tested for the first time in a dispute is a weak form of retention, and that the cost of finding out belongs in the deal timetable and not in a lawsuit.

A leaver clause is only as good as the law that governs the job. Test it before the executive signs, not after the executive leaves.

Who can sell, and to whom

In a UK deal the question of how managers get cash has one answer: the sponsor sells, and they sell with it. Tag-along and drag-along rights make sure of it. The law-firm summaries of the UAE amendments mention both for private joint stock companies, which suggests the mechanism is available.

The difficulty is the structure where nobody sells. A family office that holds for a generation, a sovereign-anchored platform with a strategic purpose, and a fund-style vehicle that rolls assets into a successor can each leave a management team holding shares with no buyer. In those cases the plan needs another route to cash, and it has to be written in. There are three. A put right lets the executive require the company or the holder to buy back shares at a stated valuation. A periodic repurchase offers the same on a calendar. A cash-settled instrument pays an amount that tracks the equity value, so no shares change hands.

Each route has a cost and a risk. A put right creates a liability and needs a valuation method both sides accept. A repurchase needs cash and a board willing to approve it. A cash-settled instrument is simpler, but it is a promise from the company, not an ownership stake, and executives who have worked inside real funds can tell the difference. JOH's perspective on the long-term incentive plan without an exit covers the family-group case in more detail. The party that bears the cost should be named before the executive signs.

What each party should settle

A deal team, a family office and a portfolio chief executive each have a different list.

A sponsor or deal team should settle what the ticket costs and who funds it, the hold the plan assumes and what happens if the hold runs two or three years longer, the leaver terms tested against the law that governs the job, the entity that issues the shares and the classes it can create, and the executive's route to cash if there is no sale. A longer hold can be handled by refreshing vesting or adding a second tranche, and both are far cheaper to agree on day one than in year four. JOH's perspective on sweet equity in Gulf portfolios sets out the same questions for a single hire.

A family office or sovereign-anchored platform should decide first whether it intends to sell at all. If it does not, the template's logic does not apply, and a different instrument is better: a long-term plan with a stated valuation and repurchase calendar, or a cash-settled award. If it might sell, it should say when it will review the hold, so that the executive knows when the plan will be revisited. The difference between a carry allocation and a purchased ticket is covered in JOH's perspective on carried interest and the operating partner.

A portfolio chief executive should ask what the shares cost and where the money comes from, what happens to them on each kind of exit and each kind of departure, who decides the valuation, and how and when the shares can be turned into cash. JOH's guide to the private equity operating partner describes the adjacent role. The executive who asks these questions early is usually the one the sponsor wants to hire.

Boards and investment committees that want a continuing view of how incentives, tenure and performance are moving across portfolio leadership, and not a snapshot at each meeting, can use platforms such as Board Pulse to keep that picture current. JOH's investments and private equity sector page sets out where the firm sees these structures most often. Tony Couloubis on turnarounds, M&A and ethical investing offers the investor's view of what holds a mandate together, and JOH's engagement placing a chief investment officer into a GCC private equity firm ahead of a fund deployment shows how incentives and mandate are set together when an investment team is built. The pay context for all of it is in JOH's Gulf executive reward report.

A forward view

Four developments will bring the question into sharper focus over the next twelve to twenty-four months. The first is the detail promised for the UAE's December 2025 amendments, which will decide how far limited liability companies can be used for management plans. The second is the lengthening of holds. If Bain's global pattern holds, a plan signed this year will mature later than its drafters assumed. The third is the first leaver dispute. In JOH's observation, a Gulf board that has not yet had to enforce a bad leaver clause will, at some point, and the result will set expectations for the market. The fourth is generational. As family groups and sovereign-anchored platforms professionalise, more of them will offer equity to outside executives for the first time, and they will start from the London template.

None of this needs new regulation. Each is a prompt for a sponsor or a family to decide what it is offering, and to write that down in terms that match how long it intends to hold.

Methodology and evidence base

This report is built from public sources and JOH Partners' qualitative reading of its own private equity, family office and portfolio mandates. The public layer is HMRC's Employment Related Securities Manual, including its reproduction of the 2003 BVCA memorandum of understanding, Bain's Global Private Equity Report 2026, law-firm summaries of the UAE Commercial Companies Law amendments of December 2025, the Abu Dhabi Global Market and DIFC rules, and the 2022 Saudi Companies Law, the text of UAE Federal Decree-Law No. 33 of 2021 on the government portal, a Saudi Capital Market Authority guidance note on listed companies, and law-firm commentary on employment law. The JOH layer is directional observation, labelled as such, and carries no counts or percentages. The one JOH figure restated, on co-investment among operating chief executives, comes from The 2026 Gulf Operator-CEO Index and the pay context from the Gulf executive reward report. JOH does not hold a proprietary dataset on management equity, and no dataset block is attached to this report.

The report has not reviewed the shareholder agreements or plans of any company and does not claim to measure how many Gulf deals use any feature described. The Gulf legal material is drawn from secondary summaries, several of which describe amendments whose implementing regulations were still to follow, so a board should read the current primary text and take local counsel before relying on any detail here. No measured Gulf holding period was found. The worked example in the PDF edition is a composite, not an account of a specific engagement. Nothing here is legal or tax advice.

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Key takeaways

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JOH Partners is an executive search and senior executive recruitment firm advising private equity sponsors, family offices and sovereign-anchored platforms on portfolio chief executive, operating partner and senior investment appointments across the GCC, the UK and Singapore. For the full report, download the PDF above, then engage a partner for a confidential conversation about how your management plan matches the hold you intend. Boards that want continuing visibility of how those appointments are working can also request a Board Pulse demo.