Esop dispute

You can consult Sri T. Kalaiselvan, a knowledgeable advocate from Chennai and a senior expert on this forum. You can obtain his number from his profile.

Dear kavksatyanarayana Sir, 

Thanks for your compliments.

Let me give my opinion on the subject which is as follows:

Any business may issue ESOP. It must be issued in compliance with the requirements of the Companies Act of 2013 and the Companies (Share Capital and Debentures) Rules of 2014.

It is regulated by section 62(1)(b) of the Companies Act 2013

It gives the employees the right to purchase or subscribe to the shares of the company at a given date at a given price decided in advance.

ESOP rules set a limit of 25% of salary as the maximum amount that can be contributed to a participant's account annually, though most companies contribute between 6-10% of salary annually

Many companies require you to sell your exercised shares back to the company within 30 to 90 days after leaving the company. Unlike promoters' equity, shares provided under ESOP do not have a one-year lock-in period, and the employee can sell them after the IPO.

There is no 'standard' ESOP vesting period. It varies from as little as 12 months to 3 years and even beyond that.

Very well explained and advised by senior expert Mr. T Kalaiselvan, I endorse and appreciate.

In a layman's language concept of ESOP is :.

• An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock.
• ESOPs encourage employees to give their all as the company’s success translates into financial rewards.
• They also help staff to feel more appreciated and better compensated for the work they do.
• Companies typically tie distributions from the plan to vesting, which gives employees rights to employer-provided assets over time.
• It’s important to read the terms of your ESOP, as each one may vary and have different rules.
• Other versions of employee ownership include direct-purchase programs, stock options, restricted stock, phantom stock, and stock appreciation rights. 

Thank you sirs for your views on this. I want to understand if a company can make  changes to a scheme based on which employees have joined and served the company. What is Sebis position on this ?

It is regulated by section 62(1)(b) of the Companies Act 2013 and SEBI(SBEB and Sweat Equity Regulations) guidelines, 2021. It gives the employees the right to purchase or subscribe to the shares of the company at a given date at a given price decided in advance.

In exercise of the powers conferred by sections 11, 11A and 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) read with sections 54 and 62 of the Companies Act, 2013 (18 of 2013) and rules 8 and 12 of the Companies (Share Capital and Debentures) Rules, 2014, to provide for regulation of sweat equity shares and all schemes by companies for the benefit of their employees involving dealing in shares, directly or indirectly, with a view to facilitate smooth operation of such schemes while preventing any possible manipulation and matters connected therewith or incidental thereto, the Securities and Exchange Board of India hereby makes the regulations, which may be perused to understand more on the subject pertaining to yiour question.