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    ESOP

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    niharikagupta0820

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    ESOP

    Uploaded by

    niharikagupta0820
    16 views4 pages

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    16 views4 pages

    ESOP

    Uploaded by

    niharikagupta0820

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    What are ESOPs?

    Employee Stock Option Plan is a instrument by which company stocks are allotted to employees at a
    discounted price. The purpose of ESOPs is to attract talent and retain employees. ESOPs in India are the
    common toll used by many startup like Flipkart, OYO and Paytm to retain and attract employees.

    Who are eligible to get the ESOPS?


    1. Permanent employee of a company irrespective of where he works except the employee who is a
    promoter i.e who holds shares
    2. Directors of a company, whether whole time director or not, but excluding an independent
    director (Director who holds more than 10% shares is not eligible for ESOPS)

    The steps to implement ESOPs are:


     Prepare the ESOP Scheme
     Have the ESOP Scheme approved by Board of directors
     Convene Shareholders Meeting with details as specified in Rule 12, Companies (Share Capital
    and Debenture Rules) 2014. The details to be included are –
    1. Total number of stock options granted
    2. Identification of the class of employees eligible
    3. Appraisal process for determining the eligibility of the employee
    4. Details of vesting and vesting and lock in period
    5. Maximum no. of options that can be granted per employee

    Forms like MGT 14 are to be submitted to ROC (registrar of companies). Once the ESOP scheme is
    approved by the shareholders the ESOP offer letter is given to the eligible employees mentioning the
    number of options allocated and other details.

    Process of ESOP Issue

    The issue of ESOP is governed by Section 62(1)(b) of the Companies Act of 2013 and Rule 12 of the
    Companies (Share Capital and Debentures) Rules of 2014 (the “Rules”). The rules’ issuing of the ESOP
    method is comparable to those of listed businesses’ Employee Stock Option Scheme Guidelines under the
    Securities and Exchange Board of India. A company’s procedures for granting ESOPs are as follows:

     Create the ESOP document in compliance with the 2013 Companies Act and its rules.

     Prepare the board meeting notice and the proposed resolution for adoption at the meeting.

     At least seven days before the meeting, all directors should receive a notice of the board meeting.

     Establish the price of the shares to be issued under the ESOP, establish the time and date, and
    authorise summoning the general meeting to adopt a special resolution for issuing the ESOP. Pass
    the resolution for the issuance of shares through the ESOP.
     Within fifteen days after the board meeting’s conclusion, provide the draught minutes to each
    director, and upon the board’s adoption of a resolution, submit the MGT-14 form with the
    Registrar of Companies.

     All of the company’s directors, auditors, shareholders, and secretarial auditors must get notice of
    the general meeting at least 21 days before the scheduled date of the meeting.

     Pass the special resolution authorising the general meeting to issue ESOP shares to the
    company’s workers, directors, and officers.

     Within thirty days of the general meeting approving the special resolution, submit the MGT-14
    form and the supporting paperwork to the Registrar of Companies.

     Send stock purchase options to the company’s directors, officials, and staff members.

     Keep track of the details of the ESOPs awarded to the company’s workers, directors, and officers
    in a “Register of Employee Stock Options” on Form No. SH-6.

     If a private firm intends to issue an ESOP share(esop for private companies), it must make sure
    that the issuing of shares through an ESOP is authorised under the articles of association (AoA).
    If the AoA does not authorise the issue of shares through ESOP, the firm must first convene an
    extraordinary general meeting to amend the AoA to add those provisions before proceeding to
    hold the board meeting to approve the resolution and get shareholder approval for the ESOP
    Scheme.

    DOCUMENTS REQUIRED FOR ALLOTEMENT


     Advance notice of the Board Meeting to the stock exchange where security is listed (only in case
    of listed companies)
     Minutes of Board meeting
     Special Resolution approving ESOP along with explanatory statement
     Minutes of General Meeting
     Reports of the Board
     PAS-3
     MGT-14
     Registration of Employee Stock Option Plan
    Draft Format

    BOARD RESOLUTION

    ===========================================================
    CERTIFIED TRUE COPY OF THE RESOLUTION PASSED BY THE DIRECTORS OF
    ________________ PRIVATE LIMITED ON (DATE) AT ITS REGISTERED ADDRESS AT
    _______, _________, City : ___________, Pin Code : ______ State : _______________. AT 3.00 PM
    ===========================================================

    APPROVAL OF ESOP SCHEME

    The Chairman informed that the Company was planning to come out with an ESOP Scheme to motivate
    employees, who are consistently performing well, and to give them opportunity to participate and gain
    from the Company's performance, thereby, acting as a retention tool as well as to align the efforts of such
    talent towards long term value creation in the organization and to attract new talent. He added that in this
    direction, an ESOP scheme has been drafted in consultation with [Name of Consultant, if any]. The draft
    ESOP policy was placed before the Board.

    Thereafter, the Chairman shared with the Members the salient features of the proposed ESOP Scheme:

    Particulars ESOP Scheme


    Total Number of Options
    Eligible Employees
    Vesting Period
    Vesting Criteria
    Exercise Price
    Exercise Period
    Maximum No. of Options to be granted per
    employee

    The Board considered the same and passed the following resolution in this regard

    “RESOLVED THAT pursuant to the provisions of Section 62 and other applicable provisions, if any, of
    the Companies Act, 2013 read with rules made thereunder and pursuant to the provisions contained in the
    Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock
    Purchase Scheme) Guidelines ("the Guidelines") (including any statutory amendment, modification or re-
    enactment to the Act or the Guidelines, for the time being in force), the Articles of Association of the
    Company, approval of Shareholders at their general meeting and subject to such other approvals,
    permissions, sanctions, conditions and modifications as may be prescribed or imposed while granting
    such approvals, permissions and sanctions, the consent of the Board be and is hereby accorded to the
    proposed "Employee Stock Option Plan" and to create, offer, issue and allot in one or more tranches
    under the said "Employee Stock Option Plan" at any time to or for the benefit of employees and Directors
    (excluding Independent Director) of the Company for such number of stock options /equity shares and /
    or equity linked instruments including any other instruments or securities which could give rise to the
    issue of equity shares (hereinafter collectively referred to as "Securities") of the Company, not exceeding
    [Number of ESOP Options] in aggregate, at such price and on such terms and conditions as may be fixed
    or determined by the Board of Directors in accordance with the Guidelines or other applicable provisions
    of any law as may be prevailing at that time.

    “RESOLVED FURTHER THAT the new Equity Shares to be issued and allotted by the Company in
    the manner aforesaid shall rank pari passu in all respects with the then existing Equity Shares of the
    Company.

    “RESOLVED FURTHER THAT [Name of the person(s) authorized] of the Company be and are hereby
    authorized jointly and/or severally to do all such acts, deeds, matters and things as may be necessary or
    expedient including filing of necessary documents, intimations including e-forms with regulatory
    authorities and to settle any questions, difficulties or doubts that may arise in this regard at any stage in
    connection to ESOP scheme.

    “RESOLVED FINALY THAT a yearly status on the ESOP granted and exercised by employees be
    presented for the information of the Board”.

    Date:

    Place:

    For, ________________ Private Limited

    ______________

    (Director)

    DIN:

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