According to Section 62 of the Companies Act 2013
as discussed earlier here, where a company having share capital propose
to increase its subscribed share capital by issue of further shares, such shares
maybe offer to employees under a scheme of employees’ stock options to special
resolution passed by company and subject to such conditions as may be
prescribed.
A company, other than a listed company which is
not required to comply with Securities and Exchange Board of India Employee
Stock Option Scheme Guidelines shall not offer shares to its employees under a
scheme of employees’ stock option (hereinafter referred to as “Employees Stock
Option Scheme”), unless it complies with Rule 12 of the Companies (Share Capital
and Debentures) Rules 2014.
Special Resolution:
The issue of Employees Stock Option Scheme has
been approved by the shareholders of the company by passing a special
resolution.
‘‘Employee’’ means-
(a) A permanent employee of the company who has
been working in India or outside India; or
(b) A director of the company, whether a whole
time director or not but excluding an independent director; or
(c) An employee as defined in clauses (a) or (b)
of a subsidiary, in India or outside India, or of a holding company of the
company or of an associate company;
But does not include-
(i) an employee who is a promoter or a person
belonging to the promoter group; or
(ii) a director who either himself or through his
relative or through any body corporate, directly or indirectly, holds more than
ten percent of the outstanding equity shares of the company.
Explanatory Statement annexed to the
Notice:
The company shall make the following disclosures
in the explanatory statement annexed to the notice for passing of the
resolution-
(a) The total number of stock options to be
granted;
(b) Identification of classes of employees
entitled to participate in the Employees Stock Option Scheme;
(c) The appraisal process for determining the
eligibility of employees to the Employees Stock Option Scheme;
(d) The requirements of vesting and period of
vesting;
(e) The maximum period within which the options
shall be vested;
(f) The exercise price or the formula for
arriving at the same;
(g) The exercise period and process of
exercise;
(h) The Lock-in period, if any ;
(i) The maximum number of options to be granted
per employee and in aggregate;
(j) The method which the company shall use to
value its options;
(k) The conditions under which option vested in
employees may lapse e.g. in case of termination of employment for
misconduct;
(l) The specified time period within which the
employee shall exercise the vested options in the event of a proposed
termination of employment or resignation of employee; and
(m) A statement to the effect that the company
shall comply with the applicable accounting standards.
Exercise Price:
The companies granting option to its employees
pursuant to Employees Stock Option Scheme will have the freedom to determine the
exercise price in conformity with the applicable accounting policies, if
any.
Special Approvals:
The approval of shareholders by way of separate
resolution shall be obtained by the company in case of-
(a) Grant of option to employees of subsidiary or
holding company; or
(b) Grant of option to identified employees,
during any one year, equal to or exceeding one percent of the issued capital
(excluding outstanding warrants and conversions) of the company at the time of
grant of option.
Variation in Terms of ESOP:
The company may by special resolution, vary the
terms of Employees Stock Option Scheme not yet exercised by the employees
provided such variation is not prejudicial to the interests of the option
holders.
The notice for passing special resolution for
variation of terms of Employees Stock Option Scheme shall disclose full of the
variation, the rationale therefor, and the details of the employees who are
beneficiaries of such variation.
Vesting of Option:
There shall be a minimum period of one year
between the grant of options and vesting of option:
In a case where options are granted by a company
under its Employees Stock Option Scheme in lieu of options held by the same
person under an Employees Stock Option Scheme in another company, which has
merged or amalgamated with the first mentioned company, the period during which
the options granted by the merging or amalgamating company were held by him
shall be adjusted against the minimum vesting period required under this
clause.
The company shall have the freedom to specify the
lock-in period for the shares issued pursuant to exercise of option.
The Employees shall not have right to receive any
dividend or to vote or in any manner enjoy the benefits of a shareholder in
respect of option granted to them, till shares are issued on exercise of
option.
Forfeiture or Refund:
The amount, if any, payable by the employees, at
the time of grant of option-
(a) May be forfeited by the company if the option
is not exercised by the employees within the exercise period; or
(b) The amount may be refunded to the employees
if the options are not vested due to non-fulfillment of conditions relating to
vesting of option as per the Employees Stock Option Scheme.
Transferability:
The option granted to employees shall not be
transferable to any other person.
The option granted to the employees shall not be
pledged, hypothecated, mortgaged or otherwise encumbered or alienated in any
other manner.
No person other than the employees to whom the
option is granted shall be entitled to exercise the option.
In the event of the death of employee while in
employment, all the options granted to him till such date shall vest in the
legal heirs or nominees of the deceased employee.
In case the employee suffers a permanent
incapacity while in employment, all the options granted to him as on the date of
permanent incapacitation, shall vest in him on that day.
In the event of resignation or termination of
employment, all options not vested in the employee as on that day shall expire.
However, the employee can exercise the options granted to him which are vested
within the period specified in this behalf, subject to the terms and conditions
under the scheme granting such options as approved by the Board.
Disclosure in Director
Report:
The Board of directors, shall, inter alia,
disclose in the Directors’ Report for the year, the following details of the
Employees Stock Option Scheme:
(a) options granted;
(b) options vested;
(c) options exercised;
(d) the total number of
shares arising as a result of exercise of option;
(e) options lapsed;
(f) the exercise price;
(g) variation of terms of
options;
(h) money realized by
exercise of options;
(i) total number of options
in force;
(j) employee wise details of
options granted to;-
(i) key managerial
personnel;
(ii) Any other employee who
receives a grant of options in any one year of option amounting to five percent
or more of options granted during that year.
(iii) Identified employees
who were granted option, during any one year, equal to or exceeding one percent
of the issued capital (excluding outstanding warrants and conversions) of the
company at the time of grant;
Register of Employee Stock
Options:
The company shall maintain a Register of Employee
Stock Options in Form SH – 6 and shall forthwith enter therein
the particulars of option granted.
The Register of Employee Stock Options shall be
maintained at the registered office of the company or such other place as the
Board may decide.
The entries in the register shall be
authenticated by the company secretary of the company or by any other person
authorized by the Board for the purpose.
Jurisdiction of SEBI:
Where the equity shares of the company are listed
on a recognized stock exchange, the Employees Stock Option Scheme shall be
issued, in accordance with the regulations made by the Securities and Exchange
Board of India in this behalf.
Form SH – 6:
Following particulars are required to be
entered:
(1) Name of the Grantee
(2) Number of options
granted
(3) Date on which vested
(4) Exercised period
(5) Date on which option
exercised
(6) Option exercised
(7) Exercise price
(8) Number of shares arising
as result of exercise of option
(9) Folio number of register
of members having respective entry
(10) Lock –in
period, if any
(11) Option
lapsed, if any
(12) Total
number of option in force
(13) Amount
forfeited / Refunded if option is not exercised
(14) Any
variation of terms of the scheme and its effect
(15)
Signature
(16) remark
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