Relaxation from Vesting period Requirement under SEBI (Share Based Employee Benefit) Regulations, 2014

Market Regulator Securities Exchange Board of India (SEBI) introduced SECURITIES AND EXCHANGE BOARD OF INDIA (SHARE BASED EMPLOYEE BENEFITS) REGULATIONS, in the year 2014 for the Listed Companies. The provisions shall be applicable to the following:-

Definitions-

• Appreciation” means the difference between the market price of the share of a company on the date of exercise of stock appreciation right (SAR) or vesting of SAR, as the case may be, and the SAR price;
• employee “means, —

(i)  a  permanent  employee  of  the  company  who  has  been  working  in  India  or  outside India; or

(ii)  a  director  of  the  company,  whether  a  whole  time  director  or  not  but  excluding  an independent director; or

(iii) an employee as defined in clause (i) or (ii) of a subsidiary, in India or outside India, or of a holding company of the company.

But does not include—(a) an employee who is a promoter or a person belonging to the promoter group; or

(b) a director who either himself or through his relative or through anybody corporate, directly or indirectly, holds more than ten per cent of the outstanding equity shares of the company;

• employee stock option scheme or ESOS” means a scheme under which a company grants employee stock option directly or through a trust
• .“employee stock purchase scheme or ESPS” means a scheme under which a  company offers shares to employees, as part of public issuer otherwise, or through a trust where the trust may undertake secondary acquisition for the purposes of the scheme;
• “exercise” means making of an application by an employee to the company or to the trust for  issue  of  shares  or  appreciation  in form  of  cash,  as  the  case  may  be,  against  vested options or vested SARs in pursuance of the schemes covered under Part A or Part C of Chapter III of these regulations, as applicable.
• general employee benefits scheme or GEBS” means any scheme of a company framed in accordance with these regulations, dealing in shares of the company or the shares of its  listed  holding  company,  for  the  purpose  of  employee  welfare  including  healthcare benefits,  hospital  care  or  benefits,  or  benefits  in  the  event  of  sickness,  accident, disability,  death  or  scholarship  funds,  or  such  other  benefit  as  specified  by  such company.
• option” means the option given to an employee which gives him a right to purchase or subscribe at a future date, the shares offered by the company, directly or indirectly, at a pre-determined price;
• “retirement  benefit  scheme or  RBS”  means  a  scheme  of  a  company, framed  in accordance with these regulations, dealing in shares of the company or  the shares of its listed  holding  company,  for  providing  retirement  benefits  to  the employees  subject  to compliance  with  existing  rules  and  regulations  as  applicable  under  laws  relevant  to retirement benefits in India;
• “stock appreciation right scheme or SAR scheme” means a  scheme under which a company grants SAR to employees;

1. EMPLOYEE STOCK OPTION SCHEME:-

♦ ADMINISTRATION AND IMPLEMENTATION-

(1) Employee Stock Option Scheme– shall contain the details of the manner in which the scheme will be implemented and operated.

(2) Disclosures – No  options   shall  be  offered  unless  the  disclosures, as  specified  by Board in  this regard,  are made by the company to the prospective option grantees.

♦ PRICING: –

Company is free to determine its exercise price subject to the conformity to Accounting policies specified in Regulation 15.

♦ VESTING PERIOD:-

(1) There shall be a minimum vesting period of one year in case of ESOS:

Provided that if such options are granted by the Company to its employees in lieu of Merger or Amalgamation, the period during which the options granted by the transferor company were held by him shall be adjusted against the minimum vesting period required under this sub-regulation.

> REGULATION 9(4)OF THE SHARE BASED EMPLOYEE BENEFIT Regulations – states that in the event of death of  the  employee  while  in  employment,  all  the  options, or  any  other  benefit granted  to  him/her under  a  scheme  till  such  date  shall  vest  in  the  legal  heirs  or nominees of the deceased employee.

> For Example– If an employee vest an option on 20^thAugust 2020 with a vesting period of one period and the employee dies on 10^th December 2020, during his employment then as per earlier provisions it shall not be transferable, in the event of death it would not be transferable to legal heir or nominee but as per Amendments now it shall be vested to his legal heirs or nominees of deceased employees.

Legal heirs or nominee of Deceased Employee able to hold options till 20^th August 2021.

> In view of the COVID-19 pandemic situation,– to provide relief to the families of the deceased employees of listed companies, it has been decided as under :-

> the  provisions under  the  SBEB  Regulations relating  to  minimum  vesting period  of  one  year  shall  not  apply  in  case  of  death (for  any  reason)  of  an employee and  in  such  instances all the  options,  SAR  or  any  other  benefit granted to such employee(s)shall vest with his/her legal heir or nominee on the date of death of the employee; and

> This relaxation shall be available to all such employees who have deceased on or after April 01, 2020.

♦ RIGHTS OF OPTION HOLDERS:-

Employee  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 him, till shares are issued upon exercise of option.

2. STOCK APPRECIATION RIGHTS SCHEME (SARS)

♦ ADMINISTRATION AND IMPLEMENTATION-

(1) Stock Appreciation Right Scheme– shall contain the details of the manner in which the scheme will be implemented and operated.

(2) Company shall have the freedom to implement cash settled or equity settled SAR scheme.

(3) Disclosures – No  options   shall  be  offered  unless  the  disclosures, as  specified  by Board in  this regard,  are made by the company to the prospective option grantees.

♦ VESTING PERIOD:-

(1) There shall be a minimum vesting period of one year in case of Stock Appreciation Right Scheme:

Provided that if such options are granted by the Company to its employees in lieu of Merger or Amalgamation, the period during which the options granted by the transferor company were held by him shall be adjusted against the minimum vesting period required under this sub-regulation.

> REGULATION 9(4)OF THE SHARE BASED EMPLOYEE BENEFIT Regulations – states that in the event of death of  the  employee  while  in  employment,  all  the  options, or  any  other  benefit granted  to  him/her under  a  scheme  till  such  date  shall  vest  in  the  legal  heirs  or nominees of the deceased employee.

> In view of the COVID-19 pandemic situation,– to provide relief to the families of the deceased employees of listed companies, it has been decided as under :-

> the  provisions under  the  SBEB(Share Based Employee Benefit) Regulations relating  to  minimum  vesting period  of  one  year  shall  not  apply  in  case  of  death (for  any  reason)  of  an employee and  in  such  instances all the  options,  SAR  or  any  other  benefit granted to such employee(s)shall vest with his/her legal heir or nominee on the date of death of the employee; and

> This relaxation shall be available to all such employees who have deceased on or after April 01, 2020.

♦ RIGHTS OF OPTION HOLDERS:-

Employee  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 him, till shares are issued upon exercise of option.

3. RETIREMENT BENEFIT SCHEME

♦ ADMINISTRATION AND IMPLEMENTATION:-

i. The Scheme may be implemented  by  a  company provided  it  is  in compliance  with  these  regulations,  and  provisions  of  any  other  law  in force  in relation  to retirement benefits.

ii. Scheme shall contain the details of the benefits under the scheme and the manner in which the scheme shall be implemented and operated.

iii.

Shares  of the company or shares of its listed holding company shall exceed ten percent of the book value or market value or fair value of the total assets of the scheme,  whichever  is  lower,  as  appearing  in  its  latest  balance  sheet  for  the  purposes

4. GENERAL EMPLOYEE BENEFIT SCHEME-

♦ ADMINISTRATION AND IMPLEMENTATION:-

The Scheme may be implemented  by  a  company  provided  it  is  in compliance  with  these  regulations,  and  provisions  of  any  other  law  in force  in relation  to retirement benefits.

Shares  of the company or shares of its listed holding company shall exceed ten percent of the book value or market value or fair value of the total assets of the scheme,  whichever  is  lower,  as  appearing  in  its  latest  balance  sheet  for  the  purposes

5. EMPLOYEE STOCK PURCHASE SCHEME-

♦ ADMINISTRATION AND IMPLEMENTATION-

(1) Employee Stock Purchase Scheme– shall contain the details of the manner in which the scheme will be implemented and operated.

♦ PRICING AND LOCK-IN-

i. Company is free to determine its exercise price subject to the conformity to Accounting policies specified in Regulation 15.

ii. Shares issued under this scheme shall be locked-in for minimum period of one year from the date of Allotment.

Provided that if such options are granted by the Company to its employees in lieu of Merger or Amalgamation, the period during which the options granted by the transferor company were held by him shall be adjusted against the minimum vesting period required under this sub-regulation.

iii. If ESPS is part of a public issue and the shares are issued to employees at the same price as in the public issue, the shares issued to employees pursuant to ESPS shall not be subject to lock-in.