What is Sweat Equity?
Sweat Equity Shares means equity shares issued by a company to its director or employee at discount or for consideration other than cash, for providing know-how or making available like intellectual property rights or value addition.
Who is Eligible?
How many Sweat Equity Shares can a Company issue?
The company can issue sweat equity shares up to the higher of two:
Also, the sweat equity shares shouldn’t go beyond 25% of the paid-up equity capital of the issuing company at any point in time.
Explanation this 25% condition is for once in life time i.e. the quantum of sweat equity shares in the paid-up capital of the Company should not go beyond 25 %
Exception: for startups, they are allowed to issue up to 50% of the paid-up capital within 5 years from the date of registration or incorporation.
What are the Conditions?
a. It is issued to the director or manager
b. They are issued for non-cash consideration
At What Price?
The price of an issue shall be the value based on the price determined by a registered valuer as to the fair price. He shall justify reaching a certain value. The registered valuer shall carry the valuation of
Disclaimer: The information contained herein is not intended to be a source of advice and it is only for the convenience of the user. The contents of this article have been prepared in accordance with the relevant provisions and information available at the time of preparation and the views and opinions expressed in this article are those of the author’s understandings. The author does not have any responsibility/liability of the same and the article cannot be quoted without the consent of the author.