prpri ESOP Checklist and Procedure ESOP Checklist and Procedure

This Employee Stock Option Scheme (ESOP) checklist & Procedure is for Unlisted Companies & for Private Companies only. This checklist helps Professional & Corporate Users to gain knowledge about the ESOP. (Section 62(1)(b))

1. Drafting of ESOP scheme.

2. Alter the Article of Association, if AOA is silent on the issue of share to employees under the scheme of ESOP.

3. Alter the Memorandum of Association, if the MOA does not have the adequate authorized share capital.

4. Convene the Board Meeting of the company and following action shall be taken are as follows:

  • Approve the ESOP scheme
  • Approve the altered AOA and MOA subject to approval by members in the Extra- Ordinary General Meeting (EGM). (if required)
  • Approve the draft notice of the EGM.
  • Authorize any person to send the notice of the Extra-Ordinary General Meeting to all the members of the company.

5. Dispatch of Notice of EGM to its Members atleast 21 clear days before the date of EGM.

(Date of Dispatch of Notice and date of EGM shall be excluded)

6. Hold the Extra-Ordinary General Meeting and conduct the following business –

  • for issuing of Employees Stock Option Scheme by the shareholders of the company by passing an ordinary resolution for Private Companies & Special Resolution for Public companies.
  • for approving the altered MOA and AOA by the shareholders of the company by passing an special resolution.

7. Valuation Report taken from Registered Valuer at time of Grant of Option and at time of determination of Fair Market value while exercising the option then valuation shall be taken from Merchant Banker.

8. The approval  of  shareholders  by way of  separate  resolution  shall  be  obtained  by  the company in case of –

(i) grant of option to employees of subsidiary or holding company; or

(ii) 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.

9. File e–form  MGT-14  to  submit the  special  resolution  within  30  days  of  passing  the resolution.

10. Granting of options to eligible employees*.

11. Vesting of options – a. There shall be a minimum period of one year between the grant of options and vesting of option.

12. Exercise of options by the employees –(i) The company 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.(ii) The company shall have the freedom to specify the lock-in period for the shares issued pursuant to exercise of option.

13. After approval of ESOP scheme by the shareholders, grant options to the eligible employees.

14. Allotment of Shares,  as  and  when  options  are  exercised  file  form  PAS-3  (Return  of Allotment) within 30 days from the allotment of shares, with ROC.


DISCLAIMER: The content of this article is for informative purposes only and should not be considered as any legal advice on the topic covered. The information is based on the facts and relevant provisions of the applicable laws.

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Qualification: CS
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Location: Faridabad, Haryana, India
Member Since: 19 Jun 2021 | Total Posts: 1
I am CS Nikhil Sukhija and having 3 years of Experience in the field of CS related work including Trademark Registration, Company Law Compliances, RBI Compliances, FEMA Compliances, NSE & BSE Compliances, Merger, All type of Govt Licensing etc. View Full Profile

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July 2021