Employees Stock Option Scheme (ESOP)

Section 62 of Companies Act, 2013 read with Rule 12 of Companies (Share Capital and Debenture) Rules, 2014

Sl. No. Compliance Brief Compliance Description Reference Section/ Clause/ Rule Act/Rules/Regulations/ Notification/ Agreement Details required from client
1 Check the Articles for any specific provision on  issue of share under ESOP Check the Articles to understand if any specific provision has been provided with respect to  issue of share under ESOP
2 Board Meeting Hold Board Meeting:-

1. Authorisation for issue of shares under ESOP

2. Formation of Compensation Committee

3. Calling of General Meeting for approval of shareholder by way of ordinary resolution

4. Issue notice of General Meeting

Section 62 Rule 12 The Companies Act, 2013

The Companies (Share Capital and Debenture) Rules, 2014

1. Date of BM

2.Members of Compensation Committee

3 Notice of General Meeting Notice of General Meeting shall be send at-least 21 clear days and explanatory statement shall disclose the details

1.Brief description of scheme and total no. of ESOP to be granted.

2.appraisal process

3.vesting requirements

4. exercise price or pricing formula

5. exercise period

6. lock in period

7. scheme implementation through co. or trust

Section 62 Rule 12 The Companies Act, 2013

The Companies (Share Capital and Debenture) Rules, 2014

1.Total no. of ESOP to be granted.

2.appraisal process

3.vesting requirements

4. excercise price or pricing formula

5. excercise period

6. lock in period

7. scheme implementation through co. or trust

4 Hold General Meeting Hold General Meeting for approval of shareholder by way of Ordinary Resolution:-

1. Authorisation for issue of shares under ESOP

2. Formation of Compensation Committee

Section 62 Rule 12 The Companies Act, 2013

The Companies (Share Capital and Debenture) Rules, 2014

Minutes Copy
5 Compensaton Committee(CC) A) No ESOP shall be offered unless the company constitutes a Compensaton Committee for administration and superintendence of the ESOP.

B) The Compensaton Committee shall be committee of Board of Directors consisiting of majority of Independent Directors.

Section 62

Rule 12

The Companies Act, 2013

The Companies (Share Capital and Debenture) Rules, 2014

6 Approval of Shareholder by separate resolution Approval of shareholders by way of separate resolution is required in case of:

(a) grant of option to employees of subsidiary or holding company

(b) grant of option to identified employees, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant of option.

Section 62

Rule 12

The Companies Act, 2013

The Companies (Share Capital and Debenture) Rules, 2014

CTC of resolution
7  Board Meeting  Hold Board Meeting:-

1. Company shall allot the shares under ESOP.

2. Issuance of share certificates

2. Authorisation for stamping of shares

Section 62

Rule 12

The Companies Act, 2013

The Companies (Share Capital and Debenture) Rules, 2014

Draft copy of share certificaters
8 Filing of Form After allotment of shares, intimation of such allotment shall be filed with Registrar of Companies within 30 days of such allotment Section 39

Rule 12

The Companies Act, 2013

The Companies (Prospectus and Allotment of Securities) Rules, 2014

Form-PAS-3
9 Disclosure in Director report(DR) The Board of Directors shall disclose the following information in DR:-

a) Option granted, vested, excercised, lapsed

b) total number of share arising as a result of exercise of option

c) exercise price, variation of terms of option, money realised by option, total number of option in force, maximum  term of option.

d) Date of shareholder approval, sources of shares, variation in term of option.

e) employees wise details of option granted to:-

i) Key Managerial Personnel

ii) any other employee who receive grants of option in one year of option amounting to 5% or more

iii) identified employee who granted option, during one year, equal or exceeding 1% of issued capital.

Section 62 with Rule 12 of Companies Act 2013 The Companies Act, 2013

The Companies (Prospectus and Allotment of Securities) Rules, 2014

Annual Compliance
10 Register Company shall maintain a register of ESOP in SH-6 at registered office of the company or such other place as Board may decide. Monthly Entry in Registers
11 Authentication by CS Entries in the Register shall be authenticated by CS or any other person authorised by Board.

Author Bio

Qualification: CS
Company: Legal Corpous Consultancy LLP
Location: delhi, New Delhi, IN
Member Since: 06 May 2019 | Total Posts: 16
CS Suraj Bhardwaj is Associate member of ICSI from 2016, He is also a law graduate. Legal Corpous is the consultancy wing, of ADMS & Co., a Chartered Accountants firm established in 2002. We strongly believe that the audit process should add value to the business and assist its management in View Full Profile

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