CS Priyanka Gera
The Reserve Bank of India (“RBI”) has notified Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 to prohibit, restrict or regulate, transfer or issue security by a person resident outside India. In furtherance to said regulations, RBI has amended regulations governing the issue of shares under employees stock options scheme (“ESOP”) to a person resident outside India of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fourth Amendment) Regulations, 2015 vide Notification No. FEMA.344/2015 RB dated June 11, 2015.
Recently, RBI has issued a circular to provide necessary directions to the authorised dealer banks on the Issue of shares under Employees Stock Options Scheme and/or sweat equity shares to person resident outside India vide Notification No. RBI/2015-16/128 dated July 16, 2015.
Requirements to be complied by Indian Company, prior to the amendment
I. An Indian company may issue shares under the Employees’ Stock Options Scheme, by whatever name called, to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, directly or through a Trust, provided that:
II. The trust or Indian company had to ensure compliance with the above conditions and adhere to the reporting requirements
The Key highlights of the amendments made by RBI for issuance of ESOP or SES to Non-resident are mentioned below, post amendment:
I. The terms of “ESOP” and “Sweat Equity Shares” have been defined in consonance with the Companies Act, 2013
II. An Indian company may issue shares employees’ stock option” and/or “sweat equity shares”, to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, directly or through a Trust, provided that:
III. The issuing company shall furnish a report/return as per the Form-ESOP to the RBI within 30 days from the date of issue of employees’ stock option or sweat equity shares
The notification can be downloaded by the following link:
(Author can be reached at Pri.email@example.com)