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

PRIYA AGGARWAL 17 Jun 2021 2,016 Views 0 comment Print SEBI | Articles

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:

> 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:-

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.

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.

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.