Please contact customerservices lexology. SEBI issued the ESOP Guidelines in to regulate the implementation of stock option schemes and stock purchase schemes by Indian listed companies.

In the past, SEBI had taken a view that employee welfare schemes that did not involve fresh issuance of securities of the company would not fall within the scope and ambit of the ESOP Guidelines. Entities whose schemes are not in conformity with the same would be given time to align with the said Guidelines. Further, such schemes will be restrained from acquiring their shares from the secondary market.

According to SEBI, such practices also raise significant compliance concerns under the SEBI Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market Regulations, and SEBI Prohibition of Insider Trading Regulations, In order to address the concerns pertaining to acquisition of shares by employee welfare trusts of listed companies from the secondary market, SEBI has, vide the Circular, introduced the following amendments to the ESOP Guidelines and the Equity Listing Agreement:.

New clause 22B has been included in the ESOP Guidelines stipulating that employee stock option scheme or stock purchase scheme shall not involve acquisition of own securities from the secondary market. Clause 35C has been included in the Equity Listing Agreement to require:.

Employee stock option plans in India: restrictions on trust structures - Lexology

Companies which have existing employee benefit schemes that do not conform to the ESOP Guidelines as amended by the Circular are now required to inform the details of their schemes to the stock exchanges, in the prescribed format, within 30 days of the date of issue of the Circular, i.

The amendment appears to be for the benefit of the investors, especially since it stems from rising concerns pertaining to insider trading and unfair trade practices.

SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, | Bare Acts | Law Library | AdvocateKhoj

At the same time, the Circular is likely to have a significant impact on the companies that have put in place employee benefit schemes involving purchase of shares from the secondary market as against issue of new shares by the company. While the ESOP Guidelines permit the use of trust structures for administering employee stock option plans, the Companies Act, permits a company to grant loans or financial assistance to employee welfare trust to purchase or subscribe to the shares of the company.

In light of these provisions, many Indian companies had adopted employee welfare schemes where trusts purchased the securities of the company from the secondary market using the funds provided by the company. Such schemes of listed companies may now have to be restructured to align them with the requirements under the ESOP Guidelines. We understand that the Associated Chambers of Commerce and Industry of India ASSOCHAM has sought an extension of deadline set for companies to comply with the amended rules 5.

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Newsfeed Navigator Analytics Track Discover. Share Facebook Twitter Google Plus Linked In. Follow Please login to follow content. Register now for your free, tailored, daily legal newsfeed service. Employee stock option plans in India: India February 19 Background SEBI issued the ESOP Guidelines in to regulate the implementation of stock option schemes and stock purchase schemes by Indian listed companies. Key Amendments In order to address the concerns pertaining to acquisition of shares by employee welfare trusts of listed companies from the secondary market, SEBI has, vide the Circular, introduced the following amendments to the ESOP Guidelines and the Equity Listing Agreement: Amendment of the ESOP Guidelines to prohibit acquisition of securities from the secondary market: Amendment of the Equity Listing Agreement: Clause 35C has been included in the Equity Listing Agreement to require: The issuer to ensure compliance with the revised SEBI Guidelines with respect to all new employee benefit schemes involving the securities of the company; and The issuer shall also ensure that all existing employee benefit schemes, i.

Analysis The amendment appears to be for the benefit of the investors, especially since it stems from rising concerns pertaining to insider trading and unfair trade practices.

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