Issuance of ESOP by Listed Company

Employee Stock Option

Pursuant to clause (b) of Sub Section (1) of Section 62 of Companies Act, 2013, the Company can offer shares through employee stock option to their employees if shareholders approve such scheme by way of passing special resolution subject to the conditions specified under Rule 12, of Companies (Share Capital and Debentures) Rules, 2014.

Compliances Applicable

• The Companies Act, 2013
• SEBI (Share Based Employee Benefit & Sweat Equity) Regulations, 2021
• SEBI (LODR) Regulations, 2015 and rules made thereunder

Process

1. Nomination & Remuneration Committee (NRC)selects the employees and Directors eligible for ESOPs and determines the criteria for eligibility for ESOPs. The approval of NRC committee is required. The Board may also authorize NRC to act as the Compensation Committee for the purpose of ESOP.
2. Preparation of the draft ESOP scheme and get valuation report issued by a Chartered Accountant or SEBI registered merchant banker.
3. Draft the notice for the Board Meeting along with the draft resolution to be passed in the Board Meeting and send draft notice and agenda to each Director at least 7 days in advance.
4. Intimation to the Stock Exchange(s) at least two days in advance(excluding the day of intimation and day of meeting) about the Board meeting in which scheme of ESOP and other details related to the ESOP shall be discussed.
5. Pass the Board Resolution for

• the issuance of shares through ESOP, approve the draft scheme and valuation report to determine the price of shares to be issued pursuant to ESOP.
• Fix time, date and venue to convene the Extra Ordinary General Meeting to pass Special Resolution for issuing ESOP.

6. Give outcome of Board meeting to Stock Exchange(s) within 30 minutes from the conclusion of the meeting.
7. Send the draft minutes of the Board Meeting to all the Directors within fifteen days of its conclusion and file Form MGT-14 with the ROC for the resolutions passed in Board meeting.
8.  Receive Certificate from Merchant Banker that scheme of ESOP complies the SEBI guidelines.
9. Send notice of the General Meeting , the explanatory statement to be annexed to the notice of the General Meeting to be convened pursuant to Section 102 shall, in addition to the particulars mentioned in sub-rule (1) of rule 18, contain the following particulars, namely; to all the directors, auditors, shareholders and secretarial auditors of the company at least twenty-one days in advance from the date of meeting by post or electronic means, if notice is sent by post in such case notice shall be sent still 48 hours earlier excluding the day of sending notice and day of meeting.
10. Convene General Meeting and pass Special Resolution for issuance of shares under the Employee Stock Option Plan (ESOP).
11. Pass the separate Special Resolution if any employee holds upto 1% of paid-up Share Capital of the Company in any financial year and the Company still wants to give him/her Employee Stock Option.
12. Give outcome of EGM to the Stock Exchange(s) within 12 hours from the conclusion of meeting.
13. Disclose voting results with scrutinizer’s report to Stock Exchange(s) within 48 hours from the conclusion of the meeting.
14. Apply for the In- Principle approval of the Stock Exchange(s) for the proposed issue of shares under the scheme of employee stock option.
15. File Form MGT-14 with the ROC within thirty days of passing the special resolution along with the necessary documents.
16. Give at least two days advance intimation to the Stock Exchange(s) (Excluding the day of intimation and the day of meeting).
17. Convene Board Meetingto grant options to the eligible employees and pass Board Resolution.
18. Give outcome of Board Meeting to the Stock Exchange(s) within 30 minutes from the conclusion of the meeting.
19. Send options to the employees, directors and officers of the company for purchasing shares under ESOP.
20. Maintain a ‘Register of Employee Stock Options’ in Form No.SH-6 and enter the particulars of the ESOP granted to the employees, Directors or officers of the company.
21. After vesting period when eligible employees exercise their options; Company is required to convene Board Meeting to allot shares under the ESOP scheme to the employees who exercised the option.
22. For convening Board Meeting for allotment, if Listed Company give at least two days advance intimation to the Stock Exchange(s) (Excluding the day of intimation and the day of meeting).
23. Convene Board Meeting, authorize allotment of shares under ESOP and allot shares to eligible employees who exercised the options.
24. Give outcome of Board Meeting to the Stock Exchange(s) within 30 minutes from the conclusion of the Meeting.
25. Company now is required to apply for Listing Approval of Stock Exchange(s) to list the shares issued under the ESOP.
26. File Form MGT-14 and PAS-3 with the Registrar of Companies within 30 days from the date of Board Resolution.
27. If there is no Lock-in applicable for ESOP, employees who exercised their options are free to trade their shares in market.
28. Get a Certificate from Secretarial Auditor that Company is administering its Scheme of ESOPs as per the SEBI guidelines.