Quick Summary
In a significant move aimed at fostering the growth of India's startup ecosystem and aligning the interests of founders with their companies, the Securities and Exchange Board of India (SEBI), vide its board meeting outcome on June 18, 2025, announced a crucial amendment to its regulations. This cha
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FAQ :
SEBI has announced that founders who subsequently become promoters before their company's IPO are now allowed to exercise their Employee Stock Option Plans (ESOPs) and retain other share-based benefits.
Previously, promoters and individuals in the promoter group were explicitly excluded from receiving share-based benefits under SEBI regulations and the Companies Act, meaning founders often had to exercise ESOPs before being classified as promoters.
The key condition is that the ESOPs or other share-based benefits must have been granted at least one year prior to the filing of the company's draft offer document.
No, once a start-up company is listed, its promoters will not be eligible for new ESOPs; they remain banned from receiving them.
The amendment helps in founder incentivisation and retention, preserves cash flow for startups by allowing equity-based remuneration, aligns founder and shareholder interests, and brings more clarity to the IPO process.
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