sweat equity

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harshita (Querist)
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08 July 2009 our unlisted closely held pvt. co. wants to issue sweat equity can any body told me the procedure for valuation of intellectual property and how the amount of discount calculated.

Ankur Garg

Ankur Garg (Expert)
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08 July 2009 Hello Harshita,

In case of an Unlisted company, the Sweat Equity Shares are issued in accordance with the “Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003” issued by Department of Company Affairs vide Notification No. GSR 923(E), dated 04-12-2003.

I advise you to go through the requirement mentioned in the rules mentioned above read with Section 79A of the Companies Act, 1956 and check whether you are complying these requirements.

PRICING
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As per rule 8 of the above rules the price of Sweat Equity Shares to be issued to employees and directors shall be at a fair price calculated by an independent valuer.

SWEAT EQUITY SHARES AT DISCOUNT
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Section 79 provides for issue of shares at a discount with the approval of CLB (Now CG). But Section 79A starts with the non-obstante clause i.e. “Notwithstanding anything contained in section 79” hence Sweat Equity Shares may be issued as per section 79A without recourse to section 79 and without approval of CLB/CG.

Best Regards

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