Sweat Equity Shares

Hi,

The expression “sweat equity shares” refers to equity shares issued by the company to employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or similar value additions to the company.

All the limitations, restrictions and provisions relating to equity shares are applicable to such sweat equity shares. A company may issue sweat equity shares of a class of shares already issued if the following conditions are fulfilled

(a)  the issue of sweat equity shares is authorised by special resolution passed by the company in the general meeting

(b)  the resolution specifies the number of shares, current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued

(c)  not less than one year has, at the date of the issue, elapsed since the date on which the company was entitled to commence, business

(d)  the sweat equity shares of a company whose equity shares are listed on a recognised stock exchange are issued in accordance with the regulations made by the Securities and Exchange Board of India in this behalf. (In case of a company whose equity shares are not listed on any recognised stock exchange, the sweat equity shares can be issued in accordance with such guidelines as may be prescribed.)

All these provisions are laid down in section 79 A of the Companies Act, 1956. This section was inserted by the Companies (Amendment) Act 1999 which provided for issue of sweat equity shares subject to fulfillment of certain conditions.

The Companies (Amendment) Act, 2000 laid down that the provisions of this section are to be administered by SEBI in respect of companies already listed or companies, which intend to get listed. In respect of other companies, the administration shall be by the Central Government. 

Regards

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thank you very much sir for your reply in detail