sweat equity shares

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Dear Experts,

1.  I would like to understand whether sweat equity shares (Section 79A)  can be allotted for free of cost to the employees (like gift of shares free of cost) for an unlisted company

2.  Is there a requirement of a scheme similar to ESOP

3. Does it amount to issue of shares at discount below face value which is not allowed as per the Companies Act

4. Does the above allotted shares form part of paid - up capital and subject to lock in

5. Suggest whether the above are trasferable and format of share certificate and draft scheme if any

 

Please Clarify.

Replies (2)

First go through the attachment carefully and re-draft your query.

Regards

Dear Ankur,

Thanks a lot !!!

I have gone through the attachment

1.  I would like to understand whether sweat equity shares (Section 79A)  can be allotted for free of cost to the employees (like gift of shares free of cost) for an unlisted company - Yes it can be for free of cost

2.  Is there a requirement of a scheme similar to ESOP - Need more clarity and draft scheme if any

3. Does it amount to issue of shares at discount below face value which is not allowed as per the Companies Act - Not clear as no where in the rules it is discussed.  My question is for a PVT Ltd company whose face value is Rs.10 per share, can we allot for free (which is obviously below the face value) to the employees other than directors and managerial personel and if it can be allotted then does it amount to discount

4. Does the above allotted shares form part of paid - up capital and subject to lock in - it is given that the treatment should be as per AS - does it mean it is not paid up capital and only either asset / expense and i understand that 3 years lock in is applicable

5. Suggest whether the above are trasferable and format of share certificate - after 3 years transferable subject to capital gains tax on profit if any and please prove a draft sweat equity share certificate

 I have highlighted my understanding in green and bold. Please confirm whether the above is correct and clarify.

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