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To attract, reward, motivate and retain employees for high levels of individual performance and for unusual efforts. ...

To attract, reward, motivate and retain employees for high levels of individual performance and for unusual efforts.

Promote employee ownership culture and reduce the attrition.

To improve the financial performance of the Company, which will ultimately contribute to the success of the Company.

Enhances job satisfaction of the Employee due to ownership incentive

Companies grant an option to employees to acquire shares of their employer company over a period of time at a reduced price or nil price.

ESOP proves to be a good retirement benefit plan for employee.

Therefore ESOP is primarily a kind of incentive to hold the employees to the company's fold.

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    Esop general Esop general Presentation Transcript

    •  
    • Definition of ESOP Employee Stock Option plan has been envisaged in the backdrop of realizing the value of knowledge lying in the minds of existing employees by the employer companies and therefore in order to attract, reward, motivate and retain its employees for high levels of individual performance and for unusual efforts to improve the financial performance of the Company, which will ultimately contribute to the success of the Company, a Company grants an option to its employees to acquire shares of their employer company over a period of time at a reduced price or nil price. Therefore ESOP is primarily a kind of incentive to hold the employees to the company's fold.
    • WHY ESOP ??
      • To attract, reward, motivate and retain employees for high levels of individual performance and for unusual efforts.
      • Promote employee ownership culture and reduce the attrition.
      • To improve the financial performance of the Company, which will ultimately contribute to the success of the Company.
      • Enhances job satisfaction of the Employee due to ownership incentive
      • Companies grant an option to employees to acquire shares of their employer company over a period of time at a reduced price or nil price.
      • ESOP proves to be a good retirement benefit plan for employee.
      • Therefore ESOP is primarily a kind of incentive to hold the employees to the company's fold.
    • Stock option available for employees other than ESOP
      • ESPS (Employee Stock Purchase Scheme)
      • Restricted Stocks (RSUs)
      • Stock Appreciation Rights
      • Performance Shares
      • Phantom Stock
    • ESOP COVERAGE Employees of holding company Own company employees (including directors/officers/ other employees) Employees of subsidiary company Indian/ NRIs
    • Legal Provisions relating to ESOP
      • The Companies Act, 1956
      • Foreign Exchange Management Act 1999
      • SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999
      • Income-Tax Act, 1961
      • SEBI Guidelines are applicable only in case of Listed Companies . However, generally unlisted companies also voluntarily comply with these guidelines.
    • Policies to frame ESOP Schemes
      • Under the present Regime,
      • Promotions / group company transfers / termination / retirement .
      • Eligibility of new joinees and effective date of grant of option should be mentioned
      • The company has freedom to specify the lock-in-period for the shares issued in pursuance to the exercise of the options.
      • Liquidity options to the Employee after exercise of Shares
    • Methods of ESOP
          • Trust Route
          • Trust route is the methods in which a trust is created for the allotment of shares to the employees.
          • Company issue shares to the trust and than trust issue shares further to the employees.
          • It eases the process of the Allotment although the work of transfer increases.
          • Direct route
          • In direct route the shares will directly be allotted to the employees of the company.
    • Decisive Criteria
      • Quantum
      • Attractive enough to create “wealth”
      • Coverage of Levels of Employees
      • Equity Share Capital Limit
      • Pricing
      • Fair market value – more dilution, no accounting charge
      • Discount – less dilution, benefit buffer with accounting charge
      • Taxation Aspects
      • Income Tax related
      • Vesting period(optional)
      • Time based or performance based
      • Standard across the board or different for key people
      • Uniform, front-ended, back-ended
      • Policy
      • Yearly / half-yearly / quarterly grants
      • New joinees – eligibility and effective date of grant
      • Promotions / group company transfers / termination / retirement
      • Liquidity Options
      • How the Employees can convert the shares so allotted into cash
    • Quantum
      • ‘ n’ number of employees
      • Irrespective of their nationality
      • Irrespective of being the employees of Holding/ Subsidiary
      • Private company restricts its membership to 50 (other than employees shareholders to whom ESOPs are issued)
    • Pricing criteria
      • ESOPs are freely priced
      • ESOPs can be issued at discount or premium
      • ESOPs can be issued at discount or premium
      • DFCF method is used in case of foreign employees
    • Taxation of ESOPs/ ESPS Fair market value of the shares as on the date of exercising the option by the employee Exercise price by employee (-) = Taxable value of ESOPs as perquisites The tax would be levied on perquisites at the rate depending upon the prescribed taxable slab and would be deducted in the form of TDS from the salary of the employee by the Employer
    • ESOP VALUATION Calculation of FMV on the date of exercise of option Listed Company Unlisted Company FMV shall be the value as determined by Category I Merchant Banker Any date earlier than, but not more than 180 days earlier than, the date of exercise of Option Market Price at the date of exercise of option
    • Liquidity Options available to the employee
      • Listed Companies not frequently traded
      • Purchased by the promoters on behalf of the Company
      • Employee Welfare trust can buy on behalf of the company which is funded by the company.
      • UnListed Companies
      • Purchased by the promoters on behalf of the Company
      • Employee Welfare trust can buy on behalf of the company which is funded by the company.
      • Listed Companies frequently traded
      • Through Stock Exchange
    • Accounting for ESOPs
      • Accounting recommended by guidance note for all grants on or after 1 st April 2005
      • According to fair value method & intrinsic value method with extensive fair value disclosure
    • Modalities of ESOP Board Meeting General Meeting of shareholders, if articles prescribe Grant of option Exercise of option by an employee One time Graded Vesting period is the time period between the grant and exercise of option, which can be any time period as the Management decides, in the Scheme.
    • Modalities Continued…. Creation of trust Creation of Trust by appointing a trustee to hold the shares/options in trust for employees who can subscribe to the shares reserved at a later date and at a pre- determined price. Directly to employees Formulate a scheme of ESOP wherein an option can be reserved in favor of employees to subscribe to the shares of the company at a future date and at a pre- determined price. The Scheme may provide for the rules governing the ESOPs including but not limited to the eligibility criterion required of the employees to subscribe to shares at a future date, the issue price, the nature of equity shares forming the subject matter of the option, the exit mechanism etc.
    • Policies to frame ESOP Schemes
      • Under the present Regime,
      • The company has freedom to specify the lock-in-period for the shares issued in pursuant to the exercise of the option
      • It can be of any time period
      • Eligibility of new joinees and effective date of grant of option should be mentioned
      • Promotions / group company transfers / termination / retirement
    • Proposed provisions FOR ESOPS Companies Bill 2009 included private companies under section 56 of further issue of share capital where a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered to employees under a scheme of employees’ stock option, subject to such conditions as may be prescribed.
    •  
    • Department Involved in the Process of ESOP
          • 1) Human Resource Department
      • To make available list of the employees to the compensation committee.
      • 2) Secretarial Department
      • Law compliances:- Form filing,
      • Stock exchanges compliances:-intimation to the stock exchanges of board meeting, inprincipal approval for listing etc.
      • Foreign exchange compliances:- RBI approval for the shares issuing resident outside approval.
      • 3) Accounts and Payroll Department
      • Compensation of the employees:- Calculate the overall compensation to the employee
      • Calculate the retirement benefits:- calculation of retirement benefits, gratuity uncashed leave etc.
      • Taxation related matters:- TDS payable etc.
    • Corporate Esop manager “taking care of those who care for you”
      • A Specialised Product developed by Corporate Professionals through our pioneering research and in depth analysis on ESOP Planning and transaction execution.
      • It has been designed keeping in mind the practical problems faced by managements post ESOP implementation.
      • A package that can be customized as per your needs
    • About cp
    • Our Gamut of Services Investment Banking Corporate Restructuring Stock Exchange Services Forex & Overseas Transaction Corporate Compliance & Management Financial & Taxation
    • ESOP MANAGER IN CP Corporate Professionals with a Pioneering research and studies on ESOP planning and transaction execution & diverse knowledge of practical problems faced by corporates post ESOP implementation.
    • ESOP process can be difficult to plan, we guide you to make it easy Esop Management Plan Direct Organize Monitor Benefits of ESOP Management with CP
      • Help to understand the ESOP option and formulate the ESOP scheme.
      • Ensure to design ESOP, meeting all necessary requirements as well as needs.
      • To start off right in the installation phase with a strong foundation for continued success.
      • End-to-end responsibility for ESOP Plan Management.
      • To keep clients and their participants updated about changes in law for continuous compliance.
    • Our Role and Responsibility
      • Understanding the Management’s perspective and advise accordingly.
      • Formulation of ESOP Scheme defining the limitations within which the ESOP Scheme would work.
      • The legal documentation required for the Scheme.
      • Valuation Report calculating the Fair Value of the shares so issued under ESOP.
      • Management of complete data of the employees (Covering Indian as well as foreign employees) to whom the ESOP has been granted.
      • Complete Advisory with respect to the Tax treatment of the Shares in the hands of the Employees
      • Advisory on the Accounting treatment of the options granted under ESOP in the Company.
      • Secretarial work time to time whenever the shares be allotted to the Employees.
      • Stamp Duty Adjudication at the time of allotment of the shares under ESOP.
      • Proving ready to use letters and communication formats to be exchanged.
    • Draft letter of grant of option
    • Draft Letter of Acceptance of Option
    • Thank You Corporate Professionals Capital Pvt. Ltd SEBI Registered Category I Merchant Banker D-28, South Extension -I, New Delhi-110 049 Ph: 011-40622200 Email: info@indiacp.com