ESOP (Employee Stock Ownership Plan) allows employees to buy company stock at fair value, making them owners. Introduced in the 1950s, ESOP trusts established by companies distribute tax-deductible contributions to employee accounts. Employees must work 1 year or 1000 hours to be eligible. After 10 years and age 55, employees can diversify up to 25% of their account. While building employee ownership and retention, ESOPs also face challenges like share dilution and decreased attractiveness if stock value declines. Overall, ESOPs are seen as beneficial for rewarding, retaining, and attracting talent through ownership.
ESOP is an Employee benefit Plan which makes the employees of a company owners of stock in that Company.
ESOP is a plan to compensate, retain and attract employees.
ESOP is a contract between a Company and its employees that give employees the right to buy a specific number of the company's shares at a fixed price within a certain period of time.
It explains the basic concept of how employee stock option plan works and gives a brief about the rules governing the issuance of the same as mentioned under the Companies Act, 2013. It also mentions the rules in place which govern the issuance of employee stock option plan by a foreign company to its employees resident in India. It also explains two case studies about the issuance of ESOP by Flipkart and redbus and how sometimes employees might be cheated in the name of ESOP.
ESOP is a step ahead to encourage, motivate and retain the existing employees in the company. Human resource is the most valuable asset for any company, which makes it important to have a idea about the incentive plans. This presentation focuses on one such area i.e. issue of ESOPs by companies in India.
Muds Services:
Constitution of Trust
Formation of ESOP Plan
Identification & Appraisal of Eligible Employees
Valuation of Company
Creation of ESOP pool
Documentation & Granting of ESOPs
https://muds.co.in/esop/
ESOP is an Employee benefit Plan which makes the employees of a company owners of stock in that Company.
ESOP is a plan to compensate, retain and attract employees.
ESOP is a contract between a Company and its employees that give employees the right to buy a specific number of the company's shares at a fixed price within a certain period of time.
It explains the basic concept of how employee stock option plan works and gives a brief about the rules governing the issuance of the same as mentioned under the Companies Act, 2013. It also mentions the rules in place which govern the issuance of employee stock option plan by a foreign company to its employees resident in India. It also explains two case studies about the issuance of ESOP by Flipkart and redbus and how sometimes employees might be cheated in the name of ESOP.
ESOP is a step ahead to encourage, motivate and retain the existing employees in the company. Human resource is the most valuable asset for any company, which makes it important to have a idea about the incentive plans. This presentation focuses on one such area i.e. issue of ESOPs by companies in India.
Muds Services:
Constitution of Trust
Formation of ESOP Plan
Identification & Appraisal of Eligible Employees
Valuation of Company
Creation of ESOP pool
Documentation & Granting of ESOPs
https://muds.co.in/esop/
Delivered to the Columbus chapter of the Society of Financial Service Professionals on April 13, 2017 by Kegler Brown's Tom Sigmund and Ted Lape of Lazear Capital Partners, this presentation defines and discussed the benefits of an ESOP (an employee stock ownership plan).
Although this presentation covers the basics of an ESOP, it details what they are used for, ESOP transactions, who is a good candidate, tax benefits, and ongoing ESOP considerations.
Employee provident fund and miscellaneous act, 1952NeerajUpreti2
Overview, Applicability, Contribution by Employer and Employees', Benefits and Registration process of Employee provident fund and miscellaneous act, 1952
With the promulgation of Companies Act, 2013, provisions governing issuance of shares by offering Stock Options to the Employees have been recognized under Section 62(1)(b) of the new Act, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014.
BONUS ACT BASICS
A bonus is an extra amount of money that is added to someone's pay, usually because they have worked very hard.
The practice of paying bonus in India appears to have originated during First World War when certain textile mills granted 10% of wages as war bonus to their workers in 1917.
An employee stock ownership plan (ESOP) may make sense for some dealers and other aftermarket retailers looking to build a succession plan they can control while protecting wealth, diversifying assets and deferring taxes.
Delivered to the Columbus chapter of the Society of Financial Service Professionals on April 13, 2017 by Kegler Brown's Tom Sigmund and Ted Lape of Lazear Capital Partners, this presentation defines and discussed the benefits of an ESOP (an employee stock ownership plan).
Although this presentation covers the basics of an ESOP, it details what they are used for, ESOP transactions, who is a good candidate, tax benefits, and ongoing ESOP considerations.
Employee provident fund and miscellaneous act, 1952NeerajUpreti2
Overview, Applicability, Contribution by Employer and Employees', Benefits and Registration process of Employee provident fund and miscellaneous act, 1952
With the promulgation of Companies Act, 2013, provisions governing issuance of shares by offering Stock Options to the Employees have been recognized under Section 62(1)(b) of the new Act, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014.
BONUS ACT BASICS
A bonus is an extra amount of money that is added to someone's pay, usually because they have worked very hard.
The practice of paying bonus in India appears to have originated during First World War when certain textile mills granted 10% of wages as war bonus to their workers in 1917.
An employee stock ownership plan (ESOP) may make sense for some dealers and other aftermarket retailers looking to build a succession plan they can control while protecting wealth, diversifying assets and deferring taxes.
Business Succession Planning and the ESOP AlternativeSES Advisors
Published in the October-November 2004 edition of the Business Development Journal
“An Employee Stock Ownership Plan – or ‘ESOP,’ is a tax-qualified retirement plan that invests primarily in employer stock,” writes Jim Steiker. “However, ESOPs offer much more than just employee benefits. To owners of closely held contractor firms, an ESOP can be used as a tool of corporate finance and a vehicle for owner buyouts.”
Selling In: Liquidity & Succession Using an ESOPSES Advisors
Published Spring 2006 in MHEDA Journal
Jim Steiker authored this article, which provides a high-level overview of ESOPs, how they work and how they can benefit multiple stakeholders.
Brian Wurpts discusses how an ESOP company's funding decisions can alleviate or exacerbate the "Have/Have Not" problem and ESOP sustainability concerns. Steve Magowan explains how to avail yourself of the protective provisions of IRS Notice 2010-6 for nonqualified deferred compensation plans.
Having secured a job, an individual aspires for a better life, a comfortable home, health care, and a pension to take them easily through retirement blues. Key to lead the life out of retirement blues is pension planning for which the savings through Employees’ Provident Funds are important.
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Read More:- https://medium.com/@vegaequity/stock-vesting-employee-commitment-f99eada3c868
Employee share ownership plans ( ESOP ) whitepaper june 2016Craig West
Find out how to use an Employee Share Ownership Plan as a tool for Business Succession and Exit planning to maximise the value of your business and help you acheive a successful exit - lock in key staff by aligning their ability to earn equity in the business with financial performance.
A detailed presentation covering in-depth details of Stress and Stress Management Techniques.
A very useful for educational institutions and corporate organizations.
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www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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2. What is ESOP?
ESOP may be defined as a part of Employee
benefit plan under which employees buy, at a ‘fair’
value, the stock of the company and they may
become owners of the company for which they
work.
The concept of ESOP was introduced by lawyer
and investment banker Louis Kelso of USA in
1950’s.
In India, ESOP comes under existence in 1987.
ESOP may comes under AS-15 of ICAI, which is
Retirement benefits in Employer’s financial
statement.
3. What is need for ESOP?
To buy the shares of a departing owner.
To borrow money at a lower after-tax cost.
To create an additional employee benefit.
Capital appreciation.
Incentive based retirement.
Tax advantage.
Company reduces its tax liability.
4. How ESOP works?
It operates through a trust which is setup by the company .
Tax deductible contributions are distributed to individual
employee accounts within the trust.
Employee with minimum 1 years of service or 1000 hours of
work in a year is eligible for ESOP.
Employee with minimum 10 years of participation in ESOP
and 55 years of age, accounts upto 25% diversification on
his/her account.
This option continues until age 60, when employee get a
one-time option to diversify his/her account upto 50%.
Employee receive the vested portion of their accounts at
termination, disability, death or retirement.
5. Major Indian companies using ESOP
Wipro
Infosys
Dabur
P&G
HLL
ONGC
Tata technologies
ICICI Bank
Bharti tele-ventures
6. ESOP with respect to Wipro
WIPRO’s employees together have stock
options for 50 lakh equity shares of a
nominal value of Rs.2 each. The plan covers
executive and non-executive directors but
excludes promoter directors. The staff
turnover at WIPRO is as low as 4-5 percent
against an industry rate of 18-20 percent.
This shows the biggest advantage of ESOP,
that is, employee retention.
7. Caveats of ESOP
Investors object why employees should be given a
stake in the company at fair market value. It dilutes the
per share worth of existing investors.
Law does not allow ESOP to be used in partnerships.
Plan committee members can be held responsible if
they knowingly participate in improper transactions.
As value of stock appreciates substantially ESOP may
not have sufficient funds to repurchase stock.
With decrease in value of the company ESOP seems to
be less attractive to the employees.
8. Conclusion
Though having some threats, ESOP is
advantageous. It is used by the
companies to Reward, Retain, Attract
talent, Create a sense of Ownership in the
company and a Retirement benefit
scheme. Hence, it improves the corporate
performance as a whole.
9. Presented By:
Group 6
Section D
MBA (General)
Batch 2006-2008