ESOPs, or employee stock option plans, allow companies to provide employees with ownership stakes and help attract, retain, and incentivize talent. The Companies Act 2013 and related rules provide the regulatory framework for ESOPs at listed and unlisted companies. Key aspects include shareholder approval, eligibility of permanent employees, and minimum vesting periods. Companies can implement ESOPs through a direct route of share allotments or a trust route involving an employee welfare trust. The document provides details on the ESOP regulatory framework and the services offered by Corporate Professionals to help companies establish and manage compliant ESOP programs.

1. ESOPs –
a new genes
under
Companies
Act, 2013
Ms. Mohini Varshneya
M. No. : +91 9971673332
Email Id: mohini@indiacp.com /
info@esoponline.in

2. What are ESOP?
 Employee Stock Option Plan/Equity Incentive Plan (commonly referred to as
ESOP) is an employee-owner method that provides a Company's workforce with
an ownership interest in the company
 ESOPs are one of the most important tools to attract, encourage and retain
Employees.
 The option granted under the plan confers a right but not an obligation on the
employee. Stock options are subject to vesting, requiring continued service
over a specified period of time. Upon vesting of options, employees can
exercise the options to subscribe to the Company’s shares, by paying the pre-
determined exercise price.
 Extending benefits through ESOPs is like creating a win-win situation for both
Employer & Employee.

3. Restructuring modes
under ESOP
Stock Options
(Sharing in the Capital of the
company)
Employee Stock Option
Scheme (ESOS)
Employee Stock
Purchase Plan (ESPP)
Restricted Stock Units
(RSUs)
Stock Indexed Plans (No
sharing in the Capital of the
Company)
Stock Appreciation
Rights (SARs
Phantom Stocks

4. Scenario under
ERSTWHILE Companies
Act, 1956
 Provisions related to ESOPs were not documented.
 Allotment to the Employees was considered under the ambit of
Section 81(1A) related to issuance of shares.
There was no other Regulatory framework for
Unlisted companies. However, Listed Companies
were been regulated by SEBI (Employee Stock
Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999

5. ESOPs- Now covered under the ambit of Companies Act, 2013
Unlisted
Companies
Listed
Companies
Regulated by Section 62(1)(b) of
the Act read with SEBI (ESOS
and ESPS) Guidelines, 1999
Regulated by Section 62(1)(b) of
the Act read with Rule 12 of
Companies (Share Capital and
Debentures) Rules, 2014.
Scenario under
New Companies
Act, 2013

6. Highlights of Rule 12 of the
Companies (Share Capital and
Debentures) Rules 2014.
 Approval from Shareholders via Special Resolution
 Permanent Employees of Company, Holding Company,
Subsidiary Company and Associate Company can be covered.
 All Directors excluding Promoter Directors and Independent
Directors can be covered under the ESOP Plan.
 Freedom to determine Exercise Price.
 Freedom to determine lock-in period.
 Separate resolution to be passed in case of grant to employees
of holding/subsidiary company.
 Explanatory statement shall disclose material details as
prescribed.

7. Highlights of Rule 12
continued…………
 Mandatory Annual disclosures in Directors Report.
 Minimum period of one year between grant and vesting of
options.
 Options granted cannot be pledged, hypothecated or otherwise
transferred.
 In case of death, all options granted shall vest in the legal heirs.
 In case of resignation, all unvested options shall lapse.
 Register to be maintained as per format prescribed by ROC.

8. ROUTES under ESOp
Trust
Route
Fresh allotments of the
Equity shares of the
company are made to
employees, as and
when they Exercise the
Options.
Direct
Route
The Company forms an Employee
Welfare Trust for administration of
the ESOP wherein the Company
issues shares to the Trust for
onward transfer to the Employees
upon Exercise of Options

9. As per NEW companies act,
following Are not covered
under THE ambit of trustees
Directors
Key Managerial Personnel
Promoter of he Company
Or any relative of such Director, Key Managerial
Personnel or Promoter
Beneficial owner holding 10% or more of the paid-up
capital

10. Regulatory framework
for PROVISIONING OF MONEY
BY COMPANY to EMPLOYEE
WELFARE TRUSTS
• Companies Act, 2013 allows Companies to make provision of money
involving purchase or subscription of its own shares or shares of holding
company subject to the compliance of the following stipulations:
 The scheme of provision of money to be separately passed by the
Shareholders.
 Value of the Shares in the Trust shall not exceed 5% of the aggregate of
paid up capital and free reserves of the company.
 Valuation of the shares purchased by the Trust is to be made by the
Registered Valuer in case of Unlisted Companies.

11. About us
is a venture promoted by Corporate Professionals Group, which is
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Professionals.

12. OUR OFFEREINGs
Planning /
Designing /
Documentation
Implementation
/ Employee
Communication
Administration
ESOP Accounting
& Valuation
ESOP Trust
Formation
Statutory
Compliances
Opinion /
Advisory

13. Our value added service
We at Corporate Professionals, provides a comprehensive
solution for all ESOP related needs of any Company.
Our Web Application, is
specifically designed by keeping in view the regulatory
framework under which ESOPs Function.

14. SOME OF OUR ESOP
CLIENTELE

15. For further
clarification,
please visit
www.esoponline.in
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