This document discusses stock-based compensation plans, including employee stock option plans, restricted stock units, stock appreciation rights, and employee stock purchase plans. It covers the lifecycle of these plans from grant to vesting to exercise and sale. Key aspects addressed include determining coverage and number of shares to grant, setting the grant price, vesting periods and conditions, liquidity options upon exercise, and accounting and regulatory requirements. The goal is to design and implement stock-based plans that attract and retain talent while meeting compliance standards.

1. S T O C K B A S E D
C O M P E N S A T I O N P L A N S
C H E R I A N M J

2. SETTLED IN
EQUITY OR CASH
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3. SETTLED IMMEDIATELY
OR
IN FUTURE
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4. EMPLOYEE STOCK OPTIONS PLANS
RESTRICTED STOCK UNITS
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5. STOCK APPRECIATION RIGHTS
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6. EMPLOYEE STOCK PURCHASE PLAN
RESTRICTED STOCK AWARDS
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7. LIFE CYCLE
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VEST
EXERCISE
SELL
GRANT

8. GRANT – COVERAGE - WHO?
PASSION
SKILL
CUSTOMERS
PAYMENTS
SUSTAINABILITY
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9. GRANT – HOW MUCH DO I DILUTE?
COVERAGE - WHO & HOW MANY?
BENEFIT - WHAT IS THE MINIMUM BENEFIT?
VALUE - WHAT IS YOUR DREAM?
(THE EXPECTED UPSIDE)
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10. GRANT – OBJECTIVE
PAST PERFORMANCE REWARD
IN ANTICIPATION OF FUTURE PERFORMANCE
JOINING BONUS
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11. GRANT – PRICE
FAIR MARKET VALUE
FACE VALUE
DISCOUNT TO FAIR MARKET VALUE
(HIGHER ACCOUNTING CHARGE WITH DEEPER DISCOUNT)
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12. VESTING – SERVICE PERIOD
UNIFORM ACROSS THE BOARD
DIFFERENT FOR DIFFERENT PEOPLE
FRONT ENDED
BACK ENDED
UNIFORM OVER THE SERVICE PERIOD
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13. VESTING – HOW DO YOU EARN THE BENEFIT?
PASSAGE OF TIME
PERFORMANCE OF THE INDIVIDUAL
PERFORMANCE OF THE COMPANY
TOTAL INVESTOR RETURNS
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14. EXERCISE – NEW PARTNERS!!
LIQUIDITY OPTIONS:
-INITIAL PUBLIC OFFER?
-TRADE SALE?
-BUY BACK?
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15. NEW PARTNERS – PROTECT THEM!!
ACCELERATE VESTING ON PROMOTER EXIT?
TERMINATION POST CORPORATE ACTION? -
ACCELERATE VESTING!!
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16. NEW PARTNERS – DEAL BREAKERS??
EXERCISE ONLY ON A LIQUIDITY EVENT?
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17. DOCUMENT IT & COMMUNICATE!
SHAREHOLDER APPROVALS
BOARD APPROVALS
PLAN DOCUMENT
EMPLOYEE AGREEMENT
TALK ABOUT THE PROGRESS & WEALTH!
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18. ACCOUNT FOR IT!
THIS IS A FORM OF COMPENSATION,
SO ACCOUNT FOR IT!
- OPTION VALUATION (BLACK-SCHOLES OPTION PRICING)
- DISCLOSURE IN NOTES TO ACCOUNTS
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19. REGULATORY NOTES
PRIOR APPROVAL OF SHAREHOLDERS
ONLY PERMANENT EMPLOYEES
NO PROMOTERS
NO INDEPENDENT DIRECTORS
MINIMUM 1 YEAR FROM GRANT TO VESTING
MINIMUM PRICE – FACE VALUE
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20. TRUST ROUTE
NOT UNLESS YOU WANT TO FACILITATE BUYBACK
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21. REGULATIONS
COMPANIES ACT, 2013
INCOME TAX ACT, 1961
GUIDANCE NOTE ON STOCK BASED COMPENSATIONS, ICAI
RBI GUIDELINES
SEBI (SBEB) REGULATIONS, 2014
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22. INCOME TAX – TAX ON PERQUISITE VALUE
GRANT: NO TAX
VESTING: NO TAX
EXERCISE:
FMV AS ON EXERCISE – EP = PERQUISITE (SALARY)
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23. INCOME TAX- CAPITAL GAINS
SALE:
SALE PRICE – FMV AS ON EXERCISE = LONG/ SHORT
TERM CAPITAL GAIN
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24. “YOU MAY NOT CHANGE THE WORLD, BUT YOU
CAN DEFINITELY CHANGE THE WAYA FEW PEOPLE
EXPERIENCE IT.”
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25. THANK YOU
CHERIAN M J
cherian@keynoteindia.net
+91-9967774042