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

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