share based employee benefits & sweat equity

SEBI press release dated 6th August, 2021 wherein they are merging two regulations viz. Issue of Sweat Equity and Share Based Employee Benefits into one viz. Share Based Employee Benefits and Sweat Equity Regulations 2021.

Further, read on………..

The Board approved the merger of SEBI (Issue of Sweat Equity) Regulations, 2002 (“Sweat Equity Regulations”) and SEBI (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”) into a single regulation called the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. While approving the said merger, the Board also agreed to certain amendments to existing provisions. Some of the key proposals approved by the Board are as follows:

  1. The companies will be allowed to provide share based employee benefits to employees, who are exclusively working for such company or any of its group companies including its subsidiary or its associate.
  2. The companies will have flexibility in switching the administration of their schemes from the trust route to the direct route and vice versa with the approval of the shareholders, subject to the condition that the switch is not
    prejudicial to the interest of the employees.
  3. The time period for appropriating the unappropriated inventory of the trust has been extended from existing 1 year to 2 years subject to the approval of the Compensation/Nomination and Remuneration Committee for such extension.
  4. It has been decided to dispense with the minimum vesting period and lockin period for all share benefit schemes in the event of death or permanent incapacity (as defined by the company) of an employee.
  5. Maximum yearly limit of sweat equity shares that can be issued by a company listed on the main board has been prescribed at 15% of the existing paid up equity share capital within the overall limit not exceeding 25% of the
    paid-up capital at any time. Further, in case of companies listed on the Innovators Growth Platform (“IGP”), the yearly limit will be 15% and overall limit shall be 50% of the paid-up capital at any time. This enhanced overall limit for IGP shall be applicable for 10 years from the date of company’s incorporation.

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