Rule 9 - Issue of Sweat Equity Shares for consideration other than cash.

Companies Issuing Sweat Equity Shares Must Follow Valuation Guidelines and Justify Actions to Shareholders Under Companies Act, 1956.

When a company plans to issue sweat equity shares for non-cash consideration, it must adhere to specific guidelines. The valuation of intellectual property or know-how must be conducted by a valuer, who may consult industry experts. The valuer submits a report justifying the valuation, which is shared with shareholders before the general meeting. The company must also justify the issuance of sweat equity shares in the meeting notice. If issued to directors or managers for non-cash consideration not recorded as an asset, these shares are considered part of managerial remuneration under certain sections of the Companies Act, 1956.