Issue of employee stock options to non-residents requires compliance with securities/company rules, sectoral caps and prior government approvals. Grants of employees' stock options and sweat equity to non-resident employees or directors are permitted only if the scheme conforms to SEBI or Companies rules, the issuance adheres to the applicable sectoral foreign investment cap, prior government approval is obtained where the company falls under the approval route or where recipients are citizens of specified neighbouring countries, and the Reserve Bank may require periodic reporting by the issuing company.