TaxTMI 
TaxTMI 
Amendment to SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
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....d Guidelines. Accordingly, the amendments to the captioned Guidelines have been made in exercise of powers conferred under section 11(1) of SEBI Act, 1992. The amendments are enclosed. You are directed to ensure compliance with the Guidelines. These amendments except clauses 22.3 and 22.6 shall come into force with immediate effect. Clauses 22.3 and 22.6 shall come into force on the date/s specified by the Board. The amended guidelines are also available in SEBI website i.e. www.sebi.gov.in Yours faithfully, Sd/- (Neelam Bhardwaj) Deputy General Manager Primary Market Department Tel. (Board): 22850451-56, 22880962-70(Extn. 367) Tel. (Direct: 22842826 email: [email protected] Fax: 22045633 AMENDMENTS TO SEBI (EMPLOYEE STOCK OPTION SCHEME AND EMPLOYEE STOCK PURCHASE SCHEME) GUIDELINES, 1999 (1) In clause 2.1, (i) after sub-clause (2), the following shall be inserted, namely- "(2A) 'employee stock option' means the option given to the whole-time Directors, Officers or employees of a company which gives such Directors, Officers or employees, the benefit or right to purchase or subscribe at a future date....
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....deration by the compensation committee- (i) the number and the price of ESOS shall be adjusted in a manner such that total value of the ESOS remains the same after the corporate action (ii) for this purpose global best practices in this area including the procedures followed by the derivative markets in India and abroad shall be considered. (iii) the vesting period and the life of the options shall be left unaltered as far as possible to protect the rights of the option holders." (4) In clause 6.2, after sub-clause (i), the following shall be inserted, namely- "(j) the method which the company shall use to value its options whether fair value or intrinsic value. (k) the following statement : "In case the company calculates the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed in the Directors report and also the impact of this difference on profits and on EPS of the com....
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....or graded vesting, the vesting period shall be determined separately for each portion of the option and shall be accounted for accordingly." (9) In clause 17.2 after sub-clause (b), the following shall be inserted namely- "(c) Total number of shares to be granted." (10) After clause 17.4, the following shall be inserted, namely- "17.5 Approval of shareholders by way of separate resolution in the general meeting shall be obtained by the company in case of; (a) allotment of shares to employees of subsidiary or holding company and, (b) allotment of shares to identified employees, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of allotment of shares. (11) Clause 21 shall be omitted. (12) For clause 22.1, the following shall be substituted, namely- "22.1 The shares arising pursuant to an ESOS and shares issued under an ESPS shall be listed immediately upon exercise in any recognized stock exchange where the securities of the company are listed subject to compliance of the following : ....
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.... line with the clauses 12 and 19 of these guidelines, regarding all the options/shares issued in last three (3) years (separately for each year) and on a cumulative basis for all the options/shares issued prior to date of the prospectus. 22.3 For listing of shares issued pursuant to ESOS or ESPS the company shall make application to the Central Listing Authority as per SEBI (Central Listing Authority) Regulations, 2003 and obtain the in-principle approval from Stock Exchanges where it proposes to list the said shares. 22.4 The existing provisions of lock-in specified in SEBI (Disclosure and Investor Protection) Guidelines, 2000 shall not be applicable on the pre-initial public offering ESOS options/shares, ESPS options/shares held by employees other than promoters provided that the earlier resolution is ratified by the shareholders in General Meeting and disclosures in the prospectus for IPO is made as mentioned in clause 22.2 (i) & (ii). 22.5 The ESOS/ESPS shares held by the promoters prior to Initial Public offering shall be subject to lock-in as per the provisions of SEBI (Disclosure and Investor Protection) Guidelines, 2000. 22.6 The listed c....
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....erlying stock or its volatility, the life of the option, dividends on the stock, or the risk-free interest rate. (iv) Where the exercise price is fixed in Indian Rupees, the risk-free interest rate used shall be the interest rate applicable for a maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities. (v) The expected life of an award of stock options shall take into account the following factors : (a) The expected life must at least include the vesting period. (b) The average lengths of time similar grants have remained outstanding in the past. If the company does not have a sufficiently long history of stock option grants, the experience of an appropriately comparable peer group may be taken into consideration. (c) The expected life of ESOSs should not be less than half of the exercise period of the ESOSs issued until and unless the same is supported by historical evidences with respect to ESOSs issued by the company earlier. (vi) If the company does not have a sufficiently long history of traded stock pri....
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....tion grant or otherwise. 3. Risk Factors : Management perception of the risk factors of the company in accordance with item VIII of Part I of Schedule II of the Companies Act. 4. Continuing disclosure requirement : The option grantee should receive copies of all documents that are sent to the members of the company. This shall include the annual accounts of the company as well as notices of meetings and the accompanying explanatory statements. Part C Salient Features of the Employee Stock Option Scheme This Part shall contain the salient features of the employee stock option scheme of the company including the conditions regarding vesting, exercise, adjustment for corporate actions, and forfeiture of vested options. It shall not be necessary to include this Part if it has already been provided to the employee in connection with a previous option grant, and no changes have taken place in the scheme since then. If the option administrator (whether the company itself or an outside securities firm appointed for this purpose) provides advisory services to the option grantees in connection with the exercise of o....
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....under the plan : 19. Whether employee can exercise all the Options Vested at one time ? Yes/No 20. Whether employee can exercise vested Options at various points of time within the exercise period ? Yes/No 21. Whether scheme provides for the procedure for making a fair and reasonable adjustment to the number of options and to the exercise price in case of rights issues, bonus issues and other corporate actions ? Clause in Scheme describing such adjustment : 22. Description of the appraisal process for determining the eligibility of employees under the scheme. 23. The specified time period within which vested options are to be exercised in the event of termination or resignation of an employee : 24. The specified time period within which options are to be exercised in the event of death of the employee : 25. Whether Plan provides for conditions under which option vested in employees may lapse in case of termination of employment for misconduct ? Clause in Scheme describing such adjustment: 26. Whether Plan provide....
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....ot previously disclosed in the statement or any material change to such information in the statement. (2) To notify, the concerned stock exchanges on which the securities of the company are listed, of each issue of securities pursuant to the exercise of options under the scheme mentioned in this Statement, in the prescribed form, as amended from time to time. (3) That the company shall conform to the accounting policies specified in clause 13.1 of the SEBI (ESOS & ESPS) Guidelines. (4) That the Scheme confirms to the SEBI (ESOS & ESPS) Guidelines. (5) That the company has in place systems/codes/procedures to comply with the SEBI (Insider Trading) Regulations. Signatures Pursuant to the requirements of the SEBI Act/guidelines, the company certifies that it has reasonable grounds to believe that it meets all the requirements for the filing of this form and has duly caused this statement to be signed on its behalf by the undersigned, thereunto, duly authorized. Name of the company Sd/- Name of the Compliance Officer Designation Date : ....