TaxTMI 
TaxTMI 
Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021
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....hort title, commencement and application. (1) These regulations may be called the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. (2) They shall come into force on the date of their publication in the Official Gazette. (3) The provisions of these regulations shall apply to the following: - (i) employee stock option schemes; (ii) employee stock purchase schemes; (iii) stock appreciation rights schemes; (iv) general employee benefits schemes; (v) retirement benefit schemes; and (vi) sweat equity shares. (4) The provisions of these regulations shall apply to any company whose equity shares are listed on a recognised stock exchange in India and who seeks to issue sweat equity shares or has a scheme:- (i) for direct or indirect benefit of employees; (ii) involving dealing in or subscribing to or purchasing securities of the company, directly or indirectly; and (iii) satisfying, directly or indirectly, any one of the following conditions: - (a)&nb....
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....s not a promoter or member of the promoter group, but excluding an independent director; or (iii) an employee as defined in sub-clauses (i) or (ii), of a group company including subsidiary or its associate company, in India or outside India, or of a holding company of the company, but does not include- (a) an employee who is a promoter or a person belonging to the promoter group; or (b) a director who, either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten per cent of the outstanding equity shares of the company; (j) "employee stock option scheme or ESOS" means a scheme under which a company grants employee stock options to employees directly or through a trust; (k) "employee stock purchase scheme or ESPS" means a scheme under which a company offers shares to employees, as part of public issue or otherwise, or through a trust where the trust may undertake secondary acquisition for the purposes of the scheme; (l) "exercise" means making of an application by an employee to the company or to the trust for issue of shares or apprecia....
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....ia (Listing Obligations and Disclosure Requirements) Regulations, 2015; (v) "initial public offer or IPO" shall have the same meaning assigned to it under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; (w) "key managerial personnel" shall have the same meaning as defined under section 2(51) of the Companies Act, 2013 (18 of 2013); (x) "market price" means the latest available closing price on a recognised stock exchange on which the shares of the company are listed on the date immediately prior to the relevant date. Explanation,-If such shares are listed on more than one recognised stock exchange, then the closing price on the recognised stock exchange having higher trading volume shall be considered as the market price; (y) "merchant banker" means a merchant banker as defined under regulation 2(1)(cb) of the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, which is registered under section 12 of the Act; (z) "option" means the option given to an employee which gives such an employee a right to purchase or subs....
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...." means a scheme of a company proposing to provide share based benefits to its employees under Chapters III of these regulations, which may be implemented and administered directly by such company or through a trust, in accordance with these regulations; (mm) "securities" means securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (nn) "secondary acquisition" means acquisition of existing shares of the company by the trust on the platform of a recognised stock exchange for cash consideration; (oo) "secretarial auditor" means a company secretary in practice appointed by a company under rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 to conduct secretarial audit pursuant to regulation 24A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015; (pp) "share" means equity shares and securities convertible into equity shares and includes American Depository Receipts, Global Depository Receipts or other depository receipts representing underl....
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....ting up an irrevocable trust(s): Provided that if the scheme is to be implemented through a trust, the same has to be decided upfront at the time of taking approval of the shareholders for setting up the scheme(s): Provided further that if prevailing circumstances so warrant, the company may change the mode of implementation of the scheme subject to the condition that a fresh approval of the shareholders by a special resolution is obtained prior to implementing such a change and that such a change is not prejudicial to the interests of the employees: Provided further that if the scheme(s) involves secondary acquisition or gift or both, then it shall be mandatory for the company to implement such scheme(s) through a trust(s). (2) A company may implement several schemes as permitted under these regulations through a single trust: Provided that such single trust shall keep and maintain proper books of account, records and documents for each scheme so as to explain its transactions and to disclose at any point of time, the financial position of each scheme and in particular give a true and fair view of the state of affairs of each scheme. ....
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....mum of twenty five per cent as prescribed under the Securities Contracts (Regulation) Rules, 1957. (10) Secondary acquisition in a financial year by the trust shall not exceed two per cent of the paid up equity capital of the company as at the end of the previous financial year. (11) The total number of shares under secondary acquisition held by the trust shall at no point of time exceed the below mentioned limits as a percentage of the paid up equity capital of the company as at the end of the financial year immediately prior to the year in which the shareholders' approval is obtained for such secondary acquisition: Sr. No. Particulars Limit A For the schemes enumerated in Part A, Part B or Part C of Chapter III of these regulations 5% B For the schemes enumerated in Part D or Part E of Chapter III of these regulations 2% C For all the schemes in aggregate 5% Explanation 1,-The above limits shall automatically include within their ambit the expanded or reduced capital of the company where such expansion or reduction has taken place on account of corporate action(s) including issue of bonus shares, split, rights issue, buy-ba....
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...., the amount necessary to meet his/her tax obligations and other related expenses pursuant to exercise of options granted under the ESOS; (b) on vesting or exercise, as the case may be, of SAR under the scheme covered by Part C of Chapter III of these regulations; (c) in case of emergency for implementing the schemes covered under Part D and Part E of Chapter III of these regulations, and for this purpose - a. the trustee(s) shall record the reasons for such sale; and b. money so realised on sale of shares shall be utilised within a definite time period as stipulated under the scheme or trust deed. (d) participation in buy-back or open offers or delisting offers or any other exit offered by the company generally to its shareholders, if required; (e) for repaying the loan, if the unappropriated inventory of shares held by the trust is not appropriated within the timeline as provided under sub-regulation (12); (f) winding up of the scheme(s); and (g) based on approval granted by the Board to an applicant, for the reaso....
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....ectors of the company as provided under regulation 19 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time: Provided that a company may also opt to designate its nomination and remuneration committee as the compensation committee for the purposes of these regulations. (3) The compensation committee shall, inter alia, formulate the detailed terms and conditions of the schemes which shall include the provisions as specified in Part B of Schedule - I of these regulations. (4) The compensation committee shall frame suitable policies and procedures to ensure that there is no violation of securities laws including the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 and the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, as amended from time to time, by the trust, the company and its employees, as may be applicable. 6. Shareholders' approval. (1) No scheme shall be offered to employees of a company unless the shareholders ....
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....schemes shall disclose full details of the variation, the rationale therefor, and the details of the employees who are beneficiaries of such variation. (5) A company may reprice the options, SAR or shares, as the case may be, which are not exercised, whether or not they have been vested, if the schemes were rendered unattractive due to fall in the price of the shares in the stock market: Provided that the company ensures that such repricing is not detrimental to the interests of the employees and approval of the shareholders by a special resolution has been obtained for such repricing. 8. Winding up of the schemes. In case of winding up of the schemes being implemented by a company, the excess monies or shares remaining with the trust after meeting all the obligations, if any, shall be utilised for repayment of loan or by way of distribution to employees or subject to approval of the shareholders, be transferred to another scheme under these regulations, as recommended by the compensation committee. 9. Non-transferability. (1) Option, SAR or any other benefit granted to an employee under the regulations shall not be transferable to any pers....
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....e terms of grant shall continue in case of such transferred or deputed employee even after the transfer or deputation. (8) In the event that an employee who has been granted benefits under a scheme, is transferred pursuant to scheme of arrangement, amalgamation, merger or demerger or continued in the existing company, prior to the vesting or exercise, the treatment of options in such case shall be specified in such scheme of arrangement, amalgamation, merger or demerger provided that such treatment shall not be prejudicial to the interest of the employee. 10. Listing. In case a new issue of shares is made under any scheme, shares so issued shall be listed immediately on all recognised stock exchange(s) where the existing shares are listed, subject to the following conditions: (a) The scheme is in compliance with these regulations; (b) A statement, as specified in Part D of Schedule - I of these regulations, is filed and the company obtains an in-principle approval from the recognised stock exchange(s); (c) As and when an exercise is made, the company notifies the concerned recognised stock exchange(s) as per the stat....
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....y shall disclose the payment or receipt, as the case may be, in the ‗notes to accounts' to their financial statements. (6) The company shall appoint a merchant banker for the implementation of schemes covered by these regulations till the stage of obtaining in-principle approval from the recognized stock exchanges in accordance with clause (b) of regulation 10 of these regulations. 13. Certificate from auditors. In the case of every company which has passed a resolution for the scheme(s) under these regulations, the Board of Directors shall at each annual general meeting place before the shareholders a certificate from the secretarial auditors of the company that the scheme(s) has been implemented in accordance with these regulations and in accordance with the resolution of the company in the general meeting. 14. Disclosures. In addition to the information that a company is required to disclose in relation to employee benefits under the Companies Act, 2013 (18 of 2013), the Board of Directors of such a company shall also disclose the details of the scheme(s) being implemented, as specified in Part F of Schedule - I of these regulations. 15.....
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.... dividend or to vote or in any manner enjoy the benefits available to a shareholder in respect of an option granted to him/her, till shares are issued to him/her upon exercise of the option. 20. Consequence of failure to exercise an option. The amount paid by the employee, if any, at the time of grant, vesting or exercise of option- (a) may be forfeited by the company if the option is not exercised by the employee within the exercise period; or (b) may be refunded to the employee if the options are not vested due to non-fulfilment of conditions relating to vesting of option as per the ESOS. PART B: EMPLOYEE STOCK PURCHASE SCHEME (ESPS) 21. Administration and implementation. Subject to the provisions of these regulations, an ESPS shall contain the details of the manner in which the scheme will be implemented and operated. 22. Pricing and lock-in. (1) A company may determine the price of shares to be issued under an ESPS, subject to conforming to the accounting policies specified under regulation 15 of these regulations. (2) Shares issued under an ESPS shall be locked-in for a minimum period of one year from the ....
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....appropriate policy with respect to the death or permanent incapacity of an employee, subject to compliance with applicable laws. 25. Rights of the SAR holder. The employee holding a SAR shall not have the right to receive dividend or to vote or in any manner enjoy the benefits available to a shareholder in respect of a SAR granted to him/her. PART D: GENERAL EMPLOYEE BENEFITS SCHEME (GEBS) 26. Administration and implementation. (1) Subject to the provisions of these regulations, GEBS shall contain the details of the scheme and the manner in which the scheme shall be implemented and operated. (2) The shares of the company or shares of its listed holding company shall not exceed ten per cent of the book value or market value or fair value of the total assets of the scheme, whichever is lower, as appearing in its latest balance sheet (whether audited or limited reviewed) for the purposes of GEBS. (3) The secretarial auditor of the company shall certify compliance with sub-regulation (2) at the time of adoption of such balance sheet by the company. PART E: RETIREMENT BENEFIT SCHEME (RBS) 27. Administration and implementatio....
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....t any time: Provided further that a company listed on Innovators Growth Platform shall be permitted to issue not more than fifteen percent of the paid up equity share capital in a financial year subject to overall limit not exceeding fifty percent of the paid up equity share capital of the company, up to ten years from the date of its incorporation or registration. 32. Special resolution. (1) For the purposes of passing a special resolution under clause (a) of sub-section (1) of section 54 of the Companies Act, 2013 (18 of 2013), the explanatory statement to be annexed to the notice for the general meeting pursuant to section 102 of the Companies Act, 2013 (18 of 2013) shall contain disclosures as specified in the Schedule - II of these regulations. (2) The issue of sweat equity shares to employees who belong to promoter or promoter group shall be approved by way of a resolution passed by a simple majority of the shareholders in general meeting: Provided that for passing such a resolution, voting through postal ballot and/or e-voting as specified under Companies (Management and Administration) Rules, 2014 shall also be adopted; Provided further t....
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....on. The amount of sweat equity shares issued shall be treated as part of managerial remuneration for the purpose of sections 196, 197 and other applicable provisions of the Companies Act, 2013 (18 of 2013), if the following conditions are fulfilled: (i) the sweat equity shares are issued to any director or manager; and (ii) the sweat equity shares are issued for non-cash consideration, which does not take the form of an asset which can be carried to the balance sheet of the company in accordance with the relevant accounting standards. 38. Lock-in of sweat equity shares. (1) The sweat equity shares shall be locked in for such period of time as specified in relation to a preferential issue under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from time to time. (2) The provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosures Requirements) Regulations, 2018 in respect of public issue in terms of lock-in and computation of promoters' contribution shall apply if a company makes a public issue after it has issued sweat equit....
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....the purposes of these regulations, "regulatory sandbox" means a live testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market, subject to such conditions as may be specified by the Board. 43. Exemption from enforcement of the regulations in other cases. (1) The Board may suo motu or on an application made by a company, for reasons recorded in writing, grant relaxation from strict compliance with any of these regulations subject to such conditions as the Board deems fit to impose in the interests of investors in securities and the securities market. (2) A company making an application under sub-regulation (1), shall pay a non-refundable fee of rupees one lakh by way of direct credit in the specified bank account of the Board through NEFT/RTGS/IMPS or any other mode allowed by the Reserve bank of India. CHAPTER VI MISCELLANEOUS 44. Directions by the Board. Without prejudice to provisions of the Act and those of the Companies Act, 2013 (18 of 2013), the Board may in case of....
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....ovisions in Trust Deed [See regulation 3(3)] The trust deed shall, inter alia, cover the following: 1. Details of the trust, including: (i) Name of the trust; (ii) Object of the trust; (iii) Details of settlor; (iv) Details of scheme(s) administered; (v) Source(s) of funds; (vi) Description of the manner in which the trust funds shall be used for meeting the objects of the trust; (vii) Description of the classes of beneficiaries along with their rights and obligations; (viii) Details of trustee(s). 2. Powers and duties of trustee(s), including: (i) To frame rules for administration of the scheme(s) in compliance with the scheme documents, object(s) of the trust and these regulations; (ii) To maintain books of account of the trust as required under law including these regulations; 3. Provisions for dissolution of the trust; 4. Trust deed shall provide that it would be the duty of the trustees to act in the interest of employees who are beneficiaries of the trust and subject to provisions of the....
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.... are on long leave; i. eligibility to avail benefits under schemes covered by Part D and/or Part E of Chapter III of the regulations in case of employees who are on long leave; j. the procedure for funding the exercise of options / SARs; and k. the procedure for buy-back of specified securities issued under these regulations, if to be undertaken at any time by the company, and the applicable terms and conditions, including: (i) permissible sources of financing for buy-back; (ii) any minimum financial thresholds to be maintained by the company as per its last financial statements; and (iii) limits upon quantum of specified securities that the company may buy-back in a financial year. Explanation,-Specified securities means as defined under the Securities and Exchange Board of India (Buyback of Securities) Regulations, 2018 Part C - Contents of the explanatory statement to the notice and resolution for shareholders meeting [See regulation 6(2)] The explanatory statement to the notice and the resolution proposed to be passed for the schemes in general meeting shall, inter alia, contai....
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....ctors' report'; r. period of lock-in. s. Terms & conditions for buyback, if any, of specified securities covered under these regulations. Part D- Information required in the statement to be filed with recognised Stock Exchange(s) [See regulation 10(b)] Description of Schemes 1 Authorized Share Capital of the Company. 2 Issued Share Capital of the Company as on date of Institution of the scheme/ amendment of the scheme. 3 Date of institution of the scheme/ amendment of the scheme. 4 Validity period of the scheme. 5 Date of notice of AGM/EGM for approving the scheme/for amending the scheme/for approving grants under regulation 6(3) of these regulations. 6 Date of AGM/EGM approving the scheme/amending the scheme/approving grants under regulation 6(3) of these regulations. 7 Kinds of benefit granted under the scheme. 8 Identity of classes of persons eligible under the scheme: a. employees b. employees outside India c. employees of subsidiary d. employees of holding company e. directors, whether ....
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....3) of these regulations with respect to: a. Grant to employees of subsidiary or holding or associate company. b. Grant 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 grant. 29 Details of the variation made to the scheme along with the rationale therefor and the details of the employees who are beneficiary of such variation: Sd/- Company Secretary Place: Date: Documents to be filed with registration statement 1 Copy of scheme, certified by the Company Secretary. 2 Copy of notice of AGM/EGM approving the scheme/for amending the scheme/for approving grants under regulation 6(3) of these regulations certified by the Company Secretary. 3 Copy of resolution of shareholders for approving the scheme/ for amending the scheme/for approving grants under regulation 6(3) of these regulations certified by the Company Secretary. 4 List of Promoters as defined under these regulations. 5 Copy of latest Annual Report. 6 Certificate of Secretarial Auditor on compliance with ....
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....on which the company's shares are listed : 3. Filing date of the statement referred in regulation 10(b) of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 with the recognised Stock Exchange : 4. Filing Number, if any : 5. Title of the Scheme pursuant to which shares are issued, if any: 6. Kind of security to be listed : 7. Par value of the shares : 8. Date of issue of shares : 9. Number of shares issued : 10. Share Certificate No., if applicable : 11. Distinctive number of the share, if applicable : 12. ISIN Number of the shares if issued in Demat : 13. Exercise price per share: 14. Premium per share : 15. Total issued shares after this issue : 16. Total issued share capital after this issue : 17. Details of any lock-in on the shares : 18. Date of expiry of lock-in : 19. Whether shares are identical in all respects to existing shares? If not, when will they become identical? : 20. Details of listing fees, if payable : Signature of Company Secretary/Compli....
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.... Number of options exercised during the year Number of shares arising as a result of exercise of options Money realized by exercise of options (INR), if scheme is implemented directly by the company Loan repaid by the Trust during the year from exercise price received Number of options outstanding at the end of the year Number of options exercisable at the end of the year (v) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock. (vi) Employee wise details (name of employee, designation, number of options granted during the year, exercise price) of options granted to - (a) senior managerial personnel as defined under Regulation 16(d) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015; (b) any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year; and (c)&n....
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....e company at the time of issuance; Consideration received against the issuance of shares, if scheme is implemented directly by the company Loan repaid by the Trust during the year from exercise price received E. Details related to SAR (ii) A description of each SAR scheme that existed at any time during the year, including the general terms and conditions of each SAR scheme, including - (a) Date of shareholders' approval (b) Total number of shares approved under the SAR scheme (c) Vesting requirements (d) SAR price or pricing formula (e) Maximum term of SAR granted (f) Method of settlement (whether in cash or equity) (g) Choice of settlement (with the company or the employee or combination) (h) Source of shares (primary, secondary or combination) (i) Variation in terms of scheme (iii) Method used to account for SAR - Intrinsic or fair value. (iv) Where the company opts for expensing of SAR using the intrinsic value of SAR, the difference between the employee compensation cos....
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....rms of scheme G. Details related to Trust The following details, inter alia, in connection with transactions made by the Trust meant for the purpose of administering the schemes under the regulations are to be disclosed: (iv) General information on all schemes Sl. No. Particulars Details 1. Name of the Trust 2. Details of the Trustee(s) 3. Amount of loan disbursed by company / any company in the group, during the year 4. Amount of loan outstanding (repayable to company / any company in the group) as at the end of the year 5. Amount of loan, if any, taken from any other source for which company / any company in the group has provided any security or guarantee 6. Any other contribution made to the Trust during the year (v) Brief details of transactions in shares by the Trust (a) Number of shares held at the beginning of the year; (b) Number of shares acquired during the year through (i) primary issuance (ii) secondary acquisition, also as a percentage of paid up equity capital as at the end of the previous financial ye....
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....for the company (i.e., sensitivity to foreign exchange rate fluctuations, difficulty in availability of raw materials or in marketing of products, cost/time overrun etc.). 4. Continuing disclosure requirement: The option or SAR grantee shall be provided 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. C: Salient Features of the Scheme This Part shall contain the salient features of the scheme of the company including the conditions regarding vesting, exercise, adjustment for corporate actions, and forfeiture of vested options / SARs as the case may be. It shall not be necessary to include this Part if it has already been provided to the employee in connection with a previous grant, and no changes have taken place in the scheme since then. If the scheme administrator (whether the company itself or an outside securities firm appointed for this purpose) provides advisory services to the grantees in connection with the exercise of options or SAR, as the case may be, or sale of resulting shares, such advice must ....