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ESOP is the best way of remuneration to the eligible employees. Roll out the ESOP plan hassle free with ComplyKart Experts.

With our Services, you get:

  1. Consultancy on ESOP
  2. Formation of ESOP Plan
  3. ESOP Trust Formation
  4. Identification of Eligible Employees
  5. Valuation of Company
  6. Creation of ESOP pool
  7. Documentation & Granting of ESOPs

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What is Employee Stock Option Plan

An ESOP also known as Employee Stock Option Plan refers to a benefit plan which offers employees an option to acquire the shares in the organization, it is one of the most important tools to encourage and retain the best talents of company for longer period. Employee Stock Option Plans are just options that could be purchased at a specific price before the exercise date. They are defined in Companies Rules and Regulations under the Companies Act, 2013 which employer need to follow for granting Employees Stock Option Plan to their employees.

A company grants an ESOP to its employees for acquiring a specified number of shares of the company at future date on a predefined price for a particular time period (in years) which is called Lock In period. It means employee is bound to work for the company unless and until the entire stock option is expired. There is no limit on number of employees for the issue of ESOP. There shall be a minimum period of one-year gap between the grant of options and vesting of option.

In some of the cases, the foreign holding/subsidiary/ company can also grant such options to the employees of the Indian subsidiary/ holding company. The eligible employees are under no compulsion to buy these number of shares and are free to reject the offer if they wish. The option granted to the employees shall not be pledged, hypothecated, mortgaged or otherwise encumbered in any other manner.

Only the employees to whom the option is granted shall be entitled to exercise the option subject to the event of the death of employee. cases where an employee suffers a permanent disability in employment, the options granted to him as on the date of permanent disability, shall vest in him on that very day.

Companies also allow the vesting of ESOP through a trust. Normally Trusts are created by the listed entity to ease the vesting of ESOP and opting the cashless allotment of ESOPs. Companies are required to maintain a Register of Employee Stock Options in Form SH-6 and the Register is required to be maintained at the head office of company or any other place decided by the Board.

Eligibility Criteria for Granting ESOP

  1. An employee of the company who has been working on a permanent basis

  2. A Director but not an independent director of the company

  3. An employee covered above of a holding or associate company of the company who does not belong to the promoter group or a Director holding more than 10% shares of company, directly or indirectly.

Advantages of Employee Stock Plan

Motivates the employees

It attracts, reward, and motivates the employees, employees of the company feel motivated as company provide a beneficial scheme for them and employees provide efficiency towards the company.

Sense of Ownership

ESOP Scheme act as an incentive that creates the sense of ownership among the employees as they hold the shares of company.

Retirement Benefit Plan

ESOP is a good retirement benefit plan and provides financial benefits after they leave the company.

Retain Employees

ESOP is very common in Start-ups as they take time to achieve the break-even and it is not in position of offering huge packages assure great performance.

Procedure for the Issue of ESOP

  • 1

    Planning & Consultancy

    The first step is to plan the ESOP and to prepare the list of the eligible employees to whom the ESOP scheme is provided and how many shares are to be given under this scheme

  • 2

    ESOP Trust Formation

    Listed Companies plan their ESOP through Trusts, Companies may invest their funds in the ESOP Trust to enable the company to transfer the shares in a cashless exercise.

  • 3

    Conduct Meeting

    The Board meeting is conducted to approve the ESOP by the Directors and notice of EGM is also sent for holding General Meeting.

  • 4

    Take Approval from Shareholder

    The ESOP Scheme is approved by passing Resolution of members. File MGT-14 within 30 days of passing Special/ Ordinary Resolution.

  • 5

    Letter of Option to Employees

    Once the shareholders approval is taken, the grant letter is to be given to eligible employees to exercise their right after a given period of time.

  • 6

    Exercising the Option

    The Option is either exercised or rejected by the employees, if exercised by the employees then the next step is allotment of shares.

Documents Required

  • Notice of the Board Meeting to the Stock Exchange (only in case of listed company)
  • Minutes of the Board Meeting
  • Special Resolution approving ESOP
  • Minutes of the general meeting
  • Form PAS-3 & MGT-14
  • Registration documents of Employee Stock Option Plan
  • How can ComplyKart help you?

    Consulting & Strategy

    Our ESOP Experts will give you the best consulting and prepare the strategy for ESOP roll out & its execution.

    Client’s growth

    Our services are aimed at achieving growth for clients. We can provide necessary guidance for complete the ESOP process

    Competence is our strength

    We make every effort to stay updated with the rules and regulations by MCA & SEBI. This enables us to deal with client’s needs effectively.

    Always there for you

    The assurance of a dedicated workforce including support staff and managers can be a promising factor in the process for completion of ESOP.

    Post ESOP Compliance

    Once the ESOP is finalized and exercised, you need to comply with certain rules which we help you to Comply and keep it running.

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