The Securities and Exchange Board of India, on Friday, said companies were barred from acquiring shares from the secondary market under the employee stock option schemes till the new regulations in this regard were notified.
SEBI has also extended the timeline for companies to align their schemes with that of its guidelines as the watchdog is in the process of preparing new norms.
Earlier this month, the board of SEBI approved certain proposals for framing a new set of regulations concerning the employee stock option scheme (ESOS) and the employee stock purchase scheme (ESPS) dealing in shares of the company. Citing the board’s decision, the market regulator said that timeline had been extended for “aligning existing employee benefit schemes with the SEBI (ESOS and ESPS) Guidelines, 1999, till the new regulations are notified.’’
“... it is reiterated that prohibition on acquiring securities from the secondary market shall continue till the existing schemes are aligned with the new regulations to be notified,” SEBI said in a circular. In a circular issued in November last, SEBI had given time till June 30 for alignment of existing employee benefit schemes with the SEBI (ESOS and ESPS) Guidelines, 1999.
Meanwhile, under the new norms approved by the SEBI board during its meeting on Thursday last, companies would have employee stock option programmes where they could buy their own company shares subject to certain conditions.
The employee stock option is a practice followed the world over and the market regulator has outlined certain safeguards to improve the governance and transparency of the schemes and also address concerns regarding potential market abuse.
Besides, the regulator has decided to classify ESOP Trust as a separate group of shareholding entities.
Some of the safeguards as outlined by SEBI include, requirement of shareholders’ approval through special resolution for undertaking secondary market acquisitions; restrictions on sale of shares by trusts; at least six month holding period for shares acquired from secondary market.
