The Securities and Exchange Board of India (SEBI) is all set to announce a new set of ESOP regulations including purchase of shares by employee welfare trusts from the secondary market with adequate safeguards.
The Primary Market Advisory Committee of SEBI has suggested some changes and the market regulator had sought public comments on the recommendations.
The final norms have been prepared after taking into account these suggestions and they would be placed before SEBI’s board on Thursday, a senior official said.
The proposed regulations shall be applicable to Employee Stock Options Scheme and Employee Stock Purchase Scheme, generally called ESOP guidelines, as well as on other general employee benefit schemes like in the case of accident, sickness, disability, death and scholarship funds.
If fresh shares are proposed to be issued against the employee benefit schemes, then the company may have the flexibility of either adopting the trust route or implementing it directly, SEBI said.
In case secondary market acquisitions are proposed under the scheme, the same must be implemented through a mechanism of trust.
“The trust route provides for better governance of the schemes. Considering that secondary market transactions necessitate adequate safeguards. Trust route may be made mandatory for schemes to undertake secondary market transactions,” SEBI said.
The trust may hold the shares acquired from secondary market for a minimum period of six months.
However, within the said holding period of six months the trust may be allowed to tender shares in open offers/buybacks/delisting offers or any other exit offered by the company to its shareholders.
No off-market transfer may be permitted except to employees pursuant to the scheme, the market regulator said.
To ensure “independence of trustees and create an arm’s length relationship” in the operation of trust, SEBI suggested that a person shall not be appointed as a trustee to hold the shares if he is a director, key managerial personnel or promoter of the company or the beneficiary holding ten per cent or more of the paid-up share capital of the company.
Those companies which have already acquired shares from secondary market in excess of maximum permissible limits could be given a longer time period of 5 years from the date of notification to come down to the permissible level.
For general employee benefit and retirement benefit schemes holding more than the prescribed limit is proposed to be given more than five years period from the date of notification to reduce the same to the permissible level.
SEBI has also proposed to extend the timeline for alignment of existing employee benefit schemes with the ESOP guidelines till June 30, this year.
