SEBI proposes new norms for ESOP

The Securities and Exchange Board of India (SEBI), on Wednesday, proposed a new set of regulations for the employee stock option scheme (ESOP), wherein certain restrictions imposed on companies for award of such allotments to staff members could be eased.

To finalise new norms, the Securities and Exchange Board of India (SEBI has sought public comments on the recommendations made by its Primary Market Advisory Committee (PMAC).

SEBI said the PMAC had already taken into account suggestions made by an expert group in this regard, which was set up “to deliberate on a framework for framing a set of regulations with a view to ensure better enforceability, address the concerns raised with regard to composition of employee welfare trusts, disclosures, etc. and to enable secondary market transactions with adequate safeguards.”

The public comments on PMAC recommendations have been sought till December 5, SEBI said in a circular.

Earlier, industry bodies had raised concerns over restrictions imposed by SEBI earlier this year with regard to ESOP guidelines, including on composition of employee trusts.

As per the new recommendations, employee welfare trusts can be permitted to acquire shares of the company provided that the trust is administering any of the schemes such as ESOP, ESPS (employee stock purchase scheme), SAR (stock appreciation right) and general benefit schemes for the employees of the company.

Shareholders’ approval would need to be obtained in cases where acquisition of shares is from the secondary market, and there could be limits on secondary market purchases for ESOP and non-ESOP schemes.

Besides, separate section could be made for general employee benefit schemes, including retirement schemes, in the proposed regulations.

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Printable version | Oct 8, 2022 3:18:13 am |