FAQ

ESOP SCHEME

1. What is stock option?

It is one of the way by which a company may reward its employees by granting them an option or choice to buy the shares of the company. Under this the employees have an option to buy the shares in the future date at the predetermined price which is generally lower than the market price.

2. Who are the persons eligible for the ESOP?

i) permanent employee of the Company working in India or out of India; or 
ii) Whole-time Director of the Company; or
iii) an employee as defined in (i) and (ii) above, of the subsidiary companies of the Company in India or out of India but does not include:-         
    a) An employee who is a promoter or a person belonging to the promoter group;        
   b) Independent Director of the company;         
   c) A director who either himself or through his relative or through anybody corporate, directly or indirectly, holds more than 10% of the outstanding equity shares of the company.

3. What is vesting period?

Vesting Period is the period on the completion of which the option to buy the shares could be exercised.

4. What is exercise period?

This is the period within which the option to purchase the shares can be exercised. This period shall start from the date of vesting. This period is always defined under scheme.

5. What is the exercise price?

Exercise price is the price which the employee has to pay to convert his option given by shares of the company.

6. What is lapse of options?

Option may be said to be lapsed on the expiry of the exercise period or on the happening of the events.

7. What are the laws governing the ESOP?

Companies Act, 2013, read with Rules under Chapter IV of the Act. 

    

8. What are the instruments which could be issued under the ESOP?

The instruments eligible to be issued under the ESOP shall be determined by the scheme so approved by the company and the relevant provisions of the articles of association of the company.

9. Is there is any requirement of the lock-in period under ESOP?

There is no requirement of lock-in, post allotment of shares pursuant to exercise of options,however, there shall be a minimum period of one year between grant and vesting of options.

10. Whether the option under the scheme is transferable or not?

Option granted to an employee shall not be transferred to any person.

11. Is there is any requirement of the disclosure of esop in the director’s report by the unlisted public company?

The Board of directors, shall, inter alia, disclose in the Directors’ Report for the year, the following details of the Employees Stock Option Scheme: a)options granted;  b)options vested;  c)options exercised; d)the total number of shares arising as a result of exercise of option;  e)options lapsed; f)the exercise price; g)variation of terms of options; h)money realized by exercise of options; i)total number of options in force;  j)Employee wise details of options granted to;-        (i) key managerial personnel;        (ii) any other employee who receives a grant of options in any one year of option amounting to five % or more of options granted during that year.         (iii) identified employees who were granted option, during any one year, equal to or exceeding one % of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant;

12. Does the employees working abroad are eligible for the scheme of ESOP?

Unless the articles of association of the company or the ESOP scheme provides otherwise, an employee working abroad shall be eligible under the ESOP scheme.

13. Does part time directors are eligible for the scheme of ESOP?

Unless the articles of association of the company or the ESOP scheme provides otherwise, the part time directors shall also be eligible for the issue of shares under the ESOP scheme.

14. Can a holding company issue shares under ESOP scheme to the employees of its subsidiary company?

Unless the articles of association of the company or the ESOP scheme provides otherwise, a holding company may issue shares to the employees of its subsidiary company under the ESOP scheme.

15. Is there any separate resolution required resolutions in case of grant of ESOPs to employees of theSubsidiary or Holding Company or in case of grant of ESOPs to identified employees equal to or exceeding 1% of the issued capital?

Yes

16. Is ESOP plan must be approved by shareholders?

Yes, by passing of Ordinary Resolution in members’ meeting.