~Employee Stock Option Scheme(ESOP)~💛

THE TERM ‘EMPLOYEE STOCK OPTION SCHEME' [ESOP] HAS BEEN DEFINED UNDER SECTION 2(37) OF COMPANIES ACT 2013.

Employess stock option scheme (ESOP) means the option given to the directors, officer, employees of the company or its holding company or subsidiary company or companies, if any, which gives such directors ,officers or employees ,the benefits or right to purchase , or the subscriber for the shares of the company at the further date at a pre-determined price.

HOW IS ESOP GOOD FOR EMPLOYEES

Employess participants to the plan can receive significant retirement benefits at no monetary cost to them. 

Being part of an ESOP company can provide unique rewards for employees. 

An ESOP is a great way to enhance the companies ability to retain and recruit at top.

WHAT HAPPENS TO ESOP, IF YOU QUIT ?

If you quit, the ESOP distributions are deferred for six years under IRS regulations.

Once those six years passes, you may receive the value of your ESOP shares in either total sum of amount or in equal payments made over five years.

AT WHAT AGE CAN YOU WITHDRAW ESOP?

The distribution automatically begins on April 1 of the first year after you reach 70 1/2 years of age.

If you retire early, distribution must begin within six years of your retirement date, with payouts being paid over a span of five years.

CONDITION FOR COMPANIES FOR ISSUING EMPLOYEE STOCK OPTION SCHEME [u/s 62(1) (b)].

* ESOP must be authorized in the articles of association.

* Approval of members are required by passing special resolution at the general meeting.

* There should be gap of atleast 1 year between grant of option ( is an opportunity to buy the shares of the company in which he or she works) and vesting of option (Vesting is known as the time period during which you unconditionally own the stock options that are issued to you by your company, Until you vest the stock options, you forfeit them if you were to leave the company. Typically, that time period is four years).

* Company is free to set the lock-in period (Lock-in period in which the investor is prohibited from redeeming the units of the fund, either partially or wholly).

* The company shall maintain the register in form SH-6

* The offer given to the employees is not transferable, nor it can be pledge or hypothecated (money by law for a specific purpose).

* No voting rights & dividend will be given unless the option is exercised.

* Disclosure to be made in board report.

* Listed companies to be comply with SEBI guidelines.

* Disclosure to be made in explanatory statement.

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