Employee stock option plan
According to the Section-62 of the Companies Act, 2013 employee means-
- Permanent employee of the company.
- Director of the company except independent director.
- Employee of subsidiary and holding of a company.
- Except the person who is employee promoter and related to the group of promoters.
- Listed company need to comply the Security Exchange Board of India (SEBI) regulations and Companies Act 2013.
- The companies which are unlisted they need to full-fill the conditions of Companies Act 2013.
Advantages of ESOP
- Stock option are provided by the company for the benefit of employees of company.
- It is kind of incentive which promote the hard work and give motivation to the employee.
- ESOP give retirement security to the employee which hold company to long period.
- Employees are not taxed on amount contributed by the employer to the ESOP.
- ESOP can be used to increase the new equity for the company.
- ESOP give benefit to both employer and employee and it makes positive impact to the company in profitability, productivity and performance of the company.
- ESOP is the attractive benefit to the employee and company.
According to the companies Act, 2013 followings are the conditions:-
- Company need to make explanatory statement which contain all the details about the ESOP and pass the resolution in the board meeting.
- Then company need to take the approval of the shareholders in the general meeting by passing the special resolution.
- There shall be a minimum period of one year between the grant of option and vesting of option.
- Grant of option means right to acquire the number of shares of the company.
- Vesting of option means the time period until you need to hold the stock option.
- The option grant to the employee which are not transferable to the other person.
- The board of director disclose the Director’s Report contain the details of ESOP during the year.
- Company maintain the register of ESOP in Form no. SH-7.