Issue of Shares — Secretarial Practice STD 12 Commerce / Arts — Question
Maharashtra BoardEnglish MediumSTD 12 Commerce / ArtsSecretarial PracticeIssue of Shares4 Marks
Question
Explain Employee Stock Option Scheme.
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Answer
An employee stock option plan is an employee benefits scheme under which the company encourages its employees to acquire ownership in the form of shares. Under this scheme, permanent employees, Directors or Officers of the Company or its holding company or subsidiary company are offered the benefit or right to purchase the equity shares of the company at a future date at a predetermined price. Generally these shares are issued at discount. The shares are offered at a price lesser than their market price.
Following are the provisions related to ESOS:
A company may offer the shares directly to the employees or through an Employee Welfare Trust.
The shares are offered at a price lesser than their market price.
There is a minimum vesting period of one year.
Company specifies the lock-in period. It is a minimum of one year between grant of option and vesting.
Shares issued under this scheme enjoys dividend or voting rights only after buying by employees.
Company has to get the approval of shareholders through a special resolution to issue ESOS.
Employee neither transfer his option to any other person nor pledge/mortgage the shares issued under ESOS.
Company has to set up a compensation committee to administer ESOS.
The company has to fulfil the provision of SEBI (Share Based Employee Benefits) Regulations, 2014.
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