1. Introduction : The new companies are keen to keep the best employees who bring in their know- how and technical expertise that adds to the business value of a company. In order tolceep them motivated and involved, companies give them reward by giving them Sweat Equity Share.
2. Meaning of Sweat Equity Share : The company issue share to their directors, professional experts, employees with discount or without consideration of cash are known as Sweat Equity Share.
Usually these shares are offered at price lower than that prevailing in the market.
3. Advantages of Sweat Equity Share:
(1) Directors of the company can get reward of their work.
(2) The employee having such type of shares, get extra income as dividend on share along with salary.
(3) Employees get all rights of shareholder. They can remain present in companies meeting and give their vote.
(4) It develops feeling of ownership of a company in the minds of employee.
4. Provisions as per Company Act for Sweat Equity Share: Provisions for issuing Sweat Equity Shares are as follows:
(1) A special resolution should be passed by the members in general meeting.
(2) In this resolutions particulars regarding share, present value of share, to whom it is to be issued - directors, employees is stated.
(3) While issuing such share, legal provisions should be followed and it is to be registered with stock exchange observing rules and regulations.
(4) The public Ltd. company can issue such share after one year of obtaining the certificate of commencement of Business.
(5) such Shares are not transferable for three years.
(6) The company can’t issue more than 15% of its paid up capital or worth five crore in a year.
(7) The company can’t issue more than 25% of total capital.
5. Conclusion : Sweat Equity Shares involve sharing the ownership of the company with the employees. It creates good feeling among employees and work with dedication.