Checklist For ESOP ( Employee Stock Option Plan ) by Private Company

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Checklist For ESOP ( Employee Stock Option Plan ) by Private Company 

’Employees stock option’ means the option given to the directors, officers or employees of a company or of its holding company or subsidiary company or companies, if any, which gives such directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price.

Process of issue:

1. Alter the Article of Association, if AOA is silent on the issue of share to employees under the scheme of ESOP.

2. Alter the Memorandum of Association, if the MOA does not have the adequate authorized share capital.
3. Convene the Board Meeting of the company and the following action shall be taken are as follows:
  • Approve the ESOP scheme
  • Approve the altered AOA and MOA subject to approval by members in the Extra- Ordinary General Meeting (EGM).
  • Approve the draft notice of the EGM.
  • Authorize any person to send the notice of the Extra-Ordinary General Meeting to all the members of the company.
 Hold the Extra-Ordinary General Meeting and conduct the following business –
  • for issuing of Employees Stock Option Scheme by the shareholders of the company by passing an ordinary resolution.
  • for approving the altered MOA and AOA by the shareholders of the company by passing a special resolution.
Granting of options to eligible employees*.
 Vesting of options – a. There shall be a minimum period of one year between the grant of options and vesting of the option.
 Exercise of options by the employees – a. The company granting the option to its employees pursuant to the Employees Stock Option Scheme will have the freedom to determine the exercise price in conformity with the applicable accounting policies if any. b. The company shall have the freedom to specify the lock-in period for the shares issued pursuant to the exercise of the option.
The amount, if any, payable by the employees, at the time of grant of option-
a) may be forfeited by the company if the option is not exercised by the employees within the exercise period; or
b) the amount may be refunded to the employees if the options are not vested due to non- fulfillment of conditions relating to vesting of option as per the Employees Stock Option Scheme.
The company shall maintain a Register of Employee Stock Options in Form No. SH.6 and shall forthwith enter therein the particulars of the option granted under clause (b) of sub-section (1) of section 62.
The Register of Employee Stock Options shall be maintained at the registered office of the company or such other place as the Board may decide.
The entries in the register shall be authenticated by the company secretary of the company or by any other person authorized by the Board for the purpose.

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