FAQs on SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021

November 18, 2021by ESOP Guardian0

SEBI had notified the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (“SEBI (SBEB & SE) Regulations”) in place of erstwhile Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 to streamline and rationalize the existing provisions with best global practices, vide its notification dated August 13, 2021.

To offer a simplistic explanation / clarification of key terms / concepts, SEBI has now released FAQs on the said Regulations.

The highlights of the FAQs are as under:
  1. The provisions of the SEBI (SBEB & SE) Regulations shall be applicable to all the Schemes including the Scheme pertaining to Restricted Stock Units satisfying applicability conditions under Regulation 1(4).
  2. The provisions of the SEBI (SBEB & SE) Regulations shall not be applicable on the Phantom Stock Units as they do not involve any actual purchase or sale of the Equity Shares of a listed company.
  3. Under the definition of “Employees” in the SEBI (SBEB & SE) Regulations, the phrase “exclusively working in India or outside India” means any Employee who is exclusively working with such Company, irrespective of whether such person is employed either in India or outside India. Further, Contractual Employees satisfying the terms of said Regulation are also eligible under Employee Benefit Schemes.
  4. Clarity on grant of Options to the Employees of the Group Company.For instance, Company X Ltd. can grant options to Employees of its Group Companies (A Ltd. & B Ltd.) even if A Ltd. and B Ltd. are not part of the same group.
  5. For the purpose of grant of Options to the Employees of Group Companies including Subsidiary, Associate, Joint Venture, Holding Company of the Company, separate approval of the Shareholders is required as per Regulation 6(3)(C) of SEBI (SBEB & SE) Regulations.
  6. Separate shareholders’ approval is required for each Employee name wise in case Company grants an option, SAR, shares or benefits, as the case may be, to identified employees, during any one year, equal to or exceeding one per cent. of the issued capital of the company.
  7. Shareholders’ approval shall be required for variance in only those terms of the Scheme which were mentioned in the explanatory statement to the notice of the general meeting in which the Scheme was approved as provided in Part C of Schedule – I of SEBI (SBEB & SE) Regulations.
  8. In the event of cessation of directorship due to retirement, all grants, SARs or other benefits would continue to vest in accordance with their respective vesting schedule subject to the terms of the Company’s policies.
  9. Any Scheme established with the objective of employee welfare including healthcare benefits, hospital care or benefits, or benefits in the event of sickness, death, disability etc. with no share-based benefits to its Employees and is involving holding / dealing in shares of the Company or the shares of its listed Holding Company shall also be covered under the scope of SEBI (SBEB & SE) Regulations.
  10. Shares held by the trust formed as per the provisions of SEBI (SBEB & SE) Regulations shall be taken into account for the determination of percentage of voting rights under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“SEBI (SAST) Regulations”).
  11. The Beneficiaries of Sweat Equity Shares shall be liable to make an open offer if the acquisition exceeds the threshold limits under SEBI (SAST) Regulations.

Click here to view SEBI FAQs


For any discussions, feel free to contact:

Ms. Mohini Varshneya
Corporate Professionals
E: mohini@indiacp.com
M: +91 9971673332, +91 9999808893

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