{"id":5957,"date":"2026-05-13T11:19:37","date_gmt":"2026-05-13T11:19:37","guid":{"rendered":"https:\/\/digiwic.in\/spgindia\/?p=5957"},"modified":"2026-05-13T11:41:57","modified_gmt":"2026-05-13T11:41:57","slug":"sec-audit-insight-series-edition-10-esop","status":"publish","type":"post","link":"https:\/\/digiwic.in\/spgindia\/sec-audit-insight-series-edition-10-esop\/","title":{"rendered":"Sec Audit Insight Series Edition 10 ESOP"},"content":{"rendered":"

Integrated Framework under the Companies Act, 2013 and the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021\u00a0<\/strong><\/p>\n

ESOPs are often looked at as just an employee incentive tool, but in reality, they say a lot about how seriously a company takes governance and compliance. It\u2019s not only about granting options\u2014right from structuring the scheme and taking approvals to tracking vesting, exercise and eventual allotment, the entire lifecycle needs to be properly aligned with the law.<\/p>\n

On the legal side, Section 62(1)(b) of the Companies Act, 2013, read with Rule 12 of the Share Capital Rules, lays down the basic framework for issuance of ESOPs. For listed companies, this is further supplemented by the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, which bring in an additional layer of approvals, disclosures and oversight. What we often see in practice is that companies tend to focus on one framework and miss out on the other, which is where most compliance gaps start.<\/p>\n

Even small lapses\u2014like not maintaining proper grant documentation, delays in allotment after exercise, or incomplete disclosures\u2014can lead to regulatory issues. These are not always intentional, but they do reflect gaps in internal processes and monitoring.<\/p>\n

In this article, we have tried to cover the key compliance requirements under both the Companies Act, 2013 and the SBEB Regulations, along with some common observations from a secretarial audit perspective, to highlight where companies typically go wrong and what needs more attention.<\/p>\n

Key Compliance Requirement under the Companies Act,2013\u00a0<\/strong><\/p>\n\n\n\n\n
Section<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Compliance Mandate<\/strong><\/td>\n<\/tr>\n
2(37)<\/strong><\/p>\n

Definition<\/strong><\/td>\n

Employees\u2019 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.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014<\/u>\u00a0<\/strong><\/p>\n\n\n\n\n\n
Sub Rule\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Compliance Mandate<\/strong><\/td>\n<\/tr>\n
1<\/strong><\/td>\nA company, other than a listed company, may offer shares to employees under an ESOP only after approval of shareholders by special resolution.<\/td>\n<\/tr>\n
Explanation<\/strong> to <\/strong>Sub Rule 1<\/strong><\/td>\n\u201cEmployee\u201d means-<\/p>\n

a)\u00a0\u00a0\u00a0\u00a0 a permanent employee of the company who has been working in India or outside India; or<\/p>\n

b)\u00a0\u00a0\u00a0 a director of the company, whether a whole-time director or not but excluding an independent director; or<\/p>\n

c)\u00a0\u00a0\u00a0\u00a0 an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company but does not include-<\/p>\n

i.\u00a0\u00a0\u00a0 an employee who is a promoter or a person belonging to the<\/p>\n

promoter group; or<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n
<\/td>\nii. a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten percent of the outstanding equity shares of the company.<\/p>\n

(in case of a startup company, the conditions mentioned in sub-clause<\/em><\/p>\n

(i) and (ii) shall not apply upto 10 year from the date of its incorporation or registration.)<\/em><\/td>\n<\/tr>\n

2<\/strong><\/td>\nExplanatory statement to the ESOP special resolution notice shall disclose key scheme details including number of options, eligible employees, eligibility criteria, vesting\/exercise terms, pricing, lock-in, per employee limits, valuation method, lapse conditions, exit\/resignation treatment, and compliance with applicable accounting standards.<\/td>\n<\/tr>\n
3<\/strong><\/td>\nThe company may determine the exercise price of ESOPs in accordance with applicable accounting policies.<\/td>\n<\/tr>\n
4<\/strong><\/td>\nThe approval of shareholders by way of separate resolution shall be obtained by the company in case of-<\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0 grant of option to employees of subsidiary or holding company; or<\/p>\n

(b)\u00a0\u00a0\u00a0 grant of option to identified employees, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant of option.<\/td>\n<\/tr>\n

5<\/strong><\/td>\nUnexercised ESOP terms may be varied by special resolution, provided no prejudice is caused to option holders, with notice disclosing full details, rationale, and beneficiaries of the variation.<\/td>\n<\/tr>\n
6<\/strong><\/td>\nMinimum one year shall elapse between grant and vesting of options<\/strong>; company may prescribe lock-in on shares issued upon exercise; employees shall have no dividend, voting, or shareholder rights until shares are allotted on exercise.<\/td>\n<\/tr>\n
9<\/strong><\/td>\nBoard\u2019s Report shall disclose ESOP details including options granted, vested, exercised, lapsed, shares issued, exercise price, variations, money realised, options outstanding, and employee-wise grants to KMPs and specified employees.<\/td>\n<\/tr>\n
10<\/strong><\/td>\nCompany shall maintain Register of Employee Stock Options in Form SH-6, recording grants under Section 62(1)(b), at the registered office or other Board-approved place, duly authenticated by the Company Secretary or authorised person.<\/td>\n<\/tr>\n
11<\/strong><\/td>\nWhere the equity shares of the company are listed on a recognized stock exchange, the Employees Stock Option Scheme shall be issued, in accordance with the regulations made by the SEBI in this behalf.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021<\/u><\/strong><\/p>\n\n\n\n\n\n\n\n
Regulation<\/strong><\/td>\nCompliance Mandate<\/strong><\/td>\n<\/tr>\n
Reg 3<\/strong><\/td>\nA company may implement a scheme(s) either directly or by setting up an<\/td>\n<\/tr>\n
Implementation<\/strong><\/td>\nirrevocable trust.<\/td>\n<\/tr>\n
of Scheme<\/strong><\/td>\n<\/td>\n<\/tr>\n
through Trust<\/strong><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n\n\n\n\n\n\n
<\/td>\nEnsure that unappropriated shares acquired by the trust through secondary acquisition are appropriated against employee grants within the prescribed timeline\u2014by the end of the subsequent financial year (or second subsequent financial year with approval of the Compensation Committee\/NRC).<\/td>\n<\/tr>\n
Reg 4 Eligibility<\/strong><\/td>\nAn employee shall be eligible to participate in the schemes of the company as determined by the compensation committee.<\/td>\n<\/tr>\n
Reg 5 <\/strong>Compensation Committee\/ <\/strong>NRC<\/strong><\/td>\n\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Company shall constitute a compensation committee for administration and superintendence of the schemes. Where the scheme is being implemented through a trust the compensation committee shall delegate the administration of such scheme(s) to the trust.<\/p>\n

\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The company may also opt to designate its nomination and remuneration committee as the compensation committee for the purposes of these regulations.<\/p>\n

\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The Compensation Committee is required to formulate the detailed terms and conditions of the scheme, including matters specified under Part B of Schedule I of the SBEB Regulations.<\/td>\n<\/tr>\n

Reg 6 <\/strong>Shareholder\u2019s Approval<\/strong><\/td>\nNo scheme can be implemented without shareholders\u2019 approval by special resolution<\/strong>. The explanatory statement must contain disclosures prescribed under Part C of Schedule I<\/strong>.<\/td>\n<\/tr>\n
Reg<\/strong> 7<\/strong> Variation <\/strong>of Terms of Scheme<\/strong><\/td>\nAny variation in the terms of an existing scheme requires shareholders\u2019 <\/strong>approval by special resolution<\/strong>, provided such changes are not prejudicial to employees. However, changes made solely to meet regulatory requirements do not require shareholder approval. Repricing of unexercised options\/SARs\/shares is also permitted with shareholder approval, subject to employee interest safeguards.<\/td>\n<\/tr>\n
Reg 13 Certificate from Auditors<\/strong><\/td>\nThe Board is required to place before shareholders at every AGM a certificate from the Secretarial Auditor <\/strong>confirming that the scheme has been implemented in compliance with the SBEB Regulations and the shareholders\u2019 approved resolution.<\/td>\n<\/tr>\n
Reg 14 <\/strong>Disclosures<\/strong><\/td>\nIn addition to disclosures required under the Companies Act, 2013, the Board\u2019s Report\/Annual Report <\/strong>must also disclose details of the scheme<\/p>\n

as prescribed under Part F of Schedule I of the SBEB Regulations.<\/strong><\/td>\n<\/tr>\n

Reg 15 <\/strong>Accounting Policies<\/strong><\/td>\nCompanies implementing share-based benefit schemes must comply with the applicable accounting standards prescribed under Section 133 of the Companies Act, 2013<\/strong>, including relevant Guidance Notes on Accounting for Employee Share-Based Payments <\/strong>issued from time to<\/p>\n

time.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Adjudication Orders on ESOP Compliance Failures<\/u>\u00a0<\/strong><\/p>\n

While ESOPs are an effective employee retention tool, improper implementation can attract regulatory action. Recent orders by ROC and SEBI highlight that non-compliance with the Companies Act, 2013 and applicable SEBI regulations may result in penalties and enforcement action. The cases below provide a snapshot of key compliance lapses and regulatory outcomes.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Company<\/strong><\/td>\nDate of Order<\/strong><\/td>\nAuthority<\/strong><\/td>\nProvision Violated<\/strong><\/td>\nNature<\/strong>\u00a0\u00a0\u00a0\u00a0 of\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Non-Compliance<\/strong><\/td>\nPenalty (includes penalty<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 for other violations)<\/strong><\/td>\n<\/tr>\n
Krazzy<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Fin<\/strong><\/td>\n27th<\/td>\nRegistrar<\/td>\nSection<\/td>\nThe\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 company<\/td>\nPenalty\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\n<\/tr>\n
Private<\/strong><\/td>\nMarch<\/td>\nof<\/td>\n62(1)(b)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\nallotted 216 equity<\/td>\n\u20b91,00,000<\/td>\n<\/tr>\n
Limited<\/strong><\/td>\n2024<\/td>\nCompanie,<\/td>\nthe<\/td>\nshares under ESOP<\/td>\nimposed\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 on<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nGujarat,<\/td>\nCompanies<\/td>\nbefore\u00a0 completion<\/td>\nthe\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 company<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nDadra\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 &<\/td>\nAct, 2013 read<\/td>\nof\u00a0 the\u00a0 mandatory<\/td>\nand\u00a0\u00a0\u00a0\u00a0 \u20b925,000<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nNagar<\/td>\nwith\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Rule<\/td>\nminimum\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 vesting<\/td>\neach\u00a0\u00a0\u00a0\u00a0 on\u00a0\u00a0\u00a0\u00a0 its<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nHaveli<\/td>\n12(6)(a)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\nperiod of one year,<\/td>\ndirectors.<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nthe<\/td>\nresulting\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 in<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nCompanies<\/td>\npremature<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n(Share Capital<\/td>\nallotment under its<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nand Debentures)<\/td>\nESOP 2021 Scheme.<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nRule, 2014<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Bharti<\/strong><\/td>\n27th<\/td>\nSecurities<\/td>\nReg 3(12) of<\/td>\nESOP Trust failed to<\/td>\nMonetary<\/td>\n<\/tr>\n
Infratel<\/strong><\/td>\nJune<\/td>\nand<\/td>\nSEBI\u00a0\u00a0\u00a0\u00a0\u00a0 (Share<\/td>\nappropriate\/sell<\/td>\nPenalty<\/td>\n<\/tr>\n
Limited<\/strong><\/td>\n2022<\/td>\nExchange<\/td>\nBased<\/td>\nsurplus<\/strong><\/td>\nimposed<\/td>\n<\/tr>\n
(now known<\/strong><\/td>\n<\/td>\nBoard\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\nEmployee<\/td>\nunappropriated<\/strong><\/td>\nunder section<\/td>\n<\/tr>\n
as: Indus<\/strong><\/td>\n<\/td>\nIndia<\/td>\nBenefits\u00a0\u00a0\u00a0\u00a0 and<\/td>\nshares<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (5,32,862<\/strong><\/td>\n15HB of SEBI<\/td>\n<\/tr>\n
Towers <\/strong>Limited)<\/strong><\/td>\n<\/td>\n(SEBI)<\/td>\nSweat Equity) Regulations,<\/td>\nshares) <\/strong>within the prescribed timeline.<\/td>\nAct.<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n2021<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Bodhtree<\/strong><\/td>\n15th<\/td>\nSecurities<\/td>\nMultiple<\/td>\nMisuse of employee<\/td>\nMultiple<\/td>\n<\/tr>\n
Consulting<\/strong><\/td>\nMarch<\/td>\nand<\/td>\nviolations<\/td>\nbenefit trust<\/td>\npenalties<\/td>\n<\/tr>\n
Limited<\/strong><\/td>\n2022<\/td>\nExchange<\/td>\nincluding<\/td>\nshares, improper<\/td>\nimposed\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 on<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nBoard\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\nRegulations<\/td>\ntransfer of trust<\/td>\ncompany, trust<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nIndia<\/td>\n3(4),<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 3(6),<\/strong><\/td>\nshares, disclosure<\/td>\nand connected<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n(SEBI)<\/td>\n3(9), 5, 6, 13,<\/strong><\/td>\nlapses and alleged<\/td>\nindividuals<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n15 & 22(1) <\/strong>of<\/td>\nfraudulent<\/td>\nunder\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 SEBI<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nSBEB<\/td>\npractices involving<\/td>\nAct\/SCRA.<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nRegulations,<\/td>\nemployee benefit<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nSEBI circulars<\/td>\ntrust shares.<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nand\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 PFUTP<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nRegulations.<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Guvi<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Geek<\/strong><\/td>\n9th<\/td>\nRegistrar<\/td>\nSection<\/td>\nGranted 327 ESOP<\/strong><\/td>\nROC imposed<\/td>\n<\/tr>\n
Network<\/strong><\/td>\nFebruary<\/td>\nof<\/td>\n62(1)(b)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\noptions exceeding<\/strong><\/td>\nadjudication<\/td>\n<\/tr>\n
Private <\/strong>Limited<\/strong><\/td>\n2023<\/td>\nCompanies<\/p>\n

,\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Tamil<\/td>\n

the Companies<\/td>\n1%<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 issued capital\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 to<\/strong><\/td>\npenalty\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 on company and<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nNadu,<\/td>\nAct, 2013 r\/w<\/td>\nidentified<\/strong><\/td>\nofficers\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 in<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nChennai<\/td>\nrule\u00a0\u00a0\u00a0\u00a0\u00a0 12\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\nemployees<\/strong> without<\/td>\ndefault.<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nCompanies<\/td>\nobtaining separate<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n(Share Capital<\/td>\nshareholder<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nand Debentures)<\/td>\napproval.<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nRules, 2014<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Wurknet<\/strong><\/td>\n17th<\/td>\nRegistrar<\/td>\nSection<\/td>\nRequired<\/td>\nROC imposed<\/td>\n<\/tr>\n
Private<\/strong><\/td>\nNov,<\/td>\nof<\/td>\n62(1)(b) r\/w<\/td>\ndisclosures<\/td>\npenalty\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 on<\/td>\n<\/tr>\n
Limited<\/strong><\/td>\n2023<\/td>\nCompanies<\/td>\nRule\u00a0\u00a0\u00a0\u00a0 12\u00a0\u00a0\u00a0\u00a0 of<\/td>\nregarding\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 ESOP<\/td>\ncompany and<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n, Mumbai<\/td>\nCompanies<\/td>\nscheme were\u00a0 not<\/strong><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/td>\n<\/td>\n<\/td>\n(Share Capital and Debentures) Rules, 2014<\/td>\nincluded<\/strong>\u00a0\u00a0\u00a0\u00a0 in\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 the explanatory statement\/EGM notice\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>for<\/p>\n

shareholder<\/p>\n

approval.<\/td>\n

officers\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 in default.<\/td>\n<\/tr>\n
Vikas<\/strong><\/td>\n28th<\/td>\nSecurities<\/td>\nSEBI\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (Share<\/td>\nMisleading\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 ESOP<\/td>\nPenalty of Rs.<\/td>\n<\/tr>\n
Proppant<\/strong><\/td>\nFebruary<\/td>\nand<\/td>\nBased<\/td>\ndisclosure\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 and<\/td>\n25,00,000<\/td>\n<\/tr>\n
and Granite Limited<\/strong><\/td>\n2023<\/td>\nExchange Board\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\nEmployee Benefits\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 and<\/td>\nmisuse\u00a0\u00a0\u00a0\u00a0\u00a0 of\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 SBEB Regulations\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u2014<\/td>\nimposed\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 on Noticee No.1 &<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nIndia<\/td>\nSweat Equity)<\/td>\nESOP\u00a0 shares\u00a0 (85<\/td>\n2, and penalty<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n(SEBI)<\/td>\nRegulations,<\/td>\nlakh) were granted<\/td>\nof\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Rs.<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n2021\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 and<\/td>\nentirely\u00a0\u00a0\u00a0\u00a0\u00a0 to\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 two<\/td>\n10,00,000<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nother<\/td>\nsenior KMPs (CFO<\/td>\nimposed\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 on<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nregulations<\/td>\nand\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Compliance<\/td>\nNoticee No. 3<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nOfficer), sold within a couple of months<\/td>\n& 4<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nof allotment, with<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nproceeds\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 routed<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nback\u00a0\u00a0\u00a0\u00a0\u00a0 to\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 related<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\ngroup entities; the<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\ncompany<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nsimultaneously<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nmade\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 a\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 false<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\ndisclosure\u00a0\u00a0\u00a0\u00a0 in\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 its<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nAnnual Report that<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nno ESOP had been<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nissued to any senior<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\nmanagerial<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\npersonnel.<\/td>\n<\/td>\n<\/tr>\n
One97<\/strong><\/td>\n30th<\/td>\nRegistrar<\/td>\nSection<\/td>\nESOPs\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 were<\/td>\nROC held that<\/td>\n<\/tr>\n
Communicat<\/strong><\/td>\nNov,<\/td>\nof<\/td>\n62(1)(b)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\ngranted to a person<\/td>\nthere was a<\/td>\n<\/tr>\n
ions Limited<\/strong><\/td>\n2021<\/td>\nCompanies<\/p>\n

,\u00a0\u00a0\u00a0\u00a0 NCT\u00a0\u00a0\u00a0 of<\/td>\n

the Companies<\/td>\nwho\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 became<\/p>\n

ineligible\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 under<\/td>\n

violation, but refused to<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nDelhi\u00a0\u00a0\u00a0\u00a0 and<\/td>\nAct, 2013 read<\/td>\nrevised Companies<\/td>\nimpose<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nHaryana<\/td>\nwith Rule 12<\/td>\nAct\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 provisions<\/td>\npenalty under<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nof\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 the<\/td>\n(relative\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of<\/td>\nSection 454<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nCompanies<\/td>\npromoter category<\/td>\nbecause the<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n(Share Capital<\/td>\nissue).<\/td>\ndefault pre-<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nand<\/td>\n<\/td>\ndated the<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nDebentures)<\/td>\n<\/td>\n21.12.2020<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\nRules, 2014<\/td>\n<\/td>\namendment\u2014therefore, the<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\ncompany was<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\nasked to opt<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\nfor<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\ncompounding<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\ninstead of<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\nadjudication<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\npenalty.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Insight<\/strong>
\nThese cases reflect that ESOP compliance extends far beyond merely obtaining shareholder approval for adopting a scheme. Regulators have highlighted lapses relating to employee eligibility, vesting timelines, disclosures, trust operations, and utilisation of shares. The broader takeaway is clear\u2014ESOPs must be implemented with strong procedural discipline, as even seemingly technical lapses can lead to significant regulatory consequences.<\/p>\n

CS Suresh Pandey<\/strong><\/p>\n

Practising Company Secretary<\/strong><\/p>\n

SPG & Associates<\/strong><\/p>\n

9968300649
\n<\/strong>suresh@spgindia.co.in<\/strong><\/a><\/p>\n

Coming Up in Edition 11: Common Non-Compliances in Auditor Appointment, Resignation & Reporting\u00a0<\/strong><\/p>\n

\u00a0<\/strong>Disclaimer: This content is intended solely for research and knowledge-sharing purposes among professionals, based on information available in the public domain. It is not intended to malign any individual or entity, nor should it be construed as a solicitation or used for any commercial or promotional purpose. The views expressed do not constitute a legal opinion or professional advice. <\/em>While utmost care has been taken to ensure the accuracy of the content, no responsibility is accepted for any errors or omissions. Readers are advised to verify the information independently from official and original sources before taking any action based on the same.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Integrated Framework under the Companies Act, 2013 and the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021\u00a0 ESOPs are often looked at as just an employee incentive tool, but in reality, they say a lot about how seriously a company takes governance and compliance. It\u2019s not only about granting options\u2014right from structuring the […]<\/p>\n","protected":false},"author":1,"featured_media":4390,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[34],"tags":[],"year_tax":[],"month_tax":[],"class_list":["post-5957","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-audit"],"acf":[],"featured_image_src":{"landsacpe":["https:\/\/digiwic.in\/spgindia\/wp-content\/uploads\/2025\/01\/accounting-process-4.jpg",443,260,false],"list":["https:\/\/digiwic.in\/spgindia\/wp-content\/uploads\/2025\/01\/accounting-process-4.jpg",443,260,false],"medium":["https:\/\/digiwic.in\/spgindia\/wp-content\/uploads\/2025\/01\/accounting-process-4-300x176.jpg",300,176,true],"full":["https:\/\/digiwic.in\/spgindia\/wp-content\/uploads\/2025\/01\/accounting-process-4.jpg",443,260,false]},"_links":{"self":[{"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/posts\/5957","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/comments?post=5957"}],"version-history":[{"count":2,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/posts\/5957\/revisions"}],"predecessor-version":[{"id":5959,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/posts\/5957\/revisions\/5959"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/media\/4390"}],"wp:attachment":[{"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/media?parent=5957"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/categories?post=5957"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/tags?post=5957"},{"taxonomy":"year_tax","embeddable":true,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/year_tax?post=5957"},{"taxonomy":"month_tax","embeddable":true,"href":"https:\/\/digiwic.in\/spgindia\/wp-json\/wp\/v2\/month_tax?post=5957"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}