SEBI proposes ESOP to companies for non-permanent and gig workers, know what it is

New Delhi. The Securities and Exchange Board of India (SEBI) has proposed to offer an Employee Stock Ownership Scheme (ESOP) to non-permanent employees and non-executive directors of listed companies. SEBI, through its expert group report, suggested amending the definition of “employee” in the Share-Based Employee Benefit (SBEB) Regulations. In addition, it has suggested relaxation with regard to the quantum of sweat equity shares that can be issued by new age companies listed on the Innovators Growth Platform, according to a consultation paper issued on July 8. The seven-member group, headed by partner, S&R Associates Sandeep Bhagat, in its 141-page report, made several policy recommendations, including both sweat equity and SBEB (share-based employee benefits) regulations.

The report said companies may hire employees on a temporary basis who may not be “permanent” employees on the payrolls of such companies while working exclusively for such companies. Such employees may otherwise be treated at par with permanent employees in respect of their remuneration. These employees are kept out of the purview of SBEB Regulations.

The word permanent can be removed

“The expert group also looked at other categories of persons who may provide services to the company, such as contractual or part-time employees or gig workers who cannot be regularized by the company at the institution (eg. delivery services, transportation services, etc.), the report also proposed that within the definition under Regulation 2(1)(f) of the SBEB Regulations Instead of including multiple categories of persons, the word “permanent” may be omitted.

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Recommendation for inclusion of non-executive director

The Expert Group’s report recommends inclusion of “Non-Executive Director (who is not a promoter or a member of the promoter group)” as part of the definition of “employee”. Earlier, SEBI had also agreed to make a reference to the Ministry of Corporate Affairs to amend the Companies Act, 2013, to allow independent directors to get stock options instead of profit linked commission. Currently, independent directors cannot obtain stock options.

What is Employee Stock Option Plan

Employee Stock Option Plan (ESOP) is an employee benefit scheme under which a company encourages its own employees to invest in its shares. These shares are distributed to the employees at a much lower rate than the current market rate. In addition to employee-benefit purpose, ESOP is also for the interests of employees as well as shareholders, it is assumed that employees, if they invest in shares, will better focus on the performance and growth of the company so as to increase the value of their shares. be increased.

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