The SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 were recently implemented by the Securities and Exchange Board of India (SEBI). Employees who can be offered stock (equity) options have been expanded as a result of the new regulations. The SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations) and the SEBI (Issue of Sweat Equity) Regulations, 2002 (SEBI Regulations) have been combined (Sweat Equity Regulations). SEBI is a statutory organisation that was created in 1992 under the terms of the SEBI Act. Its primary purpose is to safeguard the interests of securities investors and to regulate the securities market.
Sweat equity is a non-monetary contribution made by a business’s individuals or founders to the company. Sweat equity is commonly used by cash-strapped entrepreneurs and company owners to support their ventures.
It will be issued for the provision of know-how or the provision of intellectual property rights or value additions. A listed company’s maximum annual limit for issuing shares has been set at 15% of its existing paid-up equity share capital. It will be valid for ten years from the company’s incorporation date.
In the case of IGP-listed firms, the yearly sweat equity share limit will be 15%, with a total maximum of 50% of the paid-up capital at any moment, according to a Sebi announcement dated August 13. This increased total limit will be in effect for ten years after the company’s formation. The yearly sweat equity maximum for firms trading on the mainboard will likewise be 15%, but the total limit will be set at 25%. The Sebi (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, have consolidated two sets of regulations into one.
Source: Business Standard