Issue of Sweat Equity Shares
“Sweat Equity Shares” means such equity shares as are issued by the Company to its Directors or Employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.
The sweat equity shares shall be issued to the following category of employees which includes:-
> Permanent employee of the Company whether working in India or outside India;
> Director of the Company, whether a whole-time Director or not;
> Employee or Director as mentioned above of a Subsidiary in India or outside India, or of a Holding Company of the Company.
For issue of sweat equity shares, Listed Company shall comply with the provisions of Securities and Exchange Board of India (SEBI) Regulations on Sweat Equity and the Company other than listed company shall comply with the provisions of Section 54 of the Companies Act, 2013 and Rule 8 of Companies (Share capital and Debentures) Rules, 2014.
Conditions for issue of Sweat Equity Shares by Unlisted Company
A Company may issue sweat equity shares to its Directors or employees of the Company at a discount or consideration other than cash. Sweat Equity shares is a reward given to the employees for their contribution towards fulfilling the objectives of the Company. The various conditions for the issue of Sweat Equity Shares by Unlisted Company are as:
1. Quantum of issue of Sweat Equity Shares
| For One time: | The Company shall not issue Sweat Equity Shares for more than 15% of existing paid-up share capital or issue value of shares Rs.5,00,00,000/- (Rupees Five Crores), whichever is higher. |
| For lifetime: | The Company shall not issue Sweat Equity shares for more than 25% of the paid-up Equity Capital at any time. |
Further the limit for issuance of Sweat Equity Shares for Start-up Company shall not exceed 50% of its paid-up capital upto 5 years from the date of its incorporation or registration.
2. Price of Sweat Equity Shares
The price of the Sweat equity shares shall be determined by the Registered valuer by providing valuation report as the fair price giving justification for such valuation.
3. Convene a Board Meeting
The Board of Directors of the Company shall call, hold and conduct Board meeting and discuss the matter in respect of issue of sweat equity shares and the Board of Directors may pass board resolution in favour of the same.
4. Lock-in Period
The shares are non-transferable and are in lock-in period for a period of 3 years from the date of allotment and the share certificate shall also specifies the lock-in period on the same.
On expiry of lock-in period, the share certificate shall be stamped in bold or mentioned in any other manner that the lock-in period has been expired.