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DEPUTY
GENERAL MANAGER CORPORATION
FINANCE DEPARTMENT DIVISION
OF ISSUES AND LISTING ( (Direct)� : 22842826 ( (Board)� :
22850451-56, 22880962-70 (Extn.: 367) Fax����������� � : 22045633 E-mail��� ���� :
neelamb@sebi.gov.in SEBI/CFD/DIL/ESOP/3/2004/22/7 To All Registered Merchant Bankers To All
Recognised Stock Exchanges Dear Sirs, Sub.:
� Amendment to SEBI (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. SEBI has amended SEBI (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 vide Circular no.
SEBI/PMD/MBD/ESOP/2/2003/30/6 dated 30th June 2003 to include, inter-alia,
provisions of mandatory disclosures of employee compensation cost using fair
value of ESOS/ ESPS calculated on the basis of option pricing model and also
the impact of the same on profits and EPS of the company, mandatory appointment
of merchant banker, accounting treatment for ESOS/ ESPS administered through
trust route, provisions to facilitate faster listing of shares arising out of
exercise of ESOP, etc. Subsequent to these amendments, SEBI received queries
seeking clarifications. Hence, proposals, addressing the queries and amending the
said Guidelines, were put up on the SEBI Website for public comments. The
public comments/representations received were placed before the �Committee on
ESOP�, chaired by Prof. J. R. Varma. The recommendations of the Committee were
also put up on the SEBI Website for public comments. The Board, after considering the recommendations of
the aforesaid Committee and the public comments received thereon, has approved
certain modifications to be made to the said Guidelines. Accordingly,
amendments to the said Guidelines have been made in exercise of the powers
conferred under section 11(1) of SEBI Act, 1992. The amendments are enclosed in
�Annexure A�. The
date of applicability of the amendments to the said Guidelines, issued vide
Circular no. SEBI/PMD/MBD/ESOP/2/2003/30/6 dated
Clause
2.1 (10) of the said Guidelines which defines market price was amended w.e.f. The amended Guidelines
are also available on the SEBI Website, viz., www.sebi.gov.in.
Yours faithfully NEELAM BHARDWAJ Encl.: a/a ANNEXURE A AMENDMENTS
TO SEBI (EMPLOYEE STOCK OPTION SCHEME AND EMPLOYEE STOCK PURCHASE SCHEME)
GUIDELINES, 1999 1.
In
clause 2.1, for sub-clause (9A), the following words shall be omitted, namely,
�at the date of grant of the option�. 2.
In
clause 2.1, for sub-clause (10), the following shall be substituted, namely: �(10) �market
price� means the latest available closing price, prior to the date of the
meeting of the Board of Directors in which options are granted/ shares are
issued, on the stock exchange on which the shares of the company are listed. If
the shares are listed on more than one stock exchange, then the stock exchange
where there is highest trading volume on the said date shall be considered.� 3.
In
clause 7.5, for the words �the options
which are not exercised� the following words shall be substituted, namely,
�the options which are not exercised,
whether or not they have been vested�. 4.
In
clause 9.1, the following proviso shall be inserted, namely: �Provided that in a case where options are granted by a
company under an ESOS in lieu of options held by the same person under an ESOS
in another company which has merged or amalgamated with the first mentioned
company, the period during which the options granted by the transferor company
were held by him shall be adjusted against the minimum vesting period required
under this clause.� 5.
In
clause 12.1, in sub-clause (k), for the words, brackets and figures �International Accounting Standard (IAS) 33� the
following words, brackets and figures shall be substituted, namely, �Accounting Standard (AS) 20 �Earnings per
Share��. 6.
In clause 12.1, in sub-clause (m), the following words shall
be omitted, namely �on the grant date�. 7.
After
clause 12.1, the following clause shall be inserted, namely: �12.2 Until all
options granted in the three years prior to the IPO have been exercised or have
lapsed, disclosures shall be made either in the Directors� Report or in an
Annexure thereto of the information specified in clause 12.1 in respect of such
options also.� �12.3 Until all
options granted in the three years prior to the IPO have been exercised or have
lapsed, disclosure shall be made either in the Directors� Report or in an
Annexure thereto of the impact on the profits and on the EPS of the company if
the company had followed the accounting policies specified in clause 13 in
respect of such options.� 8.
For
clause 15.3, the following shall be substituted, namely: �15.3 If any
options granted to employees in pursuance of pre-IPO ESOS are outstanding at
the time of IPO, the IPO document of the company shall disclose all the
information specified in clause 12.1 and also the following information: a)
The impact on the
profits and on the EPS of the last three years if the company had followed the
accounting policies specified in clause 13 in respect of options granted in the
last three years. b)
The intention of the
holders of shares allotted on exercise of option granted under ESOS or
allotted� under ESPS, to sell their
shares within three (3) months after the date of listing of shares in such IPO
(aggregate number of shares intended to be sold by option holders), if any, has
to be disclosed. In case of ESOS the same shall be disclosed regardless of
whether the shares arise out of options exercised before or after the IPO. c)
Specific disclosures
about the intention to sell shares arising out of ESOS or allotted under ESPS
within three (3) months after the date of listing, by directors, senior
managerial personnel and employees having ESOS or ESPS shares amounting to more
than 1% of the issued capital (excluding outstanding warrants and conversions),
which inter-alia shall include name, designation and quantum of ESOS or ESPS
shares and quantum they intend to sell within three (3) months. d)
A disclosure in line with
the clause 12 and 19 of these guidelines, regarding all the options/shares
issued in last three (3) years (separately for each year) and on a cumulative
basis for all the options/shares issued prior to date of the prospectus.� 9.
In
clause 17.2 (c), for the word �granted�,
the following word shall be substituted, namely, �issued�. 10. In clause 18.2, the
following proviso shall be inserted, namely: �Provided that in a case where shares are allotted by a
company under a ESPS in lieu of shares acquired by the same person under an
ESPS in another company which has merged or amalgamated with the first
mentioned company, the lock in period already undergone in respect of shares of
the transferor company shall be adjusted against the lock-in required under
this clause.� 11. For clause 22.2, the
following clauses shall be substituted, namely: �22.2 The shares
arising after the IPO, out of options granted under any ESOS framed prior to
its IPO shall be listed immediately upon exercise in all the recognised stock
exchanges where the equity shares of the company are listed subject to
compliance with clause 15.3 and, where applicable, clause 22.2A.� �22.2A (1) No
listed company shall make any fresh grant of options under any ESOS framed
prior to its IPO and prior to the listing of its equity shares (hereinafter in
this clause referred to as �pre-IPO scheme�) unless � i)
such pre-IPO scheme is
in conformity with these guidelines; and, ii)
such pre-IPO scheme is
ratified by its shareholders in general meeting subsequent to the IPO. Provided that the ratification under item (ii) may be done
any time prior to grant of new options under such pre-IPO scheme. � (2) No change shall be made in the terms of options issued
under such pre-IPO schemes, whether by repricing, change in vesting period or
maturity or otherwise, unless prior approval of the shareholders is taken for
such change. Provided that nothing in this sub-clause shall apply to any
adjustments for corporate actions made in accordance with these guidelines.� 12. For clause 22.4, the
following shall be substituted, namely: �22.4 The provisions relating to lock-in of pre-IPO shares specified in SEBI
(Disclosure and Investor Protection) Guidelines, 2000 shall not be applicable
to the shares allotted to employees other than promoters before the IPO under a
pre-IPO ESOS / ESPS, subject to compliance with clauses 15.3 and 22.2.� 13. After clause 22.7, the
following clause shall be inserted, namely: �22.7A In a case
falling under clause 22.7, if the subsidiary reimburses the cost incurred by
the holding company in granting options to the employees of the subsidiary,
both the subsidiary as well as the holding company shall disclose the payment
or receipt, as the case may be, in the �notes to accounts� to their financial
statements.� 14. For clause 22.8, the
following shall be substituted, namely: �22.8 The Company shall appoint a registered Merchant Banker for the
implementation of ESOS and ESPS as per these
guidelines till the stage of framing the ESOS/ESPS and obtaining
in-principal approval from the stock exchanges in accordance with clause 22.1
(b).� 15. For clause 22A.1, the
following shall be substituted, namely: �22A.1 In case of
ESOS/ESPS administered through a Trust, the accounts of the company shall be
prepared as if the company itself is administering the ESOS/ESPS.� 16. In Schedule II, for
clause (b), the following shall be substituted, namely: �(b) The
accounting value of shares issued under ESPS shall be equal to the aggregate of
price discount over all shares issued under ESPS during any accounting period; Explanation: For the purposes of this clause, �price discount� means
the excess of the market price of the shares over the price at which they are
issued under the ESPS".� 17. In Schedule V, the
following shall be inserted at the end, namely: �Certified that the scheme conforms to the SEBI (Employee
Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999.� Authorised Signatory ������ Name of the Merchant Banker Date������� : Place������ :� |
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