Cos get more time to meet employee benefit scheme rules

Sebi had issued a discussion paper last week on the new rules on employee ESOP, ESPS and sought public comments on recommendations made by its Primary Market Advisory Committee

Market regulator Sebi today gave time till June next year for companies to align their employee benefit schemes with existing norms as it is reviewing the current framework for employee stock option and benefit plans.

 

The Securities and Exchange Board of India had issued a discussion paper last week on the new rules on employee ESOP (Employee Stock Option Scheme), ESPS (Employee Stock Purchase Scheme) and sought public comments on recommendations made by its Primary Market Advisory Committee (PMAC) till December 5.

 

"In light of the ongoing review, it has been decided to extend the time line for alignment of existing employee benefit schemes with the Sebi (ESOS and ESPS) Guidelines, to June 30, 2014," Sebi said.

 

This is the second time Sebi has extended the deadline for these norms, aimed at curbing manipulative trading in shares of companies.

 

In order to address the concerns over acquisition of shares by employee welfare trusts from the secondary market, Sebi, in January, asked listed companies to comply with new norms that bar employee welfare schemes and trusts from purchasing the shares of their own firms from the secondary market by June 30.

 

Later it extended the deadline till December 31, 2013. This has now been further extended to June next year.

 

Extending the deadline till June 30 next year, Sebi in a circular said that it is in the process for reviewing the existing guidelines on ESOP and ESPS for framing a new set of regulations.

 

As per the latest suggestions, Sebi proposed a new set of regulations for employee stock options, wherein certain restrictions imposed on companies for award of such allotments to staff members could be eased.

 

Sebi said that the PMAC has already taken into account suggestions made by an expert group in this regard.

 

The group was set up "to deliberate on a framework for framing a set of regulations with a view to ensure better enforceability, address the concerns raised with regard to composition of employee welfare trusts, disclosures, etc. And to enable secondary market transactions with adequate safeguards."

 

Industry bodies had raised concerns over restrictions imposed by Sebi earlier this year with regard to ESOP guidelines, including on composition of employee trusts.

 

As per the new recommendations, Employee Welfare Trusts can be permitted to acquire shares of the company provided that the Trust is administering any of the schemes like ESOP , ESPS, SAR (Stock Appreciation Right)and General Benefit Schemes for the employees of the company.

 

Shareholders' approval would need to be obtained in cases where acquisition of shares is from the secondary market and there could be limits on secondary market purchases for both ESOP and non-ESOP schemes.