Sebi relaxes sweat equity norms for new-age technology cos

It has been decided to dispense with the minimum vesting period and lock-in period for all share benefit schemes in the event of death or permanent incapacity of an employee.

Markets regulator Sebi on Friday decided to provide relaxations on the quantum of sweat equity that can be issued by new-age technology companies listed on the Innovators Growth Platform.

Sebi said the maximum yearly limit of sweat equity shares that can be issued by a company listed on the mainboard has been prescribed at 15 per cent of the existing paid-up equity share capital within the overall limit not exceeding 25 per cent of the paid-up capital at any time.

In the case of the companies listed on Innovators Growth Platform (IGP), the yearly limit will be 15 per cent and the overall limit will be 50 per cent of the paid-up capital at any time, the regulator said in a press release after its board meeting.

This enhanced overall limit for IGP will be applicable for 10 years from the date of the company's incorporation, it added.

The board approved the merger of two separate regulations -- Sebi (Share Based Employee Benefits) Regulations, 2014, or SBEB, and Sebi (Issue Of Sweat Equity) Regulations, 2002 -- that deal with employee compensation -- into a single regulation Sebi (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

While approving the said merger, the board also agreed to certain amendments to existing provisions.

Now, these companies will be allowed to provide share-based employee benefits to employees, who are exclusively working for such a company or any of its group companies, including its subsidiary or associate.

"The companies will have flexibility in switching the administration of their schemes from the trust route to the direct route and vice versa with the approval of the shareholders," the Securities and Exchange Board of India said.

However, this is subject to the condition that the switch is not prejudicial to the interest of the employees.

Sebi said the time period for appropriating the unappropriated inventory of the trust has been extended from existing one year to two years, subject to the approval of the compensation or nomination and remuneration committee for such extension.

It has also been decided to dispense with the minimum vesting period and lock-in period for all share benefit schemes in the event of death or permanent incapacity (as defined by the company) of an employee.

In July, the seven-member group constituted by Sebi had made several policy recommendations, including non-permanent staffers should be considered eligible to receive share-based employee benefits.