Companies awaiting FIPB approval need nod for ESOPs to foreign units

At present, an Indian company can issue shares under ESOP scheme to employee(s) of its JV or wholly-owned overseas subsidiary (ies) residing outside India

The Reserve Bank today said a company where foreign investment is under the approval route will require prior FIPB nod for issuing employee's stock option (ESOP) to employees of its overseas units.

At present, an Indian company can issue shares under ESOP scheme to employee (s) of its joint venture or wholly-owned overseas subsidiary (ies) residing outside India, directly or through a Trust, subject to certain conditions.

The RBI has reviewed the extant instructions.

"Issue of employee's stock option/sweat equity shares in a company where foreign investment is under the approval route shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India," it said.

Issue of ESOPs/sweat equity shares to an employee or director who is a citizen of Bangladesh or Pakistan shall also require prior approval of the FIPB.

RBI further said that the ESOPs/sweat equity shares issued to non-resident employees or directors by a company should comply with the sectoral cap applicable to it.