The Hindu Business Line : Disclosure document mandatory for ESOP optees, says SEBI

THE Securities and Exchange Board of India (SEBI) has made the disclosure requirement to be given to employees who avail of the stock option scheme mandatory for all options granted after June 30, 2003.

The SEBI report also states that the explanatory statement to the notice should include a declaration by the company about the method of option valuation it is going to use for accounting employee stock options scheme (ESOP).

A statement saying that the company shall disclose impact of fair value on company's profits and earnings per share if that method were used is also required to be inserted, for all notices sent after June 30, 2003.

Further, for all initial public offers after June 30, 2003, shares arising out of the option scheme shall be immediately listed provided that a statement in the prescribed format is filed with the stock exchanges and an in-principle approval is obtained before the exercise. Prescribed information should also be filed with the stock exchanges after the exercise, stated the report.

Elaborating on the role of merchant bankers, SEBI stated that the role of the merchant banker is primarily to certify that the ESOP scheme is compliant with the SEBI guidelines. This certification would be the part of schedule V to be filed with stock exchanges for getting in principle approval.

The report also clarified that in order to conform to the code of conduct on insider trading, employees are required to hold their investments in securities for a minimum period of 30 days from the date of allotment.

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