The Hindu Business Line : ESOP plans to be made easier for foreign cos

THE Government of India is currently in the process of separately issuing necessary amendments to the Foreign Exchange Management (Transfer of any foreign security) Regulations, 2000 to make it easier for foreign companies to reward employees by issuing shares to them under their Employee Stock Option Plan/Employee Stock Purchase Plan (ESOP/ ESPP) schemes.

This comes in the backdrop of further liberalisation of the policy on the issue of shares to Indian employees under the ESOP/ESPP scheme by foreign companies, a spokesperson of the National Association for Software and Service Companies (Nasscom) said.

According to the prevailing foreign exchange regulation, an Indian resident, working for the India office, branch or subsidiary of a foreign company or an Indian company with a foreign holding of not less than 51 per cent, was permitted to acquire shares issued by the foreign company under the ESOP/ ESPP schemes without prior approval of the Reserve Bank of India.

However, this was subject to the condition that the shares had to be issued at a "concessional" price. Through a recent circular introduced early this month, the Reserve Bank of India further liberalised the scheme, removing altogether the "concessional price" clause from the shares issuing scheme.

The RBI has also allowed the sale of such shares without any prior approval provided the proceeds of the transaction are repatriated to India.

The policy relating to the acquisition of foreign securities by resident individuals under the ESOP scheme is targeted at resident individuals who are employed or directors of an Indian office or branch of a foreign company in which the foreign holding is not less than 51 per cent.