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SEBI amends norms for employee stock options

Our Bureau

Mumbai , July 22

THE Securities and Exchange Board of India (SEBI) has amended the Employee Stock Option Scheme (ESOS) and Employee Stock Purchase Scheme (ESPS) guidelines to include provisions of mandatory disclosures of employee compensation cost using fair value of employee stock option and purchase schemes.

The report, prepared by the SEBI Committee on ESOP and chaired by Mr J.R. Varma, was put up for public comments in April.

The SEBI board has now amended the guideline after incorporating the committee's recommendations and reviewing the public comments, stated a SEBI circular.

After the modification, the guideline specifies, that market price means the latest available closing price, prior to the date of the company's board meeting in which options are granted or shares are issued on stock exchanges.

If the shares are listed on more than one stock exchange, then the exchange where there is highest trading volume on the said date should be considered.

Shares arising after the initial public offer (IPO), from options granted under any ESOS framed prior to its IPO, should be listed immediately on stock exchanges where the equity shares of the company are listed.

Also, accounting value of shares, issued under ESPS, should be equal to the aggregate of price discount over all shares issued under the scheme during any accounting period.

If any pre-IPO options granted to employees are outstanding at the time of IPO, the IPO document of the company should disclose the impact on profits and on the EPS of the previous three years in respect of these options, states the new guideline.

Also, the intention of the holders of shares allotted on ESOS or ESPS to sell their shares within three months after the date of listing of shares has to be disclosed.

"In case of ESOS, the same shall be disclosed regardless of whether the shares arise out of options exercised before or after the IPO," it says

Specific disclosures about the intention to sell shares arising out of ESOS or allotted under ESPS within three months after the date of listing by directors, senior managerial personnel, and employees having ESOS or ESPS shares amounting to more than one per cent of the issued capital should include name, designation and quantum of shares that they intend to sell within three months.

The company should appoint a registered merchant banker for the implementation of ESOS and ESPS till the stage of framing the ESOS/ESPS and obtaining in-principle approval from the stock exchanges, SEBI said. In case these schemes are administered through a trust, the accounts of the company should be prepared as if the company itself is administering the schemes, said the amended guideline.

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