Ex-staff can’t sell ESOP shares for one year post IPO: SEBI

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The Securities and Exchange Board of India today said that shares owned by ex-employees, allotted through ESOPs (Employee Stock Options), cannot be sold for a period of one year pursuant to an IPO by the company.

Replying to an informal guidance sought by the Multi Commodity Exchange, SEBI said that if someone ceases to be an employee of a company on the date of allotment of shares pursuant to the IPO, the shares held by such a person cannot be exempted from the one year lock-in provision.

“In other words, such shares held by ex-employees have to be locked in...,” SEBI said, while concurring with MCX’s stand in the matter.

Besides, the employees and ex-employees of Financial Technologies of India Ltd, which is no longer a holding company of MCX, would also not be considered as ‘employees’ for the purpose of exemption from the one year lock-in provision with regard to the shares allotted under the previous ESOP schemes.

Consequently, the lock-in provision would apply to shares held by the ex-employees of MCX under its ESOP scheme, as well as to the shares held by the existing and ex-employees of FTIL, SEBI said.

MCX had sought SEBI’s position on this matter after one of its ex-employees Raju Thomas Panackal sought to be exempted from the lock-in provision of SEBI regulations citing a market regulator guidance.

However, SEBI has replied to MCX that the guidance cited by Panackal was processed with the limited information available and could not be considered as its views.

It said that “any person who ceased to be in the employment of the company as on the date of allotment of shares pursuant to the IPO is not considered as an employee and hence the shares held by him/her would not be considered for the purpose of exemption from one year lock-in.”

MCX had hit the capital market with its IPO earlier this year and is engaged in the business of facilitating nationwide online trading, clearing and settlement operations of commodity futures.

The company had implemented two employees stock option schemes — ESOP 2006 and ESOP 2008. Under ESOP 2006, options were granted to employees and directors of MCX and its erstwhile holding company Financial Technologies (India) Limited (FTIL).

Under ESOP 2008, MCX granted 26,00,000 options to MCX ESOP Trust. As per SEBI regulations, MCX had locked-in the equity shares allotted under ESOP schemes of those persons who had ceased to be in employment at the time of its IPO.

Further, the shares issued to the employees and ex-employees of the erstwhile holding company, FTIL, were also locked in for one year, MCX had informed SEBI.

(This article was published on August 3, 2012)
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