Whether Employee Welfare Trusts acts as an Intermediary for Employees Welfare or a Portfolio Manager for the Promoters??
With the intent to create belongingness value for the real jewels i.e. Employees of the Company, nowadays, large no. of companies in India are settling their Welfare arm (i.e. Employee Welfare Trusts) for extending various benefits like Medical / Education / Retirement Benefits etc.
Apart from extending above benefits, the companies are using these Trusts to channelize monetary values to the Employees via Employee Stock Options Plan whereby such Welfare Trusts are being used either for transferring direct ownership rights to the Employees i.e. equity shares or the monetary benefit arising out of the equity shares. Prior to the SEBI Circular dated 17th January,
2013, the Companies can either allot fresh shares to these Trusts or empower these Trusts to purchase the shares from the Secondary market in order to maintain a pool of the Companies shares before the Employees exercise their rights pursuant to the Employee Stock Schemes framed by the Companies.
2013, the Companies can either allot fresh shares to these Trusts or empower these Trusts to purchase the shares from the Secondary market in order to maintain a pool of the Companies shares before the Employees exercise their rights pursuant to the Employee Stock Schemes framed by the Companies.
However, the Capital Market Regulator, SEBI vide its Circular dated 17th January, 2013, restrained the Trust of listed entities to buy shares from the secondary market for creating a pool of shares for the ESOP Schemes and prohibited the listed entities from framing any employee benefit schemes involving acquisition of own securities from the secondary market thereby directing the listed entities to align their existing schemes in consonance with the SEBI (ESOP & ESPS) Guidelines, 1999 by 30th June, 2013. However, due to practical difficulties being faced by the Corporate and to address the concerns that have a direct bearing on the capital market, SEBI vide its subsequent Circulars dated 13th May, 2013 and 29th November, 2013 extended timeline for re-alignment to 31st December, 2013 and 30th June, 2014 respectively.
Meanwhile, SEBI floated a discussion paper on the basis of various representations received from Corporate Houses, Trusteeship firms etc. to refurbish the regime for the secondary market acquisitions by Trusts in line with the internationally accepted practice.
Extension of timelines for alignment of Scheme on one hand and floating of discussion paper for regulating the working of these Trusts, on the other, can be viewed as the positive initiatives by the Regulator that aims at plugging all the fallouts and streamlining the regulatory framework with the dynamic business environment.
For any ESOP related Professional Advisory, feel free to contact:-
Ms. Mohini Varshneya
Asst. Vice President
Corporate Professionals
www.esoponline.in
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