ESOP- A New Genes Under Companies Act, 2013
We all are aware that in today’s era of globalization, Employee retention has become a buzzword and accordingly ‘ESOPs’ i.e, Employee Stock Option Plans has emerged as one of the most important tools to encourage, attract and retain employees. Earlier, when the Companies Act, 1956, was formulated, the concept of rewarding Employees through Stock Options Route was not recognized by the Indian market and was first introduced in early 90s when Indian IT Companies were facing the problem of poaching and brain drain. With the passage of time, ESOPs have gained importance not only in IT sector but in other sectors as well.
Considering the increased recognition and upward trend, lawmakers have also acknowledged the ESOPs and accordingly chalked down specific provisions for the same to ensure transparency in the process of rewarding employees.
With the promulgation of Companies Act, 2013, provisions governing issuance of shares by offering Stock Options to the Employees have been recognized under Section 62(1)(b) of the new Act, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014.
With our endeavor to disseminate knowledge about ESOPs, we have prepared a small presentation for ESOPs under New Companies Act, 2013.