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Quick Answer
ESOPs align employee incentives with shareholder value. Key concepts: (i) grant — issuance of options to specified employees; (ii) vesting period — minimum 1 year for unlisted, longer schedules common; (iii) exercise price — discount to market or fair value; (iv) exercise period — window after vesting in which options can be exercised; (v) cashless exercise structures common in liquidity events; (vi) FMV computation under Rule 11UA Income Tax Rules. Tax treatment: perquisite tax on exercise (FMV minus exercise price); capital gains on subsequent sale.
Statutory reference
Section 62(1)(b) Companies Act 2013
Related practice areas
Equity-incentive scheme allowing employees the right to purchase company shares at a predetermined price after a vesting period. Governed by Companies Act 2013 (Section 62(1)(b)) and SEBI ESOP regulations for listed companies.
ESOP is governed by Section 62(1)(b) Companies Act 2013. ESOPs align employee incentives with shareholder value. Key concepts: (i) grant — issuance of options to specified employees; (ii) vesting period — minimum 1 year for unlisted, longer schedules common; (iii) exercise price — discount to market or fair value; (iv) exercise period — window after vesting in which options can be exercised; (v) cashless exercise structures common in liquidity events; (vi) FMV computation under Rule 11UA Income Tax Rules. Tax treatment: perquisite tax on exercise (FMV minus exercise price); capital gains on subsequent sale.
ESOP falls under Corporate & Business. NyaySevak matches you with a Bar-Council-verified advocate in the relevant practice area — the first consultation is free.