Overview
This lecture explains in detail the share-related schemes given to employees by companiesтАФESOS, ESPS, SAR, and Sweat Equity SharesтАФalong with their provisions and benefits.
ESOS (Employee Stock Option Scheme)
- ESOS is given to top-level employees, directors, and officers working in the company, holding, or subsidiary.
- It gives employees the option to buy shares at a predetermined price in the future.
- Benefit: Employees get shares at a lower price, which increases their loyalty to the company.
- A minimum one-year vesting period is mandatory.
- Shares cannot be sold for at least one year after purchase (lock-in period).
- No voting or dividend rights until ESOS is received.
- ESOS cannot be transferred.
- A special resolution is required to implement ESOS.
ESPS (Employee Stock Purchase Scheme)
- ESPS covers almost all permanent employees.
- Employees get the opportunity to buy shares at a discounted price, with the amount deducted from their salary.
- Employees have the right to buy shares by a fixed date.
- ESPS also has a one-year lock-in period.
- Different numbers of shares can be offered to different employees.
- A special resolution is necessary to implement.
SAR (Stock Appreciation Rights)
- The company gives SAR to employees as a bonus or reward.
- To receive SAR, the employee must work in the company for at least one year.
- If the employee achieves the target, they benefit according to the market price.
- The company gives shares for free, does not take money.
Sweat Equity Shares
- These shares are given free or at a low price to employees/directors who have made hard work or special contributions.
- It covers all employees and directors (India and abroad).
- Benefit: Recognition and shareholding for those contributing to the company's profits.
- These shares have a three-year lock-in period.
- Passing a special resolution is mandatory.
Key Terms & Definitions
- ESOS (Employee Stock Option Scheme) тАФ The option for employees to buy shares at a predetermined price in the future.
- ESPS (Employee Stock Purchase Scheme) тАФ The right for employees to buy shares at a discounted rate.
- SAR (Stock Appreciation Rights) тАФ Share benefits as a bonus for good performance.
- Sweat Equity Shares тАФ Shares given to employees for special contributions.
- Vesting Period тАФ The minimum time an employee must stay in the company.
- Lock-in Period тАФ The period during which shares cannot be transferred/sold.
Action Items / Next Steps
- Re-read previous lectures 1, 2, 3.
- Revise the definitions of key terms.
- Practice by writing the differences between ESOS and ESPS.
- For any doubts, comment or contact via Instagram.