Sebi sought comments from the public till July 25 on the suggestions.
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A group of experts made up by Sebi proposed that non-permanent staffers should be regarded as eligible to obtain share-based employee benefits and advantages.
Also, it has been suggested relaxation discomforting the quantum of sweat equity shares that can be allocated by new-age companies listed on the Innovators Growth Platform.
The seven-membered group, chaired by Partner, S&R Associates Sandip Bhagat, has made various policy suggestions in its 141-page document, including combining both the sweat equity and SBEB (share-based employee benefits) regulations.
The motives for which issuance of sweat equity shares are authorized and the ultimate limit on the quantum of such shares allocated by a company should be incorporated in the rules, the group suggested.
Moreover, the panel evaluated several practical matters about the enactment of employee stock purchase schemes through a trust and certain aspects affecting an ant, vesting, and exercise of options and rights.
With the flexibility to amend the route for administration of a scheme, it is suggested that flexibility needs to be accorded to the companies to switch routes — from trust to direct route or vice versa — subject to the authorization of the shareholders by a special resolution.
Aboutuity, it has been proposed that the lock-in period for sweat equity shares and its pricing formula should be consistent and constant with the ICDR (Issue of Capital and Disclosure Requirements) Regulations.
After focusing on the current employment exercises, it has been proposed that non-permanent employees should also be evaluated for eligibility to receive share-based employee benefits.
Therefore, “employees” can be defined by companies that should be eligible under the SBEB Regulations, as opposed to positions of only “permanent employees”.
Regarding the lock-in restrictions required on trusts under the SBEB regulations for shares attained by the secondary market, it has been indicated that restrictions need to be retained and do not need any modification.
The maximum period prescribed for the appropriation of shares not backed by grants acquired through secondary acquisition by a trust should be extended by an additional period of one year, subject to the approval of the Compensation Committee.
Thus, these shares can be held for 2 years. “Upon winding up of schemes/trust, transfer of shares or monies held by the trust need be authorized to be transferred to one or more existing share-based employee benefit schemes under the SBEB Regulations, subject to the approval of shareholders,” the consultation paper reported.
Furthermore, about the availing of the loans by trust, the group explained companies and their trusts need be entitled to recognize and avail loans from or financing through legally allowable modes as they consider fit.
Regarding compliance by a trust with the insider trading rules, the expert group approved with the position of Sebi that this type of regulation is needed to assure transparency with good governance, and accordingly, no relaxations were proposed in the SBEB regulations.
Regarding voting of shares by the trust, the group explained no regulatory changes are required in this regard as well.
It has also been proposed that a clarification should be included in the ‘grant date’ that for accounting objectives, the grant date will be specified by applicable accounting standards.
For the vesting period in case of death or permanent incapability of the employee during the first year from the date of grant, it has been proposed that a more lenient view could be taken in such circumstances to enable for immediate vesting, instead of vesting of only such granted benefits that are in proportion to the period of service.
About the settlement of cash rather than shares in specific situations, the group of experts suggested that if due to regulatory requirements a firm is incapable to question shares, there should be a way to settle in cash. The settlement in cash should be authorized by the shareholders.
“The expert group also evaluated whether the threshold of 10% of the book value/market value/ fair value of total assets for general employee benefits schemes should continue to be evaluated on an ongoing basis and suggested that such assessment should be made as on the date of the balance sheet,” the consultation paper reported.
Concerning the question of numerous approvals required from the stock exchanges, it has been proposed that Sebi and bourses should evaluate combining many approvals into composite approvals, where feasible.