Sweat Equity Shares under Companies Act, 2013

Sweat Equity Shares under Companies Act, 2013

19 July 2016 • Kamini Goyal

Definition of Sweat Equity Share [Section 2(88)]: –

• Equity Shares which are issued to directors or employees;
• Issued at a discount or for consideration, other than cash;
• For providing their know-how or making available rights in the nature of IPR or value additions.

Applicable Provisions: –

• Section 54 of the Companies Act 2013
• Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014

Section 54

Rule 8 of Companies (Share Capital and Debentures) Rules, 2014

Employee means: –

Value Addition: –

 Benefit derived or to be derived from an expert or professional for providing: –

• Know-how or;
• Making rights available in the nature of IPR

Consideration: –

• Is not paid or;
• Included in the normal remuneration payable under the contract of employment.

Disclosures in Explanatory Statement [Rule 8(2)]: –

• Date of Board Meeting;
• Justification for the issue;
• Class of shares/total no. of shares to be issued;
• Class of Directors or employees and their names along with their relationship with the promoter or/and KMP;
• Principal T&C, basis of valuation of shares;
• Time period of association of such person with Company;
• Proposed price;
• Consideration, if any, to be received;
• The ceiling on managerial remuneration, if any, be breached by issuance of such sweat equity and how it is proposed to be dealt with;
• Statement to the effect that the Company shall conform to the applicable AS;
• Diluted EPS calculated in accordance with AS.