ESOP Scheme Compliance
Set up an Employee Stock Option Plan — ESOP scheme drafting, board and shareholder approval, grant letters, vesting schedules, exercise of options and PAS-3 allotment filing with MCA.
Set up or comply with your ESOP scheme
Share your employee count and option pool size. We draft the scheme, obtain approvals and handle all MCA filings.
Talk to a CS →A complete esop scheme compliance package
ESOP Scheme Drafting
Complete ESOP scheme document — eligible employees, grant size, vesting schedule, exercise price and conditions.
Board & Shareholder Approval
Board resolution and special resolution of shareholders required before any options are granted.
Grant Letters
Individual grant letters issued to each employee specifying options granted, vesting dates and exercise price.
Vesting & Exercise Compliance
Compliance at each vesting date and exercise date — board resolution at exercise, allotment of shares.
PAS-3 Filing
Return of Allotment (PAS-3) filed with ROC within 30 days of allotment of shares on exercise of options.
Valuation & Tax Compliance
Coordination with valuer for fair value determination — TDS on perquisite value at exercise and capital gains guidance.
What is needed for esop scheme compliance
Special Resolution Mandatory
An ESOP scheme cannot be implemented without a special resolution of shareholders under Section 62(1)(b).
Minimum 1-Year Vesting Period
The minimum vesting period between date of grant and earliest exercise is 1 year — per Rule 12 of Companies (Share Capital and Debentures) Rules.
Exercise Price Determination
Exercise price must be determined as per the scheme — market price or discounted price as approved by shareholders.
PAS-3 Within 30 Days of Allotment
On exercise of options and allotment of shares, PAS-3 must be filed within 30 days with the ROC.
No Options to Promoters
ESOPs cannot be granted to promoters, directors holding more than 10% of shares or independent directors — per Companies Act.
ESOP Register Maintenance
The company must maintain a register of employee stock options as per the prescribed format.
ESOPs cannot be granted to promoters or directors holding more than 10% of the paid-up capital. Non-compliance at the grant stage makes the entire grant void. We verify eligibility of each grantee and structure the scheme to comply with the Companies Act and, where applicable, SEBI ESOP guidelines.
Common issues with esop scheme compliance
Simple steps, no surprises
Scheme designed
Pool size, eligible employees, vesting schedule and exercise price determined — scheme document drafted.
Board and shareholder approval
Board resolution and shareholder special resolution passed — scheme and grant limits approved.
Options granted
Individual grant letters issued — employees accept grants, vesting calendar set up.
Exercise, allotment and PAS-3
Options exercised by employees — shares allotted, PAS-3 filed within 30 days, register updated.
Other services you may need
Frequently asked questions
An Employee Stock Option Plan (ESOP) is a scheme under which a company grants employees the right (option) to purchase shares of the company at a predetermined price (exercise price) after a vesting period. It is a retention and incentive tool governed by Section 62(1)(b) and Rule 12 of the Companies Act 2013.
Yes. A special resolution of shareholders is mandatory before any options can be granted under an ESOP scheme. The resolution must specify the total number of options, eligible classes of employees, exercise price and vesting conditions.
The minimum vesting period is 1 year from the date of grant of options. Options cannot be exercised before the completion of 1 year from the grant date.
No. ESOPs cannot be granted to promoters, directors who hold 10% or more of the paid-up equity capital, or independent directors. Violation at the grant stage makes the grant void.
At the time of exercise, the difference between the fair market value and the exercise price is a perquisite taxable as salary — the company must deduct TDS. At sale of shares by the employee, capital gains tax applies — depending on the holding period and the type of shares.
Ready to set up or regularise your ESOP scheme?
We draft the scheme, obtain shareholder approval, issue grant letters and handle all MCA filings.