Sweat Equity Shares
Issue sweat equity shares to directors or employees for non-cash consideration such as know-how, intellectual property or value addition — Section 54 compliance, special resolution, registered valuer and PAS-3 filing.
Issue sweat equity shares
Share the proposed grantees and nature of consideration. We handle valuation, resolutions and MCA filings.
Talk to a CS →A complete sweat equity shares package
Scheme Design
Identification of eligible directors/employees, nature of non-cash contribution and number of shares to be issued.
Registered Valuer Report
Valuation of intellectual property or know-how by a registered valuer — mandatory for sweat equity issuance.
Special Resolution
Special resolution of shareholders specifying grantees, number of shares, consideration and current market price.
PAS-3 Filing
Return of Allotment filed with ROC within 30 days of allotment of sweat equity shares.
Lock-In Compliance
Sweat equity shares are locked in for 3 years from date of allotment — lock-in noted on share certificates.
Register of Sweat Equity
Maintenance of register of sweat equity shares issued in the prescribed format under Rule 8.
What is needed for sweat equity shares
Section 54 — Sweat Equity Regime
Sweat equity shares can only be issued under Section 54 — with specific shareholder approval and valuation.
Special Resolution Mandatory
Special resolution must specify number of shares, current market price, consideration and recipients.
Registered Valuer Required
The non-cash consideration (know-how, IP, value addition) must be valued by a registered valuer under the Companies Act.
15% / 25% Cap
Sweat equity cannot exceed 15% of existing paid-up share capital in a year, or 25% cumulatively at any time.
3-Year Lock-In
All sweat equity shares are subject to a 3-year lock-in from the date of allotment.
PAS-3 Within 30 Days
PAS-3 must be filed with ROC within 30 days of allotment of sweat equity shares.
Sweat equity shares cannot exceed 25% of the paid-up share capital at any time. The annual cap is 15%. Exceeding these limits makes the allotment void. We verify the existing capital structure and confirm headroom before the special resolution is passed.
Common issues with sweat equity shares
Simple steps, no surprises
Scheme and eligibility confirmed
Recipients, nature of consideration, valuation requirement and capital caps verified.
Valuation and resolution
Registered valuer engaged — report obtained — special resolution passed at EGM.
Allotment of sweat equity shares
Shares allotted, share certificates issued with lock-in noted, register of sweat equity updated.
PAS-3 filed
Return of Allotment filed with ROC within 30 days — acknowledgement received.
Other services you may need
Frequently asked questions
Sweat equity shares are shares issued by a company to its directors or employees at a discount or for non-cash consideration — such as know-how, intellectual property or value addition to the company. They are governed by Section 54 of the Companies Act 2013.
Yes. A special resolution of shareholders is mandatory before sweat equity shares can be issued. The resolution must specify the number of shares, the current market price, the consideration and the names of the recipients.
Sweat equity shares cannot exceed 15% of the existing paid-up share capital in any financial year. The cumulative cap is 25% of the total paid-up share capital at any point in time.
All sweat equity shares are subject to a mandatory lock-in period of 3 years from the date of allotment. The lock-in must be noted on the face of the share certificates.
Yes. Where sweat equity is issued for non-cash consideration (know-how, IP, value addition), the consideration must be valued by a registered valuer. The valuation report is a mandatory attachment to the special resolution.
Ready to issue sweat equity shares?
We handle the registered valuation, special resolution, allotment and PAS-3 — fully Section 54 compliant.