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Complete Procedure for ESOP of Private Limited Company (with draft scheme)

ABC Private Limited

Complete Procedure for ESOP


  1. Notice for board meeting is to be given by not less than 7 (Seven) days in writing by post or by electronic means as per Section 173(3) of the companies act 2013. Step 1
  2. As per Section 62(1)(b) Hold board meeting for the ESOP and pass the resolution for issuance of ESOP scheme. Step 2
  3. See recent valuation report to find the value of share to be proposed in ESOP. Step 3
  4. Exercise price i.e. the value of share under ESOP is to be decided by the management. Step 3
  5. Vesting period i.e. the period after which ESOP right can be exercised. Step 3 (Minimum One year as per Rule 12 sub rule 6(a) of Co. (share capital and debentures) rules,2014.
  6. Exercise period i.e. the period in which option can be asked for issuance of share. This is to be decided by the management. Step 3
  7. Prepare full ESOP scheme. Step 3
  8. ESOP scheme to be circulate among employees and management will decide the criteria to whom ESOP scheme will be proposed and how many of them are ready for the right. Step 3
  9. Notice to be given by not less than 21(Twenty one) clear days before EGM to be held as per Section 101(1) with explanatory statement annexed as required by Sec. 102(1) with notice for issuance of ESOP. (Resolution is to be prepared to be annexed). Step 4
  10. Hold EGM and pass the ordinary resolution for the ESOP (as per new Notification No. GSR 464(E), dated 5-6-2015 after passing the resolution file MGT-14 within 30 days of passing the resolution at EGM held as required by Sec. 117(1) and Sec. 117(3) of companies act 2013. Step5


Note: As per sub rule 4 of Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 approval of the shareholders by way of special resolution shall be obtained by company in  case of- grant of the option to identified employees, during any one year, equal to or exceeding 1 (One) percent of the issued capital at the time of grant of option. At the time of Step 5

11.    Maintain register in form SH-6. Step 6

12. At the End of the vested period till exercise period allotment of shares in form PAS-3 is to be filed with ROC within 30 days of allotment of shares read with Section 39(4) and rule 12 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. Step 7

13. Check expenses to be booked in books of account and maintain year to year expenses as per calculation according to share based payments guidance note by ICAI. Step 8

Draft ESOP scheme

Category: M/S R P L & CO

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