Procedure for issue of Sweat equity shares

 

Section 54 of the Companies Act, 2013 govern the provision of the Sweat Equity Shares.

 

“Sweat equity shares” mean such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing  their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

 

The detailed procedures for issuance of sweat equity shares are herein given below:

1.       Very first foremost step is to obtain a valuation report from the registered valuer who shall provide proper report addressed to the Board of Directors with justification for such a valuation;

2.       Hold a meeting of the Board:

a)      To approve issue of sweat equity shares to directors/employee subject to approval of members by special resolution;

b)      To fix the day, date, time and agenda for the general meeting for passing a special resolution to issue of sweat equity shares;

c)       To approve draft notice of the general meeting along with the explanatory statement for the purpose of passing the special resolution;

3.       Hold a general meeting to pass the special resolution for issue of sweat equity shares. Please note that the special resolution authorizing the issue of sweat equity shares shall be valid for making the allotment within a period of not more than 12 months from the date of passing of the special resolution.

4.       Hold a meeting of the Bard of pass Board resolution by circulation within a period of not more than 12 months from the date of passing of the special resolution:

a)      To consider the allotment of sweat equity shares;

b)      To authorise CS or CFO or any director of the company to file a return of allotment with ROC.

5.       The company shall maintain the register of sweat equity shares in Form SH-3 and shall forthwith enter therein the particulars of sweat equity shares by CS or any other person authorised by the Board for the purpose.

6.       Make necessary entries in the register of members in Form MGT-1 within 7 days of the Board meeting in which allotment of sweat equity shares was approved;

7.       File a return of allotment with ROC within 30 days from the date of allotment in PAS-3 along with the requisite documents and fees;

8.       Where allotment of sweat equity shares is made to any non-resident, then file form FC GPR to RBI portal within 30 days of allotment;

9.       Where issue of sweat equity shares to person resident outside India, then file a return in Form ESOP within 30 days from the date of issue of sweat equity shares;

10.   Issue the certificates of shares within a period of 2 months in Form SH-1 from the date of allotment to the respective shareholders after payment of stamp duty.