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SEBI Notification No: LAD-NRO/GN/2014-15/16/1729 (28-Oct-14) Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014

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LAD-NRO/GN/2014-2015/16/1729.--In exercise of the powers conferred by section 11, section 11A, section 30 of the Securities and Exchange Board of India Act, 1992 read with section 62 of Companies Act, 2013 and rule 12 of Companies (Share Capital and Debentures) Rules, 2014, the Securities and Exchange Board of India hereby makes the following regulations to provide for regulation of all schemes by companies for the benefit of their employees involving dealing in shares, directly or indirectly, with a view to facilitate smooth operation of such schemes while preventing any possible manipulation and matters connected therewith or incidental thereto.

CHAPTER I

PRELIMINARY

1. Short title, commencement and application.-

(1) These regulations may be called the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

(3) The provisions of these regulations shall apply to following,-

(i) employee stock option schemes;

(ii) employee stock purchase schemes;

(iii) stock appreciation rights schemes;

(iv) general employee benefits schemes; and

(v) retirement benefit schemes.

(4) The provisions of these regulations shall apply to any company whose shares are listed on a recognised stock exchange in India, and has a scheme:

(i) for direct or indirect benefit of employees; and

(ii) involving dealing in or subscribing to or purchasing securities of the company, directly or indirectly; and

(iii) satisfying, directly or indirectly, any one of the following conditions:

  1. the scheme is set up by the company or any other company in its group;

  2. the scheme is funded or guaranteed by the company or any other company in its group;

  3. the scheme is controlled or managed by the company or any other company in its group.

    (5) Nothing in these regulations shall apply to shares issued to employees in compliance with the provisions pertaining to preferential allotment as specified in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

    (6) The provisions pertaining to preferential allotment as specified in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 shall not be applicable in case of a company issuing new shares in pursuance and compliance of these regulations.

    2. Definitions.-

    (1) In these regulations, unless the context otherwise requires, the following words, expressions and derivations therefrom shall have the meanings assigned to them as under-

  4. "appreciation" means the difference between the market price of the share of a company on the date of exercise of stock appreciation right (SAR) or vesting of SAR, as the case may be, and the SAR price;

  5. "associate company" shall have the same meaning as defined under section 2(6) of the Companies Act, 2013;

  6. "Board" means the Securities and Exchange Board of India or SEBI;

  7. "control" shall have the same meaning as defined under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

  8. "emergency" means the need of funds by the trust to meet the commitment arising out of the objective of the scheme;

  9. "employee" means,--

    (i) a permanent employee of the company who has been working in India or outside India; or

    (ii) a director of the company, whether a whole time director or not but excluding an independent director; or

    (iii) an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company or of an associate company but does not include--

    (a) an employee who is a promoter or a person belonging to the promoter group; or

    (b) a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten percent of the outstanding equity shares of the company;

  10. "employee stock option scheme or ESOS" means a scheme under which a company grants employee stock option directly or through a trust;

  11. "employee stock purchase scheme or ESPS" means a scheme under which a company offers shares to employees, as part of public issue or otherwise, or through a trust where the trust may undertake secondary acquisition for the purposes of the scheme;

  12. "exercise" means making of an application by an employee to the company or to the trust for issue of shares or appreciation in form of cash, as the case may be, against vested options or vested SARs in pursuance of the schemes covered under Part A or Part C of Chapter III of these regulations, as applicable;

  13. "exercise period" means the time period after vesting within which an employee should exercise his right to apply for shares against the vested option or appreciation against vested SAR in pursuance of the schemes covered under Part A or Part C of Chapter III of these regulations, as applicable;

  14. "exercise price" means the price, if any, payable by the employee for exercising the option or SAR granted to him in pursuance of the schemes covered under Part A or Part C of Chapter III of these regulations, as the case may be;

  15. "general employee benefits scheme or GEBS" means any scheme of a company framed in accordance with these regulations, dealing in shares of the company or the shares of its listed holding company, for the purpose of employee welfare including healthcare benefits, hospital care or benefits, or benefits in the event of sickness, accident, disability, death or scholarship funds, or such other benefit as specified by such company;

  16. "grant" means the process by which the company issues options, SARs, shares, or any other benefits under any of the schemes;

  17. "grant date" means the date on which the compensation committee approves the grant;

  18. "group" means two or more companies which, directly or indirectly, are in a position to,--

    (i) exercise twenty-six per cent. or more of the voting rights in the other company; or

    (ii) appoint more than fifty per cent. of the members of the board of directors in the other company; or

    (iii) control the management or affairs of the other company;

  19. "independent director" shall have the same meaning assigned to it in Clause 49 of the equity Listing Agreement as prescribed by the Board;

  20. "key managerial personnel" shall have the same meaning as defined under section 2(51) of the Companies Act, 2013;

  21. "market price" means the latest available closing price on a recognised stock exchange on which the shares of the company are listed on the date immediately prior to the relevant date.

    Explanation.-If such shares are listed on more than one stock exchange, then the closing price on the stock exchange having higher trading volume shall be considered as the market price;

  22. "option" means the option given to an employee which gives him a right to purchase or subscribe at a future date, the shares offered by the company, directly or indirectly, at a pre-determined price;

  23. "option grantee" means an employee having a right but not an obligation to exercise an option in pursuance of ESOS;

  24. "promoter" shall have the same meaning assigned to it under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

  25. "promoter group" shall have the same meaning assigned to it under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009:

    Provided where the promoter or promoter group of a company is a body corporate, the promoters of that body corporate shall also be deemed to be promoters of such company;

  26. "relative" shall have the same meaning as defined under section 2(77) of the Companies Act, 2013;

  27. "relevant date" means,-

    (i). in the case of grant, the date of the meeting of the compensation committee on which the grant is made; or

    (ii). in the case of exercise, the date on which the notice of exercise is given to the company or to the trust by the employee;

  28. "retirement benefit scheme or RBS" means a scheme of a company, framed in accordance with these regulations, dealing in shares of the company or the shares of its listed holding company, for providing retirement benefits to the employees subject to compliance with existing rules and regulations as applicable under laws relevant to retirement benefits in India;

  29. "SAR grantee" means an employee to whom SAR is granted;

    za. "SAR price" means the base price defined on the grant date of SAR for the purpose of computing appreciation;

    zb. "scheme" means a scheme of a company proposing to provide share based benefits to its employees, which may be implemented and administered directly by such company or through a trust, in accordance with these regulations;

    zc. "secondary acquisition" means acquisition of existing shares of the company by the trust on the platform of a recognised stock exchange for cash consideration;

    zd. "share" means equity shares and securities convertible into equity shares and shall include American Depository Receipts (ADRs), Global Depository Receipts (GDRs) or other depository receipts representing underlying equity shares or securities convertible into equity shares;

    ze. "stock appreciation right or SAR" means a right given to a SAR grantee entitling him to receive appreciation for a specified number of shares of the company where the settlement of such appreciation may be made by way of cash payment or shares of the company.

    Explanation.-An SAR settled by way of shares of the company shall be referred to as equity settled SAR;

    zf "stock appreciation right...

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