Employee Stock Option Scheme(ESOP)
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Introduction
Employee Stock Option Plans are the plans in which employees get the right to purchase a number of shares (decided by the employer) in lieu of Salary in the company at a discounted price (less than the market price). The option provided under this scheme confers a right but not an obligation on the employee. Employees have to wait for a certain time period – known as the vesting period –before they can exercise the right to purchase those specified number of shares. Upon vesting of options, employees can exercise the options to get shares by paying the pre-determined exercise price.
Traditionally, ESOPs were given to remunerate senior employees and to acknowledge their proven contribution to the company. However, in modern times, ESOPs are used as compensation and motivational tool as startups can’t afford to spend high salaries in the beginning stage. Employee Stock Options in India has gained immense popularity in recent times with the emergence of a vibrant startup ecosystem in the country.
Advantages of ESOP
Help to retain employees
ESOPs can be treated as a retainership instrument for small businesses as there is a lock-in period for exercising the right to purchase the shares. Thus, a business can retain its employees. If an employee opts for this option then he has to serve the lock-in period to become eligible to exercise it.
Easy to raise funds
Getting shares of the company in which they are working gives employees an ownership feeling. They start feeling that they are not employees of the organization but owners. Also, they get to share the profits of the company in the form of dividends and are motivated to work for the best of the company.
Motivate employees when business needs funds
Businesses that need funds and are not in a position to spend hefty amounts can offer this option to their employees in lieu of salary and motivate them to work for the betterment of the company.
Other Services
Trademark Registration
Rs.5,999/-
Brand Copyright
Rs.3,999/-
FSSAI Registration
Rs.3,999/-
FSSAI License
Rs.6,999/-
Business Plan
Rs.39,999/-
Financial Projection
Rs.29,999/-
GST Registration
Rs.1,999/-
ISO Registration
Rs.7,999/-
Terms and Conditions
Rs.8,999/-
ESOP Process Flow
1-2 HOURS
2-3 WORKING DAYS
3-4 WORKING DAYS
7-8 WORKING DAYS
Select Package
At Our Startup India, we offer a range of packages to suit your needs. Start by selecting the appropriate one, fill out the required forms, or simply speak to our experts online for assistance.
Preparation of list of eligible employees for ESOP
This is the first step and basic step required for the ESOP scheme. OurstartupIndia professionals will carefully select employees for participation in the ESOP scheme after considering his/her experience, roles, and responsibility, etc.
Preparation of ESOP Policy
It is the most important step for Companies. The following are essential things that must be kept in mind while drafting ESOP policy: Quantum of ESOP pool, Employees Selection and evaluation criteria for participating in the scheme, Rights of option holders, Rights of shareholders like Tag along, Drag along and pre-emption rights, and Tax liabilities.
Vesting and Exercise of ESOPs
Once your name is approved, Our Startup India willThere must be a minimum 1-year time gap in between the granting of option and vesting of the option. For e.g: If you grant the option on 01st April 2019, it can’t be exercised before 01st April 2020. After completion of the vesting period, employees can apply for shares or further wait up to the last date on which exercise can be made or not apply for the shares. ESOP grants only rights and no obligation to employees for the purchase of shares.
Requirements for Registering your Business
Pre-requisites
- Title of the invention
- Minutes of a board meeting.
- Special resolution approving ESOP along with the explanatory statement.
- Minutes of the general meeting.
- Boards report.
- Register of employee’s stock option plan.
- Form PAS- 3
- Form MGT- 14.
Simple & Transparent Pricing
Basic Package
Save upto-10% cost on this package
7,999
(inclusive All)- Name Search Report
- Name approval in RUN (Reserve Your Unique Name)
- DSC(2no) (Extra Dsc Per Director – Rs-1000)
- Filing Spice Form
- Issue of Incorporation certificate along with PAN & TAN
- Include Government Fees & Stamp Duty for Authorized Capital Upto -1 Lakh except for the state of Punjab, MP and Kerala.
- Msme Registration
- Share Certificate (Soft Copy)
Growth Package
Save upto-20% cost on this package
9,999
(inclusive All)- Name Search Report
- Name approval in RUN (Reserve Your Unique Name)
- DSC(2no) (Extra Dsc Per Director – Rs-1000)
- Filing Spice Form
- Issue of Incorporation certificate along with PAN & TAN
- Include Government Fees & Stamp Duty for Authorized Capital Upto -1 Lakh except for the state of Punjab, MP and Kerala.
- Msme Registration
- Share Certificate (Soft Copy)
- GST Registration
- Stamp and Company Seal
- Bank – Current Account Opening
- 10% Discount on Future Service
Premium
Save upto-30% cost on this package
16,999
(inclusive All)- Name Search Report
- Name approval in RUN (Reserve Your Unique Name)
- DSC(2no) (Extra Dsc Per Director – Rs-1000)
- Filing Spice Form
- Issue of Incorporation certificate along with PAN & TAN
- Include Government Fees & Stamp Duty for Authorized Capital Upto -1 Lakh except for the state of Punjab, MP and Kerala.
- Msme Registration
- Share Certificate (Soft Copy)
- GST Registration
- Trademark Registration
- 1month free GST filing
- NDA
- Guideline for Startup India Registration.
- Stamp and Company Seal
- Bank – Current Account Opening
- 10% Discount on Future Service
FAQ's on Permanent Application
A promoter is someone who is in overall control of the company and has played an instrumental role in the formation of the company. The name of all promoters is mentioned in the offer document. A promoter is not eligible to avail of the ESOP benefit.
No. ESOPs are valid only until the exercise period; after that, they cannot be converted into shares. They may also expire when the employee terminates his services in the company; this is usually specified in the ‘Letter of Grant’.
No. Mere granting of ESOP does not make you a shareholder. You have to pay the exercise price to exercise your option and convert it into stocks/shares. Only then will you be a shareholder.
Yes, provided that there is a provision regarding this in the company’s Article of Association.
Yes, ESOPs are completely legal and there are several corporate and legal compliances related to the ESOPs. SEBI, Income Tax Act, and Companies Act regulate different aspects of ESOPs.
There are no set rules regarding this. This depends on the employees’ expectations, level of employment, etc.
Yes. It can be changed. In most of cases, such changes are in favor of the employees.
Being a member of an ESOP company, it can provide unique rewards for employees. Participants in the plan can get significant retirement benefits at no monetary cost to them. Also, an ESOP is an excellent way to enhance the company’s ability to recruit and retain top