Legal & Regulatory Compliance

Designing and offering Employee Stock Ownership Plans (ESOPs) requires careful navigation of legal and regulatory frameworks.

  • More Than 20 years of experience
  • Team Comprises of Ex Bankers, CAs, CSs and Lawyers
  • Fully Integrated Services
  • Transparency in engagement
  • Solution based approach
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Compliance-Driven. Legally Sound. Investor-Ready.

Designing and offering Employee Stock Ownership Plans (ESOPs) requires careful navigation of legal and regulatory frameworks. From drafting plan documents to adhering to tax and securities laws, compliance is critical to avoid liabilities and ensure the integrity of your equity program.

Our legal and regulatory advisory ensures your ESOP is not only strategic—but fully compliant.

Legal Considerations in ESOP Implementation would be:

Governing Laws

Depending on your jurisdiction and incorporation status, several laws regulate ESOPs in India, including:-

  • Companies Act, 2013– It provides the framework for issuance of shares to employees and outlines the conditions and procedures for issuing shares under ESOP Schemes.
  • Income Tax Act, 1961 – ESOPs are subject to taxation under the Income Tax Act. The tax implications of ESOPs depend on various factors, such as the type of ESOP, the timing of exercise, and the holding period of the shares.
  • SEBI (SBEB & SE Regulations), 2021 – Guidelines issued hereunder shall be applicable in case of listed entities. These guidelines cover various aspects of ESOPs, including eligibility criteria, pricing, vesting, and exercise period.
  • Foreign Exchange Management Act (FEMA) – Companies must comply with the Foreign Exchange Management Act (FEMA) when issuing ESOPs to non-resident employees. FEMA regulations cover various aspects of ESOPs, such as the pricing, vesting, and repatriation of funds.

Board and Shareholder Approvals

Before issuing any ESOPs, companies must:

  • Obtain Board approval through a formal resolution
  • Secure shareholder approval via a special resolution in a general meeting
  • Clearly outline the plan structure in the notice and explanatory statement

Plan Documentation

We assist in drafting or reviewing:

  • ESOP Plan document
  • Grant letters or option agreements
  • Amendments, disclosures, and employee communication policies

These documents must clearly specify eligibility, vesting, exercise price, lock-ins, and other terms in line with legal requirements.

Taxation Implications

ESOPs are subject to dual taxation:

  • At the time of exercise – Taxed as a perquisite (salary income)
  • At the time of sale – Taxed as capital gains (short or long-term, depending on holding period)

We help you plan ESOPs that optimize post-tax benefits for employees and advise on employer obligations such as TDS (Tax Deducted at Source).

Cross-Border Compliance

For companies with global teams, it’s essential to evaluate:

  • Local labour and tax laws in each country
  • Exchange control regulations
  • Securities law exemptions or filings

We coordinate with legal experts across jurisdictions to ensure global ESOP compliance.

Our Legal & Compliance Support Includes

  • ESOP scheme vetting and structuring
  • Legal drafting of plan documents and resolutions
  • Guidance on approvals and filings (MGT-14, PAS-3, etc.)
  • Tax advisory and modeling
  • FEMA compliance and RBI reporting (if applicable)
  • SEBI and stock exchange compliance for listed entities

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