An option is a right to purchase stock of a company sometime in the future for a stated price. It is a cashless perquisite which focuses on retaining key employees.
Who ESOP can be offered to:
Process of ESOP
Valuation of shares shall be done at the time of “grant of Option” by registered valuer and “exercise of option” by Merchant Banker. Therefore, valuation is to be done every time when the options are granted and /or exercised. Valuation not older than six months will be considered valid.
Expenses involved for Issuance ESOP
Apart from dilution in shareholding of promoters, the company should keep the following expenses in mind:
Trends in ESOP in India:
Indian companies are giving stock options to senior management — the CEO, the CXOs and those who drive growth. Among unlisted companies, majority of them grant options at an estimated fair value and only 25 per cent at face value.
Companies have a clause in their ESOP Scheme which says employees will be able to exercise their options only after a liquidity event, such as an IPO, buyback or strategic sale.
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