Rule 9 - Issue of Sweat Equity Shares for consideration other than cash. - Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003

Issue of Sweat Equity Shares for consideration other than cash. 09. Where a company proposes to issue sweat equity shares for consideration other than cash, it shall comply with following: (a) The valuation of the intellectual property or of the know-how provided or other value addition to consideration at which sweat equity capital is issued, shall be carried out by a valuer; (b) the valuer shall consult such experts, as he may deem fit, having regard to the nature of the industry and the nature of the property or the value addition; (c) the valuer shall submit a valuation report to the company giving justification for the valuation; (d) a copy of the valuation report of the valuer shall be sent to the shareholders with the notice of the general meeting; (e) the company shall give justification for issue of sweat equity shares for consideration other than cash, which shall form part of the notice sent for the general meeting; and (f) the amount of Sweat Equity shares issued shall be treated as part of managerial remuneration for the purposes of sections 198, 309, 310, 311 and 387 of the Companies Act, 1956 if the following conditions are fulfilled: (i) the Sweat Equity shares are issued to any director or manager; and (ii) they are issued for non-cash consideration, which does not take the form of an asset which can be carried to the balance sheet of the company in accordance with the relevant accounting standards.