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TMI BlogAmendment to SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999X X X X Extracts X X X X X X X X Extracts X X X X ..... oned Guidelines have been made in exercise of powers conferred under section 11(1) of SEBI Act, 1992. The amendments are enclosed. You are directed to ensure compliance with the Guidelines. These amendments except clauses 22.3 and 22.6 shall come into force with immediate effect. Clauses 22.3 and 22.6 shall come into force on the date/s specified by the Board. The amended guidelines are also available in SEBI website i.e. www.sebi.gov.in Yours faithfully, Sd/- (Neelam Bhardwaj) Deputy General Manager Primary Market Department Tel. (Board): 22850451-56, 22880962-70(Extn. 367) Tel. (Direct: 22842826 email: [email protected] Fax: 22045633 AMENDMENTS TO SEBI (EMPLOYEE STOCK OPTION SCHEME AND EMPLOYEE STOCK PURCHASE SCHEME) GUIDELINES, 1999 (1) In clause 2.1, (i) after sub-clause (2), the following shall be inserted, namely- "(2A) 'employee stock option' means the option given to the whole-time Directors, Officers or employees of a company which gives such Directors, Officers or employees, the benefit or right to purchase or subscribe at a future date, the securities offered by the company at a pre-determined price." (ii) for sub-clause (3) following shall be substi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the derivative markets in India and abroad shall be considered. (iii) the vesting period and the life of the options shall be left unaltered as far as possible to protect the rights of the option holders." (4) In clause 6.2, after sub-clause (i), the following shall be inserted, namely- "(j) the method which the company shall use to value its options whether fair value or intrinsic value. (k) the following statement : "In case the company calculates the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed in the Directors report and also the impact of this difference on profits and on EPS of the company shall also be disclosed in the Directors' report." (5) After clause 7.4 the following shall be inserted, namely- "7.5 A company may reprice the options which are not exercised if ESOSs were rendered unattractive due to fall in the price of the shares in the market : Provided that the company ensures that such repricing shall not be detrimental to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) allotment of shares to identified employees, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of allotment of shares. (11) Clause 21 shall be omitted. (12) For clause 22.1, the following shall be substituted, namely- "22.1 The shares arising pursuant to an ESOS and shares issued under an ESPS shall be listed immediately upon exercise in any recognized stock exchange where the securities of the company are listed subject to compliance of the following : a. The ESOS/ESPS is in accordance with these Guidelines. b. In case of an ESOS the company has also filed with the concerned stock exchanges, before the exercise of option, a statement as per Schedule V and has obtained in-principle approval from such Stock Exchanges. c. As and when ESOS/ESPS are exercised the company has notified the concerned Stock Exchanges as per the statement as per Sche-dule VI." (13) After clause 22.1, the following clause shall be inserted, namely- "22.2 The shares arising upon exercise of option issued by an unlisted company which are to be vested or be exercised after the company is listed, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosures in the prospectus for IPO is made as mentioned in clause 22.2 (i) & (ii). 22.5 The ESOS/ESPS shares held by the promoters prior to Initial Public offering shall be subject to lock-in as per the provisions of SEBI (Disclosure and Investor Protection) Guidelines, 2000. 22.6 The listed companies shall file the ESOS or ESPS Schemes through EDIFAR filing. 22.7 When holding company issues ESOS/ESPS to the employee of its subsidiary, the cost incurred by the holding company for issuing such options/shares shall be disclosed in the 'notes to accounts' of the financial statements of the subsidiary company. 22.8 The Company shall appoint a registered Merchant Banker for the implementation of ESOS and ESPS as per these guidelines." (14) After clause 22, the following shall be inserted, namely- "22A. ESOS/ESPS through Trust Route 22A.1 In case of ESOS/ESPS are administered through a Trust Route, the ESOS/ESPS Trust shall be consolidated with the company in accordance with the Accounting Standard (AS21) specified by the Institute of Chartered Accountants of India and these Guidelines shall be applicable to the consolidated entity." (15) For clause 23 following shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company does not have a sufficiently long history of traded stock prices to estimate the expected volatility of its stock, it may use an estimate based on the estimated volatility of stocks of an appropriately comparable peer group. (vii) The estimated dividends of the company over the estimated life of the option may be estimated taking into account the company's past dividend policy as well as the mean dividend yield of an appropriately comparable peer group. (viii) Justification shall be given for significant assumptions. If at the time of further issue of ESOS/ESPS there are any changes in the assumptions, reasons for the same shall be given. Schedule IV Disclosure Document (Clause 5.1) Part A Statement of Risks All investments in shares or options on shares are subject to risk as the value of shares may go down or go up. In addition, employee stock options are subject to the following additional risks : 1. Concentration : The risk arising out of any fall in value of shares is aggravated if the employee's holding is concentrated in the shares of a single company. 2. Leverage : Any change in the value of the share can lead to a significantly larger change in the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate for such fiduciary relationships. Schedule V (Clause 22.1) Information required in the Statement to be filed with Stock Exchange Description of Stock Option Scheme 1. Authorized Share Capital of the Company : 2. Issued Share Capital of the Company as on date of Institutional of the Scheme/amending of the Scheme. 3. Date of Institution of the Scheme/amending of the Scheme 4. Validity period of the Scheme 5. Date of notice of AGM/EGM for approving the Scheme/for amending the Scheme/for approving grants under clause 6.3(a) or (b) of the SEBI (ESOS & ESPS) Guidelines. 6. Date of AGM/EGM approving the Scheme/amending the Scheme/approving grants under clause 6.3(a) or (b) of the SEBI (ESOS & ESPS) Guidelines. 7. Kind of security granted as Options under the Scheme 8. Identity of classes of persons eligible under the scheme Permanent employees Permanent employees outside India Permanent employees of subsidiary Permanent employees of holding company Whole-time directors Independent directors 9. Total number of securities reserved under the scheme : 10. Number of securities entitled under each option 11. Total number of options to be granted : 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of the employees who are beneficiary of such variation : Company Secretary Place : Date : Documents to be filed with registration statement u Copy of Stock Option Scheme/Amended Stock Option Scheme, certified by company secretary. u Copy of Notice of AGM/EGM for approving the Scheme/for amending the Scheme/for approving grants under clause 6.3(a) or (b) of the SEBI (ESOS & ESPS) Guidelines, certified by the company secretary. u Copy of resolution of shareholders for approving the Scheme/for amending the Scheme/for approving grants under clause 6.3(a) or (b) of the SEBI (ESOS & ESPS) Guidelines, certified by the company secretary. u List of Promoters as defined under the SEBI (ESOS & ESPS) Guidelines. u Copy of latest Annual Report. u Certificate of Auditor on compliance with SEBI (ESOS and ESPS) Guidelines. u Specimen copy of Share certificate. u Any other relevant documents. Undertakings A. The undersigned company hereby undertakes : (1) To file, a post-effective amendment to this statement to include any material information with respect to the scheme of distribution not previously disclosed in the statement or any material change to such informat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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