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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 ..... ifications to be incorporated in captioned Guidelines. Accordingly, the amendments to the captioned 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for making a fair and reasonable adjustment to the number of options and to the exercise price in case of corporate actions such as rights issues, bonus issues, merger, sale of division and others. In this regard following shall be taken into consideration by the compensation committee- ( i ) the number and the price of ESOS shall be adjusted in a manner such that total value of the ESOS remains the same after the corporate action ( ii ) for this purpose global best practices in this area including the procedures followed 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 dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, (2) expected life, (3) expected volatility, (4) expected dividends, and (5) the price of the underlying share in market at the time of option grant. (8) After clause 13.1, the following shall be inserted, namely- 13.2 Where a scheme provides for graded vesting, the vesting period shall be determined separately for each portion of the option and shall be accounted for accordingly. (9) In clause 17.2 after sub-clause ( b ), the following shall be inserted namely- ( c ) Total number of shares to be granted. (10) After clause 17.4, the following shall be inserted, namely- 17.5 Approval of shareholders by way of separate resolution in the general meeting shall be obtained by the company in case of; ( a ) allotment of shares to employees of subsidiary or holding company and, ( 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs after the date of listing, by directors, Senior Managerial personnel and employees having ESOS or ESPS shares amounting to more than 1% of the issued capital (excluding outstanding warrants and conversions), which inter alia shall include name, designation and quantum of ESOS or ESPS shares and quantum they intended to sell within three (3) months. ( c ) A disclosure in line with the clauses 12 and 19 of these guidelines, regarding all the options/shares issued in last three (3) years (separately for each year) and on a cumulative basis for all the options/shares issued prior to date of the prospectus. 22.3 For listing of shares issued pursuant to ESOS or ESPS the company shall make application to the Central Listing Authority as per SEBI (Central Listing Authority) Regulations, 2003 and obtain the in-principle approval from Stock Exchanges where it proposes to list the said shares. 22.4 The existing provisions of lock-in specified in SEBI (Disclosure and Investor Protection) Guidelines, 2000 shall not be applicable on the pre-initial public offering ESOS options/shares, ESPS options/shares held by employees other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. ( ii ) The fair value shall be estimated using an option-pricing model (for example, the Black-Scholes or a binomial model) that takes into account as of the grant date the exercise price and expected life of the option, the current price in the market of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the expected term of the option. ( iii ) The fair value of an option estimated at the grant date shall not be subsequently adjusted for changes in the price of the underlying stock or its volatility, the life of the option, dividends on the stock, or the risk-free interest rate. ( iv ) Where the exercise price is fixed in Indian Rupees, the risk-free interest rate used shall be the interest rate applicable for a maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities. ( v ) The expected life of an award of stock options shall take into account the following factors : ( a ) The expected life must at least include the vesting period. ( b ) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rminated for gross misconduct. Part B Information about the company 1. Business of the company : A description of the business of the company on the lines of item V( a ) of Part I of Schedule II of the Companies Act. 2. Abridged financial information : Abridged financial information for the last five years for which audited financial information is available in a format similar to that required under item B(1) of Part II of Schedule II of the Companies Act. The last audited accounts of the company should also be provided unless this has already been provided to the employee in connection with a previous option grant or otherwise. 3. Risk Factors : Management perception of the risk factors of the company in accordance with item VIII of Part I of Schedule II of the Companies Act. 4. Continuing disclosure requirement : The option grantee should receive copies of all documents that are sent to the members of the company. This shall include the annual accounts of the company as well as notices of meetings and the accompanying explanatory statements. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. The specified time period within which vested options are to be exercised in the event of termination or resignation of an employee : 24. The specified time period within which options are to be exercised in the event of death of the employee : 25. Whether Plan provides for conditions under which option vested in employees may lapse in case of termination of employment for misconduct ? Clause in Scheme describing such adjustment: 26. Whether Plan provides for conditions for the grant, vesting and exercise of option in case of employees who are on long leave ? Clause in Scheme describing such adjustment : 27. Whether amount paid/payable by the employee at the time of the grant of the Option will be forfeited if the employee does not exercise the option within the exercise period ? Clause in Scheme describ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t previously disclosed in the statement or any material change to such information in the statement. (2) To notify, the concerned stock exchanges on which the securities of the company are listed, of each issue of securities pursuant to the exercise of options under the scheme mentioned in this Statement, in the prescribed form, as amended from time to time. (3) That the company shall conform to the accounting policies specified in clause 13.1 of the SEBI (ESOS ESPS) Guidelines. (4) That the Scheme confirms to the SEBI (ESOS ESPS) Guidelines. (5) That the company has in place systems/codes/procedures to comply with the SEBI (Insider Trading) Regulations. Signatures Pursuant to the requirements of the SEBI Act/guidelines, the company certifies that it has reasonable grounds to believe that it meets all the requirements for the filing of this form and has duly caused this statement to be signed on its behalf by the undersigned, thereunto, duly authorized. Name of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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