Indian corporates can issue stock options or 'sweat equity': RBI

MUMBAI: In a move that will provide information technology companies greater flexibility in rewarding overseas employees, Reserve Bank of India has said that Indian corporates can issue stock options or 'sweat equity' to employees in overseas holding companies, joint ventures or wholly-owned subsidiaries.

At present there is a cap of 5% on the quantity of shares that are issued to foreign employees even if they are issued under the trust route. Amending FEMA regulations on Thursday, RBI said "On a review, it has been decided that an Indian company may issue "employees' stock option" or "sweat equity shares" to its employees or employee of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India," RBI said in a circular. RBI's definition of employees includes directors on the board of the company

This is subject to the condition that the stock option scheme is drawn in terms of regulation issued under the Securities Exchange Board of India Act, 1992 or the Companies (Share Capital and Debentures) Rules, 2014. Also the foreign holding cannot exceed the sector cap applicable to the company because of the issue of shares to employees.