Companies awaiting FIPB approval need nod for ESOPs to foreign units

MUMBAI: Companies can issue shares under the Employees’ Stock Option Scheme (ESOP) scheme to overseas staff under the sectoral cap for foreign investment, the Reserve Bank of India said on Thursday.

“Issue of “employee’s stock option”/ “sweat equity shares” in a company where foreign investment is under the approval route shall require prior approval of the Foreign Investment Promotion Board ( FIPB) of Government of India,” the central bank said in a notification.

At present, an Indian company can issue shares under ESOP scheme to its employee (s) of its joint venture or wholly-owned overseas subsidiary (ies) residing outside India, directly or through a Trust, subject to certain conditions.

Now, an Indian company can issue shares under ESOP Scheme to its employees or group employees including offshore ventures directly or via Trust but the face value of the shares to be allotted under the scheme to non-resident employees should not exceed 5%.

“The Trust or Indian company has to ensure compliance with the above conditions and comply with the reporting requirement,” RBI said.

The issuing company shall furnish to RBI within 30 days from the date of issue of employees’ stock option or sweat equity shares.

But, move has come along with a caveat.

“Issue of ESOPs/sweat equity shares to an employee or director who is a citizen of Bangladesh or Pakistan shall also require prior approval of the FIPB,” RBI said.