SEBI considers ESOPs for non-permanent employees

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Market regulator SEBI has proposed to allow companies to offer stock options to non­-permanent employees and non­ executive directors of the company as per a consultation paper on the issue recommended by a working group.

In a report by The Hindu Business Line, the expert group considered whether there is any need for an amendment on the definition of employee to account for contractual workers, gig workers and employees on probation or deputation.

The expert group also added that companies may hire employees on a non­ permanent basis, who, while exclusively working for such companies may not be “permanent” employees.

Employee definition

“The expert group also took note of other categories of persons who may provide services to the company, such as contractual or part­ workers or gig workers that may not be “employed” by the company (such as delivery services, transport services, etc., provided to a web­ based platform),” the SEBI paper stated.

“The expert group took note that keeping in mind the prevalence of such employment practices, non-­permanent employees may be considered for eligibility to receive share­ based employee benefits under the SBEB (share-based employee benefits) Regulations,” the report added.

Also, the expert group also proposed a discussion on the restrictions placed on the independent directors from being issued stock options. “Taking into consideration that SEBI is currently looking into this topic in consultation with the MCA, the expect group was of the view that depending on the outcome of SEBI’s deliberations in this regard, the final decision may be taken and the SBEB Regulations be amended accordingly.”

Presently, the expert group is of the view that it is permissible to include a non ­executive director (who is not a promoter or member of the promoter group) and such clarification may be included in the regulation.