Sebi amends ESOP guidelines

The Securities and Exchange Board of India has amended its guidelines on Employee Stock Option and Purchase Schemes (ESOP and ESPS) to provide for mandatory disclosures, pricing and appointment of merchant bankers.

Subsequent to changes in guidelines in June 2003, the capital market regulator had received queries seeking clarification.

The board, after considering the recommendations of the J R Verma panel on ESOP and the public comments, has approved certain modifications to the guidelines, Sebi said in a notification on Thursday.

Under the amended norms, the market price would mean the latest available closing price, prior to the date of the meeting of the company board in which options are granted or shares are issued, on stock exchanges.

If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date should be considered.

The company should appoint a registered merchant banker for the implementation of ESOS and ESPS till the stage of framing the ESOS/ESPS and obtaining in-principal approval from the stock exchanges, Sebi said.

In case these schemes are administered through a Trust, the accounts of the company should be prepared as if the company itself is administering the ESOS/ESPS, it said.

Sebi said the accounting value of shares, issued under ESPS, should be equal to the aggregate of price discount over all shares issued under scheme during any accounting period.

The price discount would mean difference between the issue price and the market price of the shares.

The shares arising after the initial public offer, from options granted under any ESOS framed prior to its IPO, should be listed immediately upon exercise on stock exchanges where the equity shares of the company are listed.

"No listed company should make fresh grant of options under ESOS framed prior to IPO and prior to the listing of its equity shares, unless such pre-IPO scheme is in conformity with guidelines and ratified by shareholders," it said.