Issue of shares under ESOP and/or sweat equity shares to persons resident outside India

Issue of shares under Employ­ees Stock Options Scheme and/or sweat equi­ty shares to per­sons res­i­dent out­side India

Atten­tion of Autho­rised Deal­er Cat­e­go­ry – I (AD Category‑I) banks is invit­ed to Reg­u­la­tion 8 of the For­eign Exchange Man­age­ment (Trans­fer or Issue of Secu­ri­ty by a Per­son Res­i­dent out­side India) Reg­u­la­tions, 2000, noti­fied by the Reserve Bank vide Noti­fi­ca­tion No. FEMA. 20/2000-RB dat­ed 3rd May 2000, as amend­ed from time to time.

2. In terms of the extant instruc­tions, an Indi­an com­pa­ny can issue shares under Employ­ees’ Stock Option (ESOP) Scheme, by what­ev­er name called, to its employ­ees or employ­ees of its Joint ven­ture or Whol­ly owned over­seas subsidiary/subsidiaries who are res­i­dent out­side India, direct­ly or through a Trust, pro­vid­ed that the scheme has been drawn in terms of reg­u­la­tions issued under the SEBI Act, 1992 and face val­ue of the shares to be allot­ted under the scheme to non-res­i­dent employ­ees does not exceed 5 per cent of the paid up cap­i­tal of the issu­ing com­pa­ny. The Trust or Indi­an com­pa­ny has to ensure com­pli­ance with the above con­di­tions and com­ply with the report­ing requirement.

3. On a review, it has been decid­ed that an Indi­an com­pa­ny may issue “employ­ees’ stock option” and/or “sweat equi­ty shares” to its employees/directors or employees/directors of its hold­ing com­pa­ny or joint ven­ture or whol­ly owned over­seas subsidiary/subsidiaries who are res­i­dent out­side India, pro­vid­ed that :

1. The scheme has been drawn either in terms of reg­u­la­tions issued under the Secu­ri­ties Exchange Board of India Act, 1992 or the Com­pa­nies (Share Cap­i­tal and Deben­tures) Rules, 2014 noti­fied by the Cen­tral Gov­ern­ment under the Com­pa­nies Act 2013, as the case may be.
2. The “employee’s stock option”/ “sweat equi­ty shares” issued to non-res­i­dent employees/directors under the applic­a­ble rules/regulations are in com­pli­ance with the sec­toral cap applic­a­ble to the said company.
3. 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.
4. Issue of “employee’s stock option”/ “sweat equi­ty shares” under the applic­a­ble rules/regulations to an employee/director who is a cit­i­zen of Bangladesh/Pakistan shall require pri­or approval of the For­eign Invest­ment Pro­mo­tion Board (FIPB) of Gov­ern­ment of India.

4. The issu­ing com­pa­ny shall fur­nish to the Region­al Office con­cerned of the Reserve Bank of India under whose juris­dic­tion the reg­is­tered office of the com­pa­ny oper­ates, with­in 30 days from the date of issue of employ­ees’ stock option or sweat equi­ty shares, a return as per the Form-ESOP (giv­en as Annex to this circular).

5. Autho­rised Deal­er banks may bring the con­tents of this cir­cu­lar to the notice of their con­stituents /customers concerned.

6. Reserve Bank has since amend­ed the Prin­ci­pal Reg­u­la­tions through the For­eign Exchange Man­age­ment (Trans­fer or Issue of Secu­ri­ty by a Per­son Res­i­dent out­side India) (Fourth Amend­ment) Reg­u­la­tions, 2015 noti­fied through Noti­fi­ca­tion No. FEMA.344/2015-RB dat­ed June 11, 2015, vide G.S.R. No. 484 (E) dat­ed June 11, 2015.

7. The direc­tions con­tained in this cir­cu­lar have been issued under sec­tions 10(4) and 11(1) of the For­eign Exchange Man­age­ment Act, 1999 (42 of 1999) and are with­out prej­u­dice to per­mis­sions / approvals, if any, required under any oth­er law.

Yours faith­ful­ly,

(B.P. Kanun­go)
Prin­ci­pal Chief Gen­er­al Manager

---

Annex to A.P. (DIR Series) Cir­cu­lar No.4 dat­ed July 16, 2015

Form ESOP
Return to be filed by Indi­an com­pa­ny who has issued shares under Employ­ees’ Stock Options (ESOP) Scheme and/or sweat equi­ty shares.
(To be filed by the com­pa­ny through its Autho­rised Deal­er Cat­e­go­ry – I bank with the Region­al Office of the RBI under whose juris­dic­tion the Reg­is­tered Office of the com­pa­ny is sit­u­at­ed mak­ing the dec­la­ra­tion as and when shares under Employ­ees’ Stock Options Scheme and/or sweat equi­ty shares are issued to the for­eign investor)

I. Details of the Com­pa­ny issu­ing ESOP/sweat equi­ty shares

S. No.	Par­tic­u­lars	(In Block Letters)
1.	Name of the Company
2.	Per­ma­nent Account Num­ber (PAN)
3.	Address of the Reg­is­tered office
4.	Reg­is­tra­tion No. giv­en by Reg­is­trar of Companies
5.	Reg­is­tra­tion No. giv­en by RBI for FDI, if applicable
6.	Tele­phone
7.	Fax
8.	e‑mail
9.	Busi­ness details
a)	Descrip­tion of the main busi­ness activity
b)	NIC Code
c)	Per­cent­age of FDI allowed as per FDI policy
d)	State whether FDI is allowed under Auto­mat­ic Route or Approval route
e)	FIPB approval, if any

II. Type of secu­ri­ty issued	(Tick mark whichev­er is applicable)
1. Sweat equi­ty shares	(            )
2. Stock Option Scheme	(            )
3. Shares issued against exer­cise of option	(            )

Please pro­vide the details of the secu­ri­ty issued in a sep­a­rate Annex viz. date of issue, names of per­sons to whom shares are issued, num­ber of shares, issue price, con­sid­er­a­tion oth­er than cash(if any), in case of options (matu­ri­ty date, pre-deter­mined issue price etc.) and any oth­er details rel­e­vant to the issue.

DECLARATION TO BE FILED BY THE AUTHORISED REPRESENTATIVE OF THE INDIAN COMPANY: (Delete whichev­er is not applic­a­ble and authenticate)

We here­by declare that:

1. We com­ply with the pro­ce­dure for issue of shares under Employ­ees’ Stock Option Scheme/ sweat equi­ty shares as indi­cat­ed in Noti­fi­ca­tion No. FEMA 20/2000-RB dat­ed 3rd May 2000, as amend­ed from time to time.

2. The invest­ment is with­in the sec­toral cap / statu­to­ry ceil­ing per­mis­si­ble under the Auto­mat­ic Route of RBI and we ful­fill all the con­di­tions laid down for invest­ments under the Auto­mat­ic Route name­ly (strike off whichev­er is not applicable).

a) Options issued under Employ­ees’ Stock Option Scheme

OR

b) Shares issued against exer­cise of option as (a) above

OR

c) Sweat Equi­ty Shares issued to non-residents

3. Shares have been issued in terms of FIPB approval No.___________________ dat­ed ____________________

4. The for­eign invest­ment received and report­ed now will be uti­lized in com­pli­ance with the pro­vi­sion of a Pre­ven­tion of Mon­ey Laun­der­ing Act 2002 (PMLA) and Unlaw­ful Activities(Prevention) Act, 1967 (UAPA). We con­firm that the invest­ment com­plies with the pro­vi­sions of all applic­a­ble Rules and Regulations.

5. We enclose the fol­low­ing doc­u­ments in com­pli­ance with Reg­u­la­tion 8 of Noti­fi­ca­tion No. FEMA 20/2000-RB dat­ed May 3, 2000:

(i) A cer­tifi­cate from our Com­pa­ny Sec­re­tary cer­ti­fy­ing that

1. Sweat equi­ty shares have been issued / the Employ­ees’ Stock Option Scheme has been drawn either in terms of reg­u­la­tions issued under the Secu­ri­ties Exchange Board of India Act, 1992 or the Com­pa­nies (Share Cap­i­tal and Deben­tures) Rules, 2014 noti­fied by the Cen­tral Gov­ern­ment under the Com­pa­nies Act, 2013, as the case may be
2. all the require­ments of the Com­pa­nies Act, 2013 have been com­plied with;
3. terms and con­di­tions of the Gov­ern­ment approval, if any, have been com­plied with;
4. the com­pa­ny is eli­gi­ble to issue shares under these Reg­u­la­tions; and
5. the com­pa­ny has all orig­i­nal cer­tifi­cates issued by autho­rised deal­ers in India evi­denc­ing receipt of amount of con­sid­er­a­tion in accor­dance with para­graph 8 of Sched­ule 1 to Noti­fi­ca­tion No. FEMA 20/2000-RB dat­ed May 3, 2000.

(ii) A cer­tifi­cate from SEBI reg­is­tered Mer­chant Banker / Char­tered Accoun­tant indi­cat­ing the man­ner of arriv­ing at the price of the shares issued to the per­sons res­i­dent out­side India.

6. Unique Iden­ti­fi­ca­tion Num­bers giv­en for all the remit­tances received as con­sid­er­a­tion for issue of shares under Employ­ees’ Stock Option Scheme/ Sweat Equi­ty shares by Reserve Bank.

(Sig­na­ture of the Appli­cant)* :___________________________________________

(Name in Block Let­ters) :___________________________________________

(Des­ig­na­tion of the sig­na­to­ry) :___________________________________________

Place:
Date:

(* To be signed by Man­ag­ing Director/Director/Secretary of the Company)

CERTIFICATE TO BE FILED BY THE COMPANY SECRETARY OF THE INDIAN COMPANY ACCEPTING THE INVESTMENT:

In respect of the above­men­tioned details, we cer­ti­fy the following:

1. Sweat equi­ty shares have been issued / the Employ­ees’ Stock Option Scheme has been drawn either in terms of reg­u­la­tions issued under the Secu­ri­ties Exchange Board of India Act, 1992 or the Com­pa­nies (Share Cap­i­tal and Deben­tures) Rules, 2014 noti­fied by the Cen­tral Gov­ern­ment under the Com­pa­nies Act, 2013, as the case may be
2. all the require­ments of the Com­pa­nies Act, 2013 have been com­plied with;
3. terms and con­di­tions of the Gov­ern­ment approval, if any, have been com­plied with;
4. the com­pa­ny is eli­gi­ble to issue shares under these Reg­u­la­tions; and
5. the com­pa­ny has all orig­i­nal cer­tifi­cates issued by autho­rised deal­ers in India evi­denc­ing receipt of amount of con­sid­er­a­tion in accor­dance with para­graph 8 of Sched­ule 1 to Noti­fi­ca­tion No. FEMA 20/2000-RB dat­ed May 3, 2000.

(Name & Sig­na­ture of the Com­pa­ny Sec­re­tary) (Seal)

FOR USE OF THE RESERVE BANK ONLY:

RBI/2015–16/128
A.P. (DIR Series) Cir­cu­lar No.4

July 16, 2015