Employee Stock Option Plan
Employee stock option plans can align retention, performance, and long-term value creation when structured properly. We assist with plan design, documentation, compliance, and implementation support for ESOP and related employee equity arrangements.
Why are ESOPs formed?
Companies usually form ESOP to facilitate succession planning in a closely held company by allowing their employees to buy stocks.
- Companies establish ESOPs as trust funds.
- ESOP shares are a part of the employee’s remuneration.
- The fact that they are a part of the employee’s salary and as the employee owns a part of the company in the form of its shares, employees focus on performing well and wholeheartedly for the company.
- This is beneficial from both the employee as well as the employer’s growth point of view.
- In simple words, ESOP refers to the employee’s ownership in the company through a share purchase.
Eligibility
Permanent employees, directors and officers are eligible to receive an option under an ESOP scheme. However, the following individuals are not eligible to participate in the scheme:
- An independent director
- An employee who is a promoter or belongs to the promoter group, and
- A director who directly or indirectly holds more than 10% of outstanding equity shares.
We offer a range of ESOP services, including the following.
- Valuation of options
- ESOP review
- Employee communication service
- ESOP Accounting and Disclosure in the annual report service