ESOP Compliance in India: Companies Act 2013, Administration

Most Indian founders treat an employee stock option plan as an HR decision: draft a scheme, get a lawyer to glance at it, issue letters, move on. It is not. An ESOP is a regulated equity instrument under the Companies Act, 2013, with its own board and shareholder approval sequence, its own statutory registers, and its own annual disclosure obligations that run for as long as the scheme is alive, not just at launch. For unlisted private companies this sits under Section 62(1)(b) and Rule 12. For listed companies, the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 add a second, heavier layer. Get either wrong and the cost shows up later, at a funding round, a secretarial audit, or an IPO due diligence review, as a cap table defect an investor’s counsel will not let pass. This guide covers that statutory and administrative layer end to end: approval, filings, registers, disclosures and penalties.

What law governs ESOP compliance for a private company in India

An unlisted private or public company issuing ESOPs is governed by Section 62(1)(b) of the Companies Act, 2013, read with Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014. Private companies get an MCA exemption allowing scheme approval by ordinary resolution instead of a special resolution. Listed companies must additionally comply with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, which impose a Compensation Committee, stock exchange disclosures, and fair value accounting under Ind AS 102.

The statutory foundation: which law applies to your company

Section 2(37) of the Companies Act, 2013 defines an employee stock option as the right given to a director, officer or employee of a company, or of its holding or subsidiary company, to purchase or subscribe to shares at a predetermined price at a future date. Section 62(1)(b) is the enabling provision: it authorises a company with share capital to issue shares to employees under a scheme of employee stock options, subject to a special resolution and other conditions. Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014 supplies the procedural detail, eligibility, disclosure and record-keeping conditions that turn the enabling provision into a workable scheme.

One terminology point that trips up first-time founders: the Companies Act calls the instrument an Employee Stock Option Scheme (ESOS). The industry universally says ESOP. Both terms refer to the same thing, and this article uses ESOP throughout.

Which framework applies to your company

Company type	Governing law	Approval threshold
Private limited (unlisted)	Section 62(1)(b) + Rule 12	Ordinary resolution, under the MCA’s private company exemption notification
Public limited (unlisted)	Section 62(1)(b) + Rule 12	Special resolution (75 percent majority), fuller explanatory statement
Listed company	Section 62(1)(b) + Rule 12 + SEBI (SBEB and SE) Regulations, 2021	Special resolution, plus a mandatory Compensation Committee and stock exchange disclosures
DPIIT-recognised startup	Section 62(1)(b) + Rule 12, with startup relaxations	Ordinary or special resolution as per company type, with promoter and 10 percent shareholder eligibility relaxed for 10 years from incorporation

The practical consequence: a private company can run a materially simpler approval process than a public or listed one, but the ongoing filing, register and disclosure obligations under Rule 12 apply regardless of company type. Simplicity at approval stage is not an exemption from administration afterward.

Everything in this article assumes the direct route, where the company allots shares to employees itself, which is how most private companies start. Companies running or considering an employee benefit trust structure instead carry an additional layer, a special resolution under Section 67(3)(b), Rule 16 of the same Rules, and the trust’s own filings, covered separately in Treelife’s guide to the direct route versus the trust route for ESOPs in India.

Who can and cannot receive ESOPs under Rule 12

Granting options to a person Rule 12 excludes creates a structural defect in the grant, not a paperwork gap, and it is one that cannot be fixed after the fact by amending the letter. Eligibility has to be checked before the first grant letter goes out, not discovered during due diligence.

Who Rule 12 permits and excludes

Category	Eligible	Detail
Permanent employees, in India or abroad	Yes	All permanent employees on payroll qualify, regardless of work location
Directors, excluding independent directors	Yes	Whole-time and part-time directors both qualify
Employees of a holding or subsidiary company	Yes	Must be explicitly named in the scheme document
Independent directors	No	Explicitly excluded under Rule 12 and, for listed companies, under the SEBI SBEB Regulations
Promoters and promoter group members	No	Standard restriction, other than the DPIIT startup exception below
Directors holding more than 10 percent equity, directly, through relatives, or through a body corporate	No	Standard restriction, other than the DPIIT startup exception
Contract or temporary staff	No	Must be permanent employees

For a DPIIT-recognised startup with Inter-Ministerial Board certification, the promoter and 10 percent shareholder restrictions do not apply for 10 years from the date of incorporation. This is a material advantage that early-stage companies routinely overlook: a founder who is technically a promoter, and who holds a meaningful stake, can still receive ESOPs under this exception, which matters when a co-founder’s original equity is thin relative to the risk they are carrying.

How is an ESOP scheme approved under the Companies Act

Approval runs through a fixed sequence: board approval, a shareholder resolution, and filing both with the Registrar of Companies. Skipping a step, or trying to shortcut the board stage with a circular resolution, is one of the more common ways companies end up with an unenforceable scheme.

Before anything else, check the Articles of Association actually authorise ESOP issuance. If they do not, that has to be amended first through an extraordinary general meeting.

The approval sequence

Step	Action	Timeline	Document generated
1	Draft the ESOP scheme: eligibility, pool size, vesting, exercise price, exercise period, lapse conditions	Before the board meeting	ESOP scheme document
2	Issue board meeting notice to all directors	Minimum 7 days before the meeting	Board meeting notice
3	Hold the board meeting and approve the scheme. Cannot be done by circular resolution	Board meeting date	Board resolution
4	File Form MGT-14 with the Registrar of Companies for the board resolution	Within 30 days of the board meeting	Form MGT-14
5	Issue the general meeting notice with the explanatory statement	Minimum 21 days before the meeting	EGM or AGM notice
6	Hold the general meeting and pass the resolution: ordinary for private companies, special for public and listed companies	General meeting date	Ordinary or special resolution
7	File Form MGT-14 for the shareholder resolution	Within 30 days of the general meeting	Form MGT-14
8	Issue signed grant letters to eligible employees	After scheme approval	Grant letters

Rule 12 prescribes what the explanatory statement accompanying the general meeting notice must disclose. Missing any of these is a procedural defect that surfaces at the worst possible moment, an investor’s legal review. The explanatory statement must state: the total number of options to be granted; the class of eligible employees; the appraisal process used to determine eligibility; the minimum one-year vesting period; the maximum exercise period after vesting; the exercise price or the formula for it; any lock-in period on shares issued after exercise; the maximum options grantable to a single employee and in aggregate; the valuation method; a statement of compliance with applicable accounting standards; and the impact on diluted earnings per share if all outstanding options were exercised.

The grant letter itself is the primary evidence of what was agreed if an employee later disputes their terms. It must be signed by both the company’s authorised signatory and the employee, and it should state the number of options granted, the exercise price, the vesting schedule, and the exercise window, stored in both physical and digital form.

Ongoing filings and registers every company must maintain

Approval of the scheme is the beginning, not the end. From the first grant onward, ESOP administration is a live, recurring obligation, not a task you revisit once a year when the Board’s Report is due.

Ongoing filing and register obligations

Filing or register	Purpose	Deadline	Penalty for default
Form PAS-3, return of allotment	Notifies the Registrar of shares allotted on exercise	Within 30 days of each allotment	Up to ₹1,000 per day of default, capped at ₹25,000, plus officer liability
Form MGT-14, resolution filing	Filed for board and shareholder resolutions at setup and for every scheme amendment	Within 30 days of the resolution	₹500 per day of default
SH-6 register, register of employee stock options	Primary evidence of ESOP administration: grants, vesting, exercise, forfeiture, lapse	Updated after every event	No standalone penalty, but a missing register is treated as a red flag in due diligence
Form MGT-7, annual return	Discloses ESOP details as part of the company’s annual return	Within 60 days of the AGM	₹50,000 to ₹5,00,000 depending on the extent of default

The filing companies most often let slip is PAS-3, not MGT-14. Most companies remember to file MGT-14 at scheme setup because a lawyer or company secretary is already in the room for that event. PAS-3 has to be filed every single time shares are allotted after an exercise window, and if a company runs annual exercise cycles without a standing calendar trigger for this filing, the gap compounds silently across several years until due diligence surfaces it in one go.

The SH-6 register deserves the same discipline. Investors treat it as the primary documentary evidence that a company’s ESOP scheme has actually been administered, not merely approved on paper. A scheme with a clean board resolution and grant letters but no updated SH-6 register still reads, to a diligence team, as an administration failure.

Companies that reach this stage without a dedicated function usually bring in the kind of ESOP administration services India teams offer, running the SH-6 register, the PAS-3 filing calendar and grant-letter documentation as one continuous process rather than a scramble before each audit.

Annual disclosures the Board’s Report must carry

Every financial year, Rule 12 requires the Board’s Report to disclose ESOP activity in specific, itemised form. A generic line stating that the company has an ESOP scheme does not satisfy the requirement, and secretarial auditors flag its absence as a compliance gap that creates director liability, not a drafting style choice.

What the Board’s Report must state, item by item

Disclosure item	What to report
Options granted	Total options granted during the financial year
Options vested	Total options that vested during the year
Options exercised	Total options exercised during the year
Shares arising from exercise	Equity shares actually allotted on exercise
Options lapsed	Options forfeited or cancelled, with the reason: resignation, performance, or scheme terms
Exercise price	The price at which options were granted
Variation of terms	Any change to scheme terms during the year (a change adverse to employees needs fresh shareholder approval)
Money realised from exercise	Total cash received by the company on exercise
Options in force at year-end	Outstanding options balance as at the financial year-end
Employee-wise detail	Named disclosure for key managerial personnel, senior management, and relatives of directors who received options
Employees holding 1 percent or more of share capital	Identified separately where options granted exceed 1 percent of issued share capital in a year
Diluted EPS	Earnings per share computed as if all outstanding options were exercised

This table is not a summary template, it is the disclosure itself. Building it from a live SH-6 register through the year, rather than reconstructing it from memory when the Board’s Report is due, is what separates a clean secretarial audit from a scramble.

Additional compliance for listed companies under SEBI SBEB Regulations

A listed company operates under a materially heavier compliance load than an unlisted one. The SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 layer requirements on top of the Companies Act framework, not in place of it.

What SEBI adds beyond the Companies Act

SEBI requirement	Applies to	Key document or filing
Compensation Committee	Every listed company with an ESOP scheme	Board resolution constituting the committee, plus its charter
Special resolution with SEBI-prescribed disclosures	Every listed company	Special resolution and an explanatory statement carrying SEBI’s specific disclosure items
Stock exchange periodic disclosures	Every listed company	Quarterly and annual disclosures under SEBI’s LODR framework and SBEB Regulations
Fair value accounting under Ind AS 102	Every listed company and Ind AS preparer	Actuarial or Black-Scholes valuation report at each grant date
Trust deed and trustee details	Companies administering ESOPs through a trust route	Trust deed, trustee appointment, annual trust accounts
Annual compliance certificate	Every listed company	Certificate signed by the compliance officer and company secretary

In its June 2025 board meeting, the Securities and Exchange Board of India extended the ESOP benefit to employees of unlisted subsidiaries of listed companies (SEBI board meeting, June 2025), a change that lets a listed parent’s group extend equity to employees sitting in unlisted operating entities. Groups with this structure should check their scheme documents specifically confirm eligibility for subsidiary employees and that disclosure obligations are met at the listed entity level.

Two further amendments in the second half of 2025 change the compliance picture for listed and pre-IPO companies. The SEBI (SBEB and SE) (Amendment) Regulations, 2025, notified 8 September 2025, inserted Regulation 9A, which lets a person who received ESOP grants as an employee, and who is only later identified as a promoter in the draft red herring prospectus at least a year after those grants, retain and exercise those pre-existing grants on their original terms. The SEBI (SBEB and SE) (Second Amendment) Regulations, 2025, effective 30 days after gazette publication in December 2025, replaced merchant bankers with independent registered valuers under Regulation 34 for all fresh valuations, with merchant bankers permitted only a nine-month window to complete assignments already in progress. Any listed company commissioning a valuation after that window should confirm its valuer is a registered valuer under Section 247 of the Companies Act, 2013, not a merchant banker, or the valuation itself becomes the compliance gap.

For a company heading toward an IPO, this compliance picture becomes urgent well before the draft red herring prospectus stage. SEBI’s ICDR Regulations require the ESOP scheme to already be compliant with the SBEB Regulations before the DRHP is filed, and IPO due diligence teams review the entire ESOP history in detail, every grant, every exercise event, every SH-6 entry, every PAS-3 filing, and every Board’s Report disclosure back to the scheme’s inception. A gap discovered at this stage, missing SH-6 entries, an undisclosed grant, an incorrect share capital figure, causes delays that cannot be resolved quickly. The compliance audit belongs 18 to 24 months before the planned filing, not six months before it.

How are ESOPs taxed in India, and what changed on 1 April 2026

ESOP taxation in India falls at two separate events, exercise and sale, and both create obligations for the employer as well as the employee. There is no tax event at grant or at vesting.

Tax treatment across the ESOP lifecycle

Event	Tax treatment	Employer obligation	Employee obligation
Grant	No tax event	None	None
Vesting	No tax event	None	None
Exercise, unlisted shares	Spread (FMV minus exercise price) taxed as a perquisite, at slab rate	Deduct TDS on the perquisite value, report in Form 16 and Form 24Q	Declare perquisite income in the ITR
Exercise, listed shares	Spread taxed as a perquisite, based on the market price on the exercise date	Deduct TDS, report in Form 16	Declare in the ITR
Sale, short-term (unlisted, under 24 months)	Capital gains at slab rate	None	Declare in ITR Schedule CG
Sale, long-term (unlisted, over 24 months)	Long-term capital gains at 12.5 percent, without indexation	None	Declare in ITR Schedule CG
DPIIT startup deferral	Perquisite tax deferred to the earliest of 48 months from the end of the assessment year of allotment, sale of the shares, or cessation of employment	TDS deferred to the triggering event	Tax payable only at the triggering event

For unlisted shares, the fair market value used to compute the perquisite is not a number the company can pick. It has to come from a merchant banker’s valuation, consistent with Rule 11UA of the Income Tax Rules, and the same valuation discipline sits behind the Ind AS 102 accounting entry discussed further below.

The Income Tax Act, 2025 received presidential assent on 21 August 2025 and took effect from 1 April 2026, replacing the Income Tax Act, 1961 as India’s direct tax statute, without changing the substantive ESOP rules, rates or thresholds. For ESOP grants exercised before 1 April 2026, the 1961 Act’s numbering continues to govern. For exercises from FY 2026-27 onward: perquisite computation continues to sit within Section 17, now at section 17(1)(d); TDS on salary, including the ESOP perquisite, moves from the erstwhile section 192 to a consolidated section 392; and the Section 80-IAC startup tax holiday that underpins the DPIIT deferral moves to section 140. Cite the 2025 Act section for any transaction executed on or after 1 April 2026, and the 1961 Act section for anything executed before that date.

The most valuable relief in this table is the DPIIT deferral. It exists because employees at pre-IPO startups otherwise face a perquisite tax bill on shares they cannot yet sell to fund it, and the deferral removes that cash trap by pushing the tax point to the earliest of sale, cessation of employment, or 48 months from the end of the assessment year of allotment. Employers at DPIIT-recognised startups should communicate this clearly at grant, since it changes an employee’s exercise decision.

A large share of what a company calls ESOP compliance services India firms provide sits precisely at this exercise-and-TDS boundary: getting the FMV valuation, the perquisite computation, and the Form 24Q reporting right at the moment employees actually exercise, not reconstructed months later when a tax notice arrives.

What changes for RSUs and SARs under the Corporate Laws (Amendment) Bill, 2026

Until now, only the ESOP itself sat inside the Companies Act’s statutory framework. Restricted stock units (RSUs) and stock appreciation rights (SARs), both common in later-stage and multinational-linked structures, existed purely on contract, with no direct statutory backing under Section 62(1)(b).

The Corporate Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on 23 March 2026, changes this. Clause 28 of the Bill expands Section 62(1)(b) to formally recognise RSUs and SARs alongside ESOPs, giving companies a clear statutory route to grant these instruments rather than relying solely on contractual arrangements that created ambiguity for legal and finance teams. This is particularly relevant for Indian subsidiaries of multinational companies, and for late-stage or pre-IPO companies that have already been issuing RSUs informally and now gain a defined legal basis for doing so.

As this is a Bill rather than a notified amendment, companies granting RSUs or SARs today should keep two things separate: continue treating these instruments under existing contractual and tax practice until the amendment is notified, and build the scheme documentation now so it converts cleanly to the statutory route once Clause 28 takes effect. Waiting for notification before starting the documentation work is the more expensive path.

Accounting treatment: Ind AS 102 and the ICAI guidance note

ESOP expense recognition is not optional, and a company that has been treating options as an off-balance-sheet perk is carrying a material financial statement error that surfaces at the worst time, during an audit or a fundraise.

Which accounting standard applies

Framework	Applies to	Requirement
Ind AS 102, share-based payment	Listed companies and large unlisted companies preparing Ind AS financials	Options measured at fair value on the grant date using the Black-Scholes or a binomial model, expense recognised over the vesting period
ICAI Guidance Note on ESOP	Companies on Indian GAAP	Intrinsic value method permitted: FMV at grant date minus exercise price, expense spread over the vesting period
Disclosure requirement, all companies	Any company with an ESOP scheme	Companies using the intrinsic value method must disclose what the expense would have been under the fair value method

The grant-date valuation that drives this expense has to come from an independent actuary or registered valuer, not an internal estimate. Once fixed, the expense is spread across the vesting period and charged to the profit and loss account each year, which means it moves reported EBITDA and profitability figures that investors and lenders rely on directly. Getting the entry booked is a Companies Act and accounting standards question; whether the resulting EBITDA add-back actually survives an investor’s quality-of-earnings review is a separate, more detailed question, covered in Treelife’s guide to ESOP due diligence in India.

What ESOP compliance services India providers actually cover

Most companies discover the gap between having a scheme and running one properly only when a funding round or audit forces the question. ESOP compliance services India providers are typically engaged to close exactly that gap: taking the scheme from board and shareholder approval through the MGT-14 filings, the Rule 12 explanatory statement disclosures, and the annual Board’s Report item-by-item disclosure, so the paperwork behind every grant, vesting and lapse event stands up to a secretarial audit or an investor’s legal review without last-minute reconstruction.

This is distinct from a one-time scheme drafting exercise. A compliance engagement runs on the same calendar as the scheme itself: it tracks resolution filing deadlines, flags an explanatory statement that is missing a required disclosure item, and prepares the Board’s Report ESOP table each year from the underlying records rather than from memory.

What ESOP administration services India providers actually cover

Where compliance work is about the filings and disclosures, ESOP administration services India providers cover the operational layer underneath them: keeping the SH-6 register updated after every grant, vesting, exercise and forfeiture; filing Form PAS-3 within 30 days of each allotment; issuing and tracking signed grant letters; and calculating the perquisite value and TDS at each exercise event.

This is the layer that most commonly lapses, not because companies do not know the rules, but because nobody owns the calendar trigger once the person who set up the scheme moves on to other things. Companies that hand this administration to a dedicated function typically do so once the option pool crosses a few dozen active grantees, or ahead of a funding round where the SH-6 register will be the first document an investor’s counsel asks for.

Common mistakes that cost companies time and money

Granting options before shareholder approval. Options issued before the scheme clears shareholder approval are legally unenforceable, and this is typically discovered during investor due diligence, causing deal delays and forced restructuring. Do not grant until the scheme is approved; if it has already happened, this needs fresh shareholder approval and, in some cases, regulatory direction to cure.

Not maintaining the SH-6 register. Investors ask for the SH-6 register as primary evidence of ESOP administration. A missing or stale register is an immediate red flag, not a minor gap. Reconstruct it from grant letters and exercise records where it has lapsed, then keep it live from every subsequent event.

Missing the PAS-3 filing after allotment. This is the single most commonly missed filing, and it attracts penalties of up to ₹25,000 at the company level plus officer liability, alongside adverse secretarial audit observations. File the delayed return with applicable late fees, and set a calendar trigger tied to every exercise event going forward.

Approving the scheme by circular resolution. ESOP scheme approval requires a formal board meeting; a circular resolution is invalid for this purpose and creates a procedural defect in every option granted under it. Convene a proper board meeting and document it clearly in the minutes.

Ignoring FEMA obligations on cross-border ESOPs. Indian employees receiving options from a foreign parent, in Singapore, the Cayman Islands, or Delaware for instance, are acquiring foreign securities, which triggers RBI reporting obligations and an annual Schedule FA disclosure in the employee’s ITR. This rarely surfaces at grant; it surfaces at an income tax assessment or when the employee sells and cannot explain the gain.

These are the statutory and administrative mistakes. Where the ESOP fair value expense itself was never booked, or an EBITDA add-back cannot be traced to the ledger, that is a distinct financial due diligence failure mode, covered in Treelife’s guide to ESOP due diligence in India.

Frequently asked questions

Q: Is an ordinary resolution enough to approve an ESOP scheme, or is a special resolution required?

A: Private limited companies benefit from an MCA exemption allowing approval by ordinary resolution. Public limited and listed companies must pass a special resolution requiring 75 percent approval, with a fuller explanatory statement under Rule 12.

Q: Can a private company issue ESOPs without amending its Articles of Association?

A: Only if the Articles already authorise share issuance to employees under an option scheme. If they do not, the Articles must be amended through an extraordinary general meeting before the scheme is approved.

Q: What is the minimum vesting period for an ESOP in India?

A: Rule 12 fixes a minimum vesting period of one year from the date of grant. Companies may choose a longer period, but not shorter.

Q: How does ESOP compliance work for a DPIIT-recognised startup differently from a standard private company?

A: DPIIT-recognised startups with Inter-Ministerial Board certification get two relaxations for 10 years from incorporation: promoters and directors holding more than 10 percent equity become eligible for ESOPs, and eligible employees get a tax deferral on the exercise perquisite (to the earliest of 48 months from the end of the assessment year of allotment, sale, or cessation of employment).

Q: How long does it typically take to complete the ESOP approval process end to end?

A: From drafting the scheme to issuing signed grant letters, the process typically runs four to eight weeks, driven mainly by the 7-day board notice period, the 21-day general meeting notice period, and internal sign-off cycles.

Q: What documents does a company need to have in place before the first ESOP grant?

A: The approved ESOP scheme document, the board resolution, the shareholder resolution, Form MGT-14 acknowledgements for both, and a signed grant letter for each employee, alongside the opening entry in the SH-6 register.

Q: Do foreign employees or Indian employees of a foreign parent company need separate ESOP compliance?

A: Yes. Indian employees receiving options from a foreign parent are acquiring foreign securities under FEMA and must report the holding in Schedule FA of their ITR annually; the granting structure itself must also be documented and reported under the applicable RBI framework.

Q: Can a family member of a director receive ESOP options?

A: Relatives of directors are not automatically excluded, but Rule 12 requires their grants to be separately disclosed by name in the Board’s Report, alongside options granted to key managerial personnel and senior management.

Q: Can a co-founder who is also a promoter receive ESOPs?

A: Not under the standard Companies Act restriction on promoters, unless the company is a DPIIT-recognised startup within its first 10 years of incorporation, in which case this restriction does not apply.

Q: What happens to unexercised options if the ESOP deal or company transaction falls through?

A: Unvested options typically lapse per the scheme’s own terms; vested but unexercised options generally survive unless the scheme states otherwise, so the scheme document’s lapse and change-of-control clauses need to be checked before assuming an outcome.

Q: Do investors or acquirers check ESOP compliance during a funding round or acquisition?

A: Yes, and closely. Due diligence teams typically request the SH-6 register, every PAS-3 filing, board and shareholder resolutions, and Board’s Report disclosures going back to the scheme’s inception; gaps here are a common source of deal delay.

Q: What happens if an employee resigns before their options fully vest?

A: Unvested options lapse on resignation as per Rule 12 and the scheme terms. Vested options must typically be exercised within a window set by the scheme, commonly 30 to 90 days after resignation, after which they too lapse.

Q: Are RSUs and SARs legal to issue in India today, before the Corporate Laws (Amendment) Bill, 2026 is notified?

A: Yes, companies already issue RSUs and SARs under contractual arrangements. The 2026 Bill gives them explicit statutory recognition under Section 62(1)(b) once notified; it does not create the instruments for the first time.

Q: Is ESOP expense recognition in the profit and loss account mandatory for private companies?

A: Yes for Ind AS preparers, under Ind AS 102. Companies on Indian GAAP may use the intrinsic value method under the ICAI guidance note, but must still disclose what the expense would have been under the fair value method.

Regulatory references:

• Section 2(37) and Section 62(1)(b), Companies Act, 2013
• Rule 12, including Rule 12(9), Companies (Share Capital and Debentures) Rules, 2014
• Section 67(3)(b) and Rule 16, Companies (Share Capital and Debentures) Rules, 2014 (trust route funding, referenced for contrast)
• SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021
• SEBI (SBEB and SE) (Amendment) Regulations, 2025, Regulation 9A, notified 8 September 2025
• SEBI (SBEB and SE) (Second Amendment) Regulations, 2025, Regulation 34, effective December 2025