The Securities and Exchange Board of India (SEBI) has announced relaxations for startups in issuing sweat equity shares if the startup is listed on the Innovators Growth Platform (IGP). SEBI has merged SEBI (Share Based Employee Benefits) Regulations, 2014, or SBEB, and Sebi (Issue Of Sweat Equity) Regulations, 2002 into the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. For IGP-listed companies, the yearly limit for sweat equity shares will be 15% and the overall limit will be 50% of the paid-up capital at any time.
The new limit will be applicable for 10 years from the date of the company’s incorporation and companies will have flexibility in switching the administration of their schemes from the trust route to the direct route and vice versa with the approval of the shareholders, provided that the switch is not against the interest of the employees. SEBI has also announced that in the event of death or permanent incapacity of the employee, the minimum vesting period and lock-in period for all share benefit schemes will be dispensed with.