The Securities and Exchange Board of India (SEBI) issued a circular on 17 January to amend the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, (ESOP Guidelines) and the Equity Listing Agreement. SEBI undertook a review of the extant regulatory framework in the primary market and approved a host of reforms to revitalize the markets.
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The circular introduced: (i) an amendment to the ESOP Guidelines to prohibit the acquisition of securities from the secondary market; (ii) an amendment to the Equity Listing Agreement which requires issuers to comply with the revised ESOP Guidelines with respect to all new employee benefit schemes involving the securities of the company and to align all existing employee benefit schemes that involve dealing in the securities of the company in the secondary market with the revised ESOP Guidelines by 30 June; and (iii) a requirement that companies which have existing employee benefit schemes that do not conform to the ESOP Guidelines (as amended by the circular) provide the details of their schemes to the stock exchanges within 30 days of the date of issue of the circular, i.e. by 16 February, and publish this information on their websites.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
