ESOP Scheme

ESOP Scheme

    About Service
An Employee Stock Option Plan (ESOP) is a benefit plan for employees which makes them owners of stocks in the company. ESOPs have several features which make them unique compared to other employee benefit plans. Most companies, both at home and abroad, are utilising this scheme as an essential tool to reward and retain their employees. Currently, this form of restructuring is most prevalent in IT companies where manpower is the main asset. nterestingly, many companies abroad use ESOPs as a technique of corporate finance for a variety of purposes -- to finance expansion, to make an acquisition, to spin off a division, to take a company private, and so on. This has yet to catch on in India, perhaps because the scale of ESOP so far is too small for many of these uses.
 Timeline: 5-7 Working days
 Package Inclusions
  • ESOP Scheme
 Documents Required
  • MOA
  • AOA
  • Certificate of Incorporation
  • Board Resolution
  • Shareholder Resolution
  • Information w.r.t. ESOP pool, vesting, exercise, grant etc
 Process Details
  • Collection of documents
  • Preparation of ESOP Scheme
  • Delivery of ESOP Scheme
 Key Advantages
  • Align employees’ interests with those of shareholders
  • Recruit or retain key employees
  • Compensate for lower salaries and relieve pressure on cash flow
  • Lower the supervision required of employee
  • Increase innovation
  • Increase customer loyalty
  • Increase shareholder value
  • Motivate employees to become more productive
  • Improve the communication between employee and managers and increase cooperation
  • Increase loyalty and reduce staff turnover
  • Increase employee job satisfaction
  • Increase the Company’s likelihood of survival
  1. What is ESOP?
    ESOP is an option provided to employees of a company to purchase the shares of a company at a future date at pre-determined prices. It is a right of the employee and not an obligation.
  2. What is a vesting period?
    Vesting period is the amount of time the employee needs to work with the company to be eligible to ESOP.
  3. What is excise price?
    It is the pre-determined price at which the shares of the company can be purchased at a future date.
  4. What is excise period?
    It is the pre-determined period within which option must be exercised by the employee.
  5. How are ESOPs beneficial for the employee and the company?
    ESOPs are beneficial for both the employee and the company. ESOP enables an employee to become a shareholder in the company and so, the company is enable to align the interest of the shareholders and the employees. Therefore, the shareholders and employees strive towards the same goal i.e. improving the financial and operational performance of the company and thereby, raising the value of shares.

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