Last Updated on 11 months by rohitlohade
Sweat Equity shares are the shares issued by a company in the form of reward to its directors or employees. Shares are issued at discount or Consideration other than cash for providing knowhow or making any value additions which generates synergy to the company. Sweat Equity shares is the reward given to the directors or employees for their hardwork and
dedication towards the Company.
The Term Employee means:
– A permanent employee of the company who has been working in India or outside India, for at least the last one year or
– A director of the company, whether a whole time director or not or
– An employee or a director as defined in sub-clauses (a) or (b) above of a subsidiary, in India or outside India, or of a holding company of the company.
A Company is eligible to issue sweat equity shares only when one year has been elapsed from the date of incorporation.
Procedure To Issue Sweat Shares
1. Board meeting to be held to consider issue of sweat equity shares and issue notice for
general meeting
2. General meeting to be held to pass the special resolution which shall specify the number of shares, current market price if the shares are listed, Consideration of issue if any and the class or classes of directors or employees to whom such shares are to be issued
3. File the special resolution in Form MGT-14
4. Hold Board meeting to issue Sweat Equity shares and then file form PAS-3 with ROC
Conditions
1. The issue of sweat equity shares shall not be more than 15 percent of the existing paid-up equity share capital in a year or shares of the issue value of Rupees Five Crores, whichever is higher. However the issuance of sweat equity shares in the Company shall any time not exceed 25% of the paid-up capital of the company.
2. Lock in period of atleast 3 years from the date of allotment.
3. The special resolution authorising the issue of sweat equity shares is required.
4. Shares to be valued at a price determined by a registered valuer as fair price giving
justification.
5. Also the valuation of IPR or of Know how or value additions for which shares are to be issued shall be carried out by a registered valuer giving justification to the board of directors.