ESOP Compliance

ESOP Compliance Services

✅ Empower Employees, Stay Compliant

Employee Stock Option Plans (ESOPs) are powerful tools for startups and businesses to attract, retain, and reward talent. However, issuing ESOPs is a regulated process, requiring careful documentation, legal structuring, and ongoing ESOP compliance with corporate, tax, and accounting laws.

At [Your Company Name], we offer end-to-end ESOP Compliance services to ensure your employee equity plans are structured, implemented, and maintained legally and efficiently. Whether you’re planning your first ESOP scheme or managing ongoing compliances, we provide full support from ESOP policy design to ROC filings and post-grant administration.

 

📌 Scope of Work – ESOP Compliance Services

Our ESOP Compliance solutions cover everything you need to legally implement and manage your Employee Stock Option Plan:

🔹 ESOP Scheme Drafting & Advisory

  • Feasibility analysis and legal strategy

  • ESOP scheme drafting compliant with Companies Act, 2013

  • Board and shareholder approval support

  • Customization for listed/unlisted/startup entities

🔹 ESOP Legal & Regulatory Compliance

  • Drafting of Board Resolution, Shareholder Resolution

  • Drafting of Grant Letters, Vesting Schedules, Exercise Notices

  • Preparation of Disclosure Documents under Rule 12 of Companies Rules

  • Filing MGT-14, PAS-3, SH-6 (Register of Employee Stock Options)

🔹 Accounting & Tax Compliance

  • Expense accounting as per Ind AS 102 / IFRS 2

  • Tax structuring for employees and company

  • Valuation certificate coordination for fair market value (FMV)

  • Support in TDS compliance on ESOP exercise

🔹 Ongoing ESOP Compliance & Reporting

  • Maintaining ESOP Register and Cap Table updates

  • Periodic disclosures to shareholders and investors

  • Assistance in buyback or transfer of vested shares

  • Due diligence and audit support

🔹 ESOP Implementation & Admin Tools

  • Setting up digital ESOP dashboards for employees

  • Grant tracking, vesting triggers, exercise windows

  • Ongoing support for option holders and HR teams

 

🔄 Our ESOP Compliance Process

We follow a structured, multi-step approach to ensure your ESOP compliance is foolproof and investor-ready:

1 Initial Consultation & ESOP Feasibility

  • Analyze company’s goals, cap table, and legal eligibility for ESOP

  • Design the right type of plan: ESOP, Phantom Stock, RSUs

2 ESOP Scheme Design

  • Draft ESOP policy in line with Companies Act, 2013

  • Finalize eligibility criteria, vesting schedule, exercise price

3 Board & Shareholder Approvals

  • Draft and help pass board and special resolutions

  • File MGT-14 with Registrar of Companies (ROC)

4 ESOP Grants & Documentation

  • Prepare and issue grant letters, vesting terms, exercise letters

  • Maintain SH-6 (ESOP Register) and offer disclosures

5 Valuation & Tax Planning

  • Coordinate with Registered Valuer/CA for FMV

  • Assist with tax treatment for employer and employee

6 Post-Grant & Ongoing Compliance

  • Update shareholding pattern and cap table

  • Help with option exercise, buybacks, and exits

  • Employee query handling and annual compliance

 

👤 Who Should Use Our ESOP Compliance Services?

  • Startups offering equity-based compensation to retain top talent

  • Private companies planning funding rounds and want clean cap tables

  • HR teams looking for efficient ESOP implementation tools

  • VC-backed firms under due diligence scrutiny

  • Listed companies managing large-scale ESOP pools

 

⚖️ Why ESOP Compliance Matters

  • Avoid penalties under Companies Act for illegal option grants

  • Maintain transparency with investors and auditors

  • Ensure employees receive fair, documented ownership

  • Stay prepared for due diligence, funding, and IPOs

  • Optimize tax treatment for employer and employee

 

💼 Why Choose Us for ESOP Compliance?

✅ Custom legal structuring for your unique ESOP needs
✅ Expertise in startup and corporate compliance
✅ Cap-table management tools included
✅ Support for FDI/foreign employee ESOPs
✅ End-to-end documentation, filings, and updates

 

❓ Frequently Asked Questions (FAQs) – ESOP Compliance

1. What is ESOP Compliance?

ESOP Compliance involves adhering to legal, tax, and regulatory norms while implementing, issuing, managing, and exercising Employee Stock Option Plans.

2. Are ESOPs allowed for private limited companies?

Yes, private limited companies can issue ESOPs subject to conditions under the Companies Act, 2013.

3. What approvals are needed for implementing an ESOP scheme?

Both Board and Shareholder (special resolution) approvals are mandatory. MGT-14 must be filed post-approval.

4. What is SH-6 Register under ESOP compliance?

SH-6 is the statutory Register of Employee Stock Options, which must be maintained by the company after grant.

5. Do ESOPs need to be filed with the Registrar of Companies (ROC)?

Yes, filings like MGT-14 (resolution) and PAS-3 (if shares are allotted post-exercise) are mandatory.

6. Is valuation required for issuing ESOPs?

Yes, companies must obtain a Fair Market Valuation (FMV) certificate from a registered valuer or merchant banker.

7. How are ESOPs taxed for employees?

Employees are taxed at the time of exercise (as perquisite) and again at sale (capital gains), depending on holding period.

8. Can foreign employees be given ESOPs?

Yes, subject to FEMA compliance and pricing guidelines. Foreign grants must follow RBI norms.

9. What is a vesting schedule?

A vesting schedule defines when employees earn the right to exercise their options, usually linked to time or performance.

10. Is TDS applicable on ESOPs?

Yes, the employer must deduct TDS on the perquisite value at the time of exercise, especially in listed companies.

11. Can I cancel or reprice granted ESOPs?

Only with proper disclosures and approvals. Repricing or cancellation must be documented and justified.

12. What is the difference between ESOP and RSU?

ESOP gives a right to buy shares, RSUs give direct shares after vesting. Compliance and tax treatment differ.

13. How does ESOP affect the cap table?

ESOPs create dilution and must be reflected in the fully diluted shareholding pattern.

14. Is expense accounting required for ESOPs?

Yes, companies must recognize employee compensation expense in P&L as per Ind AS 102 or IFRS 2.

15. How do I issue ESOPs to consultants or advisors?

ESOPs cannot be granted to non-employees. Instead, consider Phantom Stock or SARs (Stock Appreciation Rights).

16. Can ESOPs be part of a funding round or exit?

Yes. During M&A or funding, ESOP pools, ungranted options, and vested options are reviewed in due diligence.