Employee Share Based Payments

Employee Stock option Plan (ESOP) is a corporate strategy for retaining and motivating employees. An organization gives its employees the right to buy a certain number of shares at a fixed price (grant) for a certain period of time in years. An employee is required to complete the vesting period to exercise the option.

Startups are using ESOPs to retain highly skilled employees as it gives a sense of ownership and encourages employees to pursue a long-term career with the organization. It is a right, not an obligation for employees to buy shares at a predefined price.

We provide extensive and comprehensive advice to companies in their Employee Stock Option Scheme and Equity linked compensation plans. Our service offering covers every aspect of the Employee Stock Option Plan, including Conceptualization, Structuring, Documentation, Legal and Regulatory Compliance and Reporting.

We have assisted small and large companies to structure ESOPs and Equity Linked Compensation Schemes. Estimating the value of equity awards and share-based payments depends on a number of variables and often requires complex modeling to incorporate unique terms and complex risks. We assist public and private organizations with stock compensation planning and financial reporting and provide well-reasoned and defensive valuation certificates to satisfy commercial & statutory requirements.

Our valuation models are tailored to our clients’ needs. We help companies select the most appropriate approach and estimate all required parameters.

REQUIREMENT OF VALUATION UNDER ESOP:

Ind AS 102: Ind AS (Indian Accounting Standard) 102 prescribes financial reporting in respect of share-based benefits and is relevant for companies which remunerate their employees by share-based (or stock option) schemes, such as Employee Stock Options (ESOP), Share Appreciation Rights (SAR), Phantom Equity, Share Purchase Plans (SPP) etc.

Income Tax provisions: In reference to amendments vide the Finance Act, 2009, the ESOPs has been made taxable in the hands of employees as ‘Perquisites’, subject to certain conditions. For the purposes of clause (vi) of sub-section (2) of section 17, the fair market value of any specified security or sweat equity share, being an equity share in a company, on the date on which the option is exercised by the employee, .shall be determined by the merchant banker (if shares are not listed).

Our Employee Stock Ownership Plan (ESOP) services include:

• Business transition analysis and succession planning.
• Evaluation of shareholder objectives.
• ESOP feasibility analysis.
• Turn-key ESOP plan design and implementation.
• Evaluation and support of existing ESOP plans.
• Repurchase liability studies for existing ESOPs.
• Financial Advisory services.