Description

Amendment allowing employees identified as promoters in IPO draft offer documents to retain and exercise stock options granted at least one year before filing.

Summary

SEBI has amended the Share Based Employee Benefits and Sweat Equity Regulations, 2021, by inserting a new regulation 9A. This amendment allows employees who are identified as promoters or part of the promoter group in IPO draft offer documents to retain and exercise stock options, SARs, or other benefits granted at least one year before the draft offer document filing date.

Key Points

  • New regulation 9A inserted after existing regulation 9
  • Applies to employees identified as promoters/promoter group members in IPO draft offer documents
  • Stock options/SARs must have been granted at least one year before draft offer document filing
  • Employees can hold and/or exercise these benefits subject to regulatory compliance
  • Amendment effective from gazette publication date (September 8, 2025)

Regulatory Changes

  • Addition of regulation 9A to SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021
  • Clarifies treatment of employee stock benefits when employee becomes identified as promoter during IPO process
  • Provides regulatory certainty for pre-existing employee benefit arrangements

Compliance Requirements

  • Employees must comply with these regulations and other applicable legal provisions
  • Options/SARs must be exercised according to original terms and conditions
  • One-year minimum period requirement between grant date and draft offer document filing

Important Dates

  • Effective Date: September 8, 2025 (date of gazette publication)
  • Grant Requirement: Stock options/benefits must be granted at least one year before IPO draft filing

Impact Assessment

This amendment provides regulatory clarity for companies planning IPOs where employees holding stock options may be reclassified as promoters. It ensures that legitimate employee benefit schemes are not disrupted by promoter status changes during the IPO process, provided the benefits were granted sufficiently in advance of the IPO filing.

Impact Justification

Specific regulatory clarification affecting employee stock option schemes for IPO-bound companies