SEBI amendments to ESPS/ESOS need to be
extension beyond 30/6/2013: ASSOCHAM
To avoid the confusion created by the SEBI’s recent guidelines on (ESPS/ESOS) schemes, an apex industry body ASSOCHAM has suggested extension in the date for final disposal of shares held beyond June 30 this year and meanwhile prescribe that any currently available shares shall only be used for an aligned schemes and not otherwise sold/dealt with in the secondary market.
In a note submitted SEBI, ASSOCHAM says there should be a provision that an annual undertaking duly certified by Statutory Auditors can be filed with SEBI/Stock exchanges in this regards to ensure proper monitoring by SEBI.
Under current SEBI (Employee Stock Option Scheme and employee Stock Purchase Scheme) Guidelines, 1999 (“SEBI Guidelines”) there is a minimum lock-in condition of 1 year. Similarly, under schemes, where shares were acquired from secondary market, the options/purchased shares, granted to employees, are also usually subject to condition that the employees cannot dispose-off/deal with the said shares for periods varying from minimum 1 year to more till  the employees  perform in the employment of the Company for such periods (“Lock-in Condition”).
Such Lock-in Conditions may extended beyond June 30, 2013 for different employees. During such period the ASSOCHAM says be full beneficial interest, dividend and voting rights continue to be enjoyed by the concerned employees.
However, to secure compliance with Lock-in Condition, the employees have to either create a lien on the shares in favor of the Trust or the Company; or place the purchased shares with the Trust/agency (to be held by the Trust/agency with 187C declarations filed by employees and Trust/agency); or the shares need to be held for the period pre-transfer, or there may be similar other modalities to secure lock-in condition. On satisfying Lock-in Condition corresponding shares are free to be dealt with by the employees. Accordingly as such Lock-in Condition is aligned to the lock-in condition of minimum one year prescribed under SEBI Guidelines.
The chamber says, in case any employee fails to fulfill Lock-in Condition, the corresponding shares (or in case of share split, bonus shares, reorganization etc in the meanwhile, any consequential securities or benefits) are re-acquired by the Trust/agency. Such re-acquired shares may be re-granted to other eligible employees. Under such circumstances ASSOCHAM seeks clarification if such re-acquisition, for employee failure to fulfill Lock in conditions, beyond June 30, 2013, shall not imply a purchase by the Company in secondary market, and that re-acquired shares can be granted to other employees in the terms of a scheme aligned to SEBI guidelines, but not otherwise dealt with by the Trust/Agency ,shall be in order.
Further, shares validly acquired from secondary market and currently held by Trusts, are no different from shares which may be held consequent to a fresh issue of shares, for grants in future, under schemes as per SEBI guidelines. The Trusts/agencies may therefore be allowed to continue to hold these shares, though not allowed to deal with them in any manner save and except for the purpose of granting the same to employees now or after June30, 2013 in accordance with an aligned ESPS scheme of the companies. 
However if the Trusts are mandated to dispose-off all such shares  by June 30, 2013 as indicated in Annexure II , point 8 of the said Circular, it may be   contrary to the very objective of SEBI circular as it may adversely impact market prices and cause avoidable  hardship to both Companies and employees.


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