EMPLOYEE STOCK OPTION SCHEME
- employer stock option means any specified securities or sweat equity shares , allotted or transferred by the present or former employer ,to the employee, directly or indirectly, either free of cost or at a concessional price.
- “specified security” means securities as defined in securities contracts (regulation)act ,1956 and where employees stock option has been granted under any plan or scheme , includes securities offered under such plan /scheme.
- sweat equity shares means equity shares issued by a company to its employees or directors ,at a discount or for consideration other than cash for providing know how or making available intellectual property rights, or value addition by whatever name called
- value of he security or sweat equity shares = FMV of the security/sweat equity shares as on the date of exercise of option less : amount recovered from the employee
- FMV-Fair market value means the value determined n the prescribed manner (see table below)
- OPTION means a right but not an obligation granted to an employee , to apply for the specified security or sweat equity shares ,at a pre –determined price.
Determination of FMV of ESOP (rule 40C ) the fair market value shall be determined as under-
|Particulars||Fair market value|
|1. Shares of an unlisted company||As determined by a merchant banker on the specified date .|
|2. Shares of a listed companya. Trading on the date of vesting of option:|
|Listed in one recognized stock exchange||Average of opening and closing price on the date of exercising of option.|
|Listed in more than one recognized stock exchange||Average of opening and closing price in the stock exchange that records the highest volume of trading in shares on the date of exercising of option.|
|b. No trading on the date of vesting of option|
|· Listed in one recognized stock exchanges||Closing price of the shares on any recognized stock exchange on a date closest and immediately preceeding the data of exercising|
|Listed in more than one recognized stock exchanges||Closing price of the shares on any recocnisd stock exchange on a date closest and immediately preceeding the data of exercising in the stock exchange that records the highest volume of trading in shares.|
|3. FMV of specified security ,not being an equity in the company (rule 40 D)||As determined by a merchant banker on the specified date (notification no. 11/2008 dt 18.01.2008)|