‘Employee Stock Option’ (ESOP) has been defined under Section 2(37) of the Companies Act, 2013, according to which “employees’ stock option” means the option given to the directors, officers or employees of a company or its holding company or subsidiary company or companies, if any, which gives such directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a predetermined price.
As per Section 62(1)(b) of the Companies Act, 2013:Following persons can participate:
Following persons cannot participate:
Hence, it is not correct to say that “Every employee of the company is eligible to participate in Employee Stock Option Scheme” (ESOS)
|Points||Employees Stock Option Scheme||Employee Stock Purchase Scheme|
|Meaning||“Employee stock option scheme or ESOS” means a scheme under which a company grants employee stock options directly or through a trust.||“Employee stock purchase scheme or ESPS” means a scheme under which a company offers shares to employees, as part of a public issue or otherwise, or through a trust where the trust may undertake secondary acquisition for the purposes of the scheme.|
|Purchase of Shares||Under ESOS, employees are given an option to purchase shares at a later date, i.e. after the vesting period.||Under ESOPs, employees are given an option to purchase shares on the spot at a discounted price.|
|Lock-in||The company may specify the lock-in period for the shares issued pursuant to the exercise of the option.||Shares issued under an ESPS shall be locked in for a minimum period of one year from the date of allotment.|
|Public Issue||ESOS has to be approved separately by the company in general meetings by passing a special resolution. It cannot be part of a public issue.||Shares under ESPS can be issued as a part of a public issue.|
|Vesting Period||The minimum vesting period for ESOS is one year.||No vesting periods for ESPS as shares are offered on the spot.|
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