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CS Executive · Capital Market and Securities Laws · Share Based Employee Benefits and Sweat Equity

Arjun Industries Ltd has equity shares listed on a recognised stock exchange and proposes a sweat equity issue to its employees. Under Section 54(1)(d), the issue must be made in accordance with:

For a listed company, Section 54(1)(d) requires sweat equity shares to be issued in accordance with the regulations made by SEBI. The rules prescribed under the Act apply only where the equity shares are not listed on a recognised stock exchange.

  1. ARules prescribed under the Act, as for unlisted companies
  2. BThe regulations made by the Securities and Exchange Board in this behalfCorrect
  3. CThe articles of the company alone
  4. DThe directions of the Registrar of Companies

Explanation

Section 54(1)(d) says that where equity shares are listed on a recognised stock exchange, sweat equity shares are issued in accordance with SEBI regulations. Prescribed rules apply to companies whose shares are not listed, so option A is the key distractor and is wrong for a listed company.

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