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

Gramin Steel Ltd, a listed company, has completed a buy-back of its equity shares. It now needs to allot equity shares to employees who exercise options under its subsisting ESOP. Under section 68 of the Companies Act, 2013, which statement is correct?

Allotment of shares on exercise of options under a subsisting ESOP is permitted within six months of completing a buy-back. Section 68(8) bars fresh issues for six months but expressly excepts the discharge of subsisting obligations such as stock option schemes, so the company can allot shares to employees.

  1. ANo further issue of the same kind of shares can be made for six months, even for ESOP exercise
  2. BAllotment on exercise under a stock option scheme is allowed within the six months as a discharge of subsisting obligationsCorrect
  3. CAllotment is permitted only after the Registrar gives written approval
  4. DAllotment is permitted only after one year from completion of buy-back

Explanation

Section 68(8) bars a further issue of the same kind of shares for six months after buy-back, but excepts a bonus issue and the discharge of subsisting obligations such as conversion of warrants, stock option schemes, sweat equity or conversion of preference shares or debentures. So ESOP allotments are permitted. Option A ignores this exception.

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