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

Kaveri Textiles Ltd, an unlisted company, passes a special resolution to issue sweat equity shares to its working directors. Under Section 54, what must the resolution specify?

The special resolution must specify the number of shares, the current market price, the consideration if any, and the class or classes of directors or employees to whom the sweat equity shares will be issued, as Section 54(1)(b) provides.

  1. AOnly the total amount to be raised and the date of allotment
  2. BThe number of shares, current market price, consideration if any, and the class or classes of directors or employees to whom shares are to be issuedCorrect
  3. CThe names of the auditors and the valuer appointed for the issue
  4. DThe dividend rate and the redemption date of the shares

Explanation

Section 54(1)(b) lists the contents of the resolution: number of shares, current market price, consideration, if any, and the class or classes of directors or employees. Option A omits most of these. Dividend rate and redemption relate to preference shares, not sweat equity.

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