Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares

Under the Companies Act, 2013 and the related Rules, which of the following persons is NOT eligible to receive stock options under an Employee Stock Option Scheme of a company?

An independent director is not eligible for stock options under an ESOP. The Companies Act rules allow permanent employees, whole-time directors and employees of subsidiaries or holding companies, but exclude independent directors, promoters and persons holding more than ten percent of the equity.

  1. AA permanent employee working in India
  2. BA director of the company who is a whole-time director
  3. CAn employee of a subsidiary company in India
  4. DAn independent director of the companyCorrect

Explanation

Eligible persons are permanent employees, directors (whole-time or not) of the company, and employees/directors of subsidiary or holding company. Independent directors are expressly excluded, as are promoters and persons holding more than 10% of equity. Hence the independent director cannot receive options.

Did you get it right without looking?

One question tells you little. A timed set on Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares shows your real accuracy, how long you take and where you lose marks.

Practise Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of SharesFree diagnostic mock

More Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares questions