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

Vihaan Tech Ltd, a listed company, proposes to issue sweat equity shares to its employees for value addition. Under section 54 of the Companies Act, 2013 as extracted, which statement is correct?

The special resolution authorising sweat equity must state the number of shares, the current market price, the consideration if any, and the class of directors or employees receiving them. Listed companies follow SEBI regulations, and sweat equity holders rank pari passu with other equity shareholders.

  1. AThe issue needs only a Board resolution if the shares are of a class already issued
  2. BSweat equity shares have no voting rights and rank below other equity shareholders
  3. CThe special resolution must specify the number of shares, current market price, consideration, if any, and the class of directors or employees to whom they are issuedCorrect
  4. DFor a listed company, the issue is governed by prescribed rules and not by SEBI regulations

Explanation

Section 54(1)(b) requires the special resolution to specify number of shares, current market price, consideration, if any, and the class of directors or employees. Section 54(1)(d) makes SEBI regulations applicable to listed companies, and 54(2) gives sweat equity holders the same rights as equity holders, ranking pari passu.

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