Sweat Equity

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Ajit Singh (Querist)
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13 July 2011 Can Private limited company issue sweat equity to its employees within 6 months from the date of incorporation of company?what are the guidelines for the issue of sweat equity shares in case of private limited company

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 July 2011 The following provisions shall be kept in view by the unlisted public company and private company before making issuance of sweat equity shares in terms of section 79A(1)(b) and the Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003:—
(a) a special resolution shall be passed for the issue of sweat equity shares,
(b) the resolution shall specify the number of shares to be issued, current market price, consideration, if any, and the classes of directors or employees to whom such equity shares are to be issued;
(c) not less than one year should have elapsed since the date on which the company was entitled to commence business;
(d) in the case of a company whose equity shares are not listed on any recognized stock exchange, the sweat equity shares shall be issued in accordance with the Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003;
(e) necessary disclosures are made in the explanatory statement to be sent to the shareholders as given under rule 4 of the Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003;
(f) within 30 days of passing the special resolution, e-Form 23 along with a copy of the special resolution as well as a certified true copy of the explanatory statement with the requisite filing fees
shall be filed with the Registrar of Companies.