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    ESOP and Sweat Equity

    Posted By : SARIKA / Published on : 02-Jul-2022 09:56 AM / View : 367 / Comment : 2

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    What is the difference between ESOP and Sweat Equity and which option will be more feasible for the Company ?
    Read more on : equity sweat esop

    • Dear Madam,


      Followings are the major differences between ESOP and Sweat Equity Shares

      ESOP is granted in the form of an option for the employees to purchase the shares at a predetermined price on a future date while Sweat equity shares are directly allotted to the employees or directors at a discount or for consideration other than cash.

      The consideration for ESOP has to be paid in cash but in case of sweat equity shares it is other than cash or at a discount which may be partly cash and party non-cash. 

      In case of ESOP lock-in-period is decided by company itself while in Sweat equity shares the lock-in period is three years as per the Companies (Share Capital and Debentures) Rules.

      In ESOP company decides the exercise price itself while in sweat equity shares registered valuer determines pricing guidelines.

      The company has no restrictions for issuing or granting ESOP while in case of Sweat equity shares the company cannot issue sweat equity shares in excess of 15% of the already existing paid-up equity share capital in a particular year or shares of the issue value of Rs.5 crores, whichever is higher.Also, the sweat equity shares in the company should not be issued more than 25% of the paid-up equity capital of that company at any time.

      ESOP is more feasible for the company as lock in period, pricing, quantum of issue is determined by the company itself.

      Futher it depends on the reason for which company is issuing the shares like for providing incentives or for providing intellectual property rights etc.


      Hope it helps!!




      07-07-2022 / 05:34:34 AM
    • Thanks !

      12-07-2022 / 05:19:44 AM
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