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    Phantom Stocks legally recognized in India?

    Posted By : SHALU / Published on : 08-Jun-2023 10:13 AM / View : 88 / Comment : 1

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    Are Phantom Stocks legally recognized in India? What regulations govern their implementation?
    Read more on : india recognized legally stocks phantom

    • Phantom stocks, also known as shadow stocks or virtual stocks, are not specifically recognized or regulated under Indian company law or securities regulations. Phantom stocks are a form of employee incentive or compensation plan where employees receive hypothetical or notional units that track the value of the company's shares without actual ownership.

      In India, the primary regulations governing employee stock-based compensation plans are the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (ESOP Guidelines). These guidelines primarily focus on stock options and stock purchase plans, which involve the issuance of actual shares to employees.

      Since phantom stocks do not involve the issuance of actual shares, they do not fall within the purview of the ESOP Guidelines. As a result, there are no specific regulations or guidelines that govern the implementation of phantom stock plans in India.

      However, companies in India have implemented phantom stock plans on a contractual basis, guided by the principles of contract law and general employment practices. The terms and conditions of the phantom stock plan are typically outlined in an agreement or scheme document between the company and the participating employees.

      It's important to note that the taxation of phantom stock plans in India can be complex, and companies should seek advice from tax professionals to ensure compliance with applicable tax laws and regulations. The taxation treatment may vary depending on the specific structure and terms of the phantom stock plan.

      While phantom stock plans are not legally recognized or regulated in India, companies may choose to implement such plans based on contractual agreements and prevailing employment practices.

      10-06-2023 / 12:12:54 PM
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