New Delhi, Apr 16: The government has liberalised the Employee Stock Options Plans (ESOP) schemes offered by the foreign companies, thus making them hassle-free from procedures.
The Authorised Dealer banks are now authorised to allow remittances for ESOPS, without any monetary limit, to foreign companies offering these options if they hold not less than 51 per cent stake in the Indian compny either directly through a Special Purpose Vehicle, or indirectly through step down subsidiary.
Besides, the annual return of the foreign companies, giving details of remittances, beneficiaries, etc, also needs to be submitted through the Authorised Dealer banks.
Foreign companies can now repurchase the shares issued to their employees in India under any ESOP scheme, provided the shares were issued under the Foreign Exchange Management Act, 1999, and are being repurchased in terms of the initial offer document.
Although such remittances are offered directly to the company, prior permission of the Reserve Bank of India to repurchase the shares from the employees, issued under ESOP schemes, is needed.
ESOPs have been floating in the Indian market for almost two decades and have become a means of gratifying and motivating employees of corporate giants like Infosys and Wipro and ensuring employee commitment to the company.
However, the downside of these schemes is that they might be used by those in the senior managemet level to manipulate the market price and offload their ESOP shares at hefty prices.
These schemes also benefit a certain genre of employees who sell their alloted shares only for a gain, thus defeating the very purpose of the ESOPs.