Thursday, 17 April 2014

12.6.10 (Sweat Equity shares)



The Companies (Amendment) Act, 1999, has allowed issue of sweat equity shares subject to fulfillment of certain conditions. A new section -79A has been inserted for this purpose. The provision of s.79A are summarized below:

Notwithstanding anything contained in s.79, a company may issue sweat equity shares of a class of shares already issued if the following conditions are satisfied: (a) the issue of sweat equity shares is authorised by a special resolution passed by the company in the general meeting; (b) the resolution specifies the number of shares, current market price, consideration, if any and the class or classes of directors or employees to whom such equity shares are to be issued; (c) not less than one year has, at the date of the issue elapsed since the date on which the company was entitled to commence business; (d) the sweat equity shares of a company whose equity shares are listed on a recognised stock exchange are issued in accordance with the regulations of SEBI. In case of a company whose shares are not listed on any recognized stock exchange, the sweat equity shares may be issued in accordance with the guidelines as may be prescribed. For the purposes of this section, the expression ‘a company' means company incorporated, formed and registered under this Act and includes its subsidiary company incorporated in a country outside India.

The expression "sweat equity shares" means equity shares issued by the company to employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever named called."

However, all the limitations, restrictions and provisions relating to equity shares shall be applicable to such sweat equity shares.

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