ESOP Trust Registration
For execution of Employees stock option program , Trust registration is more preferred option in listed and unlisted public companies. Company done not required to dilute its shares in this method. Trust is registered for share acquisition from secondary market. Companies Act given legal guideline for lending of loan by company to Trust. The purpose of trust is execution of ESOP scheme , and not of business or charitable activity. In trust route,the administrative power of the Compensation Committee is required to be delegated to the Trust formed under these Regulations.
[divider height=”30″ style=”default” line=”default” themecolor=”1″]
Use of ESOP Trust for Shares/Stock Options
Use of ESOP Trust for Employees stock option program is more compliances. In this method company apply for ESOP Trust Registration. Purpose of trust registration is to ESOP. Trust acquires Shares from secondary market. Company grand loan to Trust for share acquisition. Once shares are with company then Employees decide to exercise ESOP option. The key benefit of this route is company done not required to dilute its current share holding. This form of allocation is mostly preferred in listed companies.
Company indirectly give loan fund to ESOP trust for shares acquisition. When the employees leave the company, the employees have the option of selling back the shares to the trust or in the secondary market and monetizing the wealth creation by way of subscribing to the shares.
Step 1 : Company funds indirectly to ESOP Trust
Step 2 : Trust acquire shares
Step 3 : Company announces ESOP Grant Option to employees
Step 4 : Employees exercise ESOP option
Step 5 : ESOP Trust Transfer shares to employees with documents
Step 6 : Repayment option
[divider height=”30″ style=”default” line=”default” themecolor=”1″]
Who cannot be trustees ?
Following persons cannot become Trustees in ESOP Trust.
A person shall not be a trustee who:
- is a director, KMP or promoter of the company or
- its holding or
- subsidiary or
- associate company or
- any relative of such director, KMP or promoter; or
- beneficially holds 10% or more of the paid-up share capital of the company
[divider height=”30″ style=”default” line=”default” themecolor=”1″]
ESOP Trust Registration Procedure
Employees stock option are issued under two method. First is direct route and second is Trust route. Trust route is more complex and require for legal compliances. The can may who wish to apply for Trust route , first step is ESOP Trust Registration , below is quick road map for ESOP Trust registration procedure, documents, timeline etc.
- ESOP Trust registration is done under Indian Trusts Act , hence company need to prepare A Trust Deed. This need to be executed on stamp paper.
- Company Documents
- List of documents required for Trust Registration are
- Passport size Photo of settler & Trustees
- Government ID proof ( Like Adhar / Passport / Voter ID ) of settler & Trustees
- Passport size Photo & ID proof of whiteness
- Stamp Paper
- Trust Address Proof
- Round stamp
- ESOP Trust deed content as below
- Trustees Full Name, Address Details , PAN Number & Contact details
- Members Full Name, Address Details , PAN Number & Contact details
- Company details
- Details related to ESOP terms & Conditions
[divider height=”30″ style=”default” line=”default” themecolor=”1″]
ESOP Trust PAN Registration
Once Trust registration is completed , Trust shall apply for registration of Income Tax PAN. The procedure for income tax pan for trust is online. Visit NDSL site , fill online form and submit documents , in 7 days time , Trust may get PAN card number.
[divider height=”30″ style=”default” line=”default” themecolor=”1″]
What is ESOP Trust Management Services ?
Once Trust is registered on routine basis Trust and company need to maintain legal compliances, documentation etc. Below is ESOP Trust management services.
- Prepare ESOP Trust Deed
- Registration of ESOP Trust
- Apply for PAN & TAN Registration
- Apply for bank account , demat account & broking account
- Purchase shares from market
- Allotment of shares to employees
- Maintain Trust books of account Balance sheet , Income expenditure statement etc.
- Insider trading compliances
- Income Tax Return filing
- Submission of Trust record
- Conduct Trust meeting
- Reporting to company about finances , shares allotment etc.
- Help Desk for employees
[divider height=”30″ style=”default” line=”default” themecolor=”1″]
