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It’s an Employee benefit plan which is intended to encourage employees to acquire stocks or

ownership in the company led to the emergence of the concept of Employee Stock Option Plan
(ESOP).

ESOP is a form of remuneration for employees. It’s a reward for loyalty, performance or tenure
with the company. When an employee gets ESOPs from the company where he/she works,
he/she gets the right to purchase a certain number of shares in the company at a predetermined
price after a predetermined period or periods. Employees consider ESOPs, a perk of working in a
good company or perk of working for a long tenure or a form of appreciation. However, ESOPs
have intricacies and legal framework associated with these stock options. Compliance to ‘The
Companies (Share Capital and Debenture) Rules, 2014’ (‘Company Rules’) govern the grant of
stock options has to be ensured while issuing ESOPs.

What kind of employees is actually entitled to ESOPs?

As per Company Rules, only

(i) A permanent employee working in or outside India;
(ii) A whole-time or part-time director of the company; and
(iii) An employee of a subsidiary, holding or an associate company working in or outside India,
can claim benefits under an ESOP scheme.

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