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ARTICLE · 15 MARCH 2024

Sweat Equity Shares: Reward Or Risk?

The concept of ‘Sweat Equity' was initially employed in the United States by Co-operatives for real estate projects. In the mid-20th century, the American Friends Service Committee...

IndiaCorporate/Commercial Law
Reference Date | Version March 04, 2024 | 1.0
Keywords Sweat Equity Shares, compensation, valuation, Lock-in Period, Startups
Legislation(s)
  • The Companies Act, 2013
  • Companies (Share Capital and Debentures) Rules, 2014
  • Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018
  • Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021
Jurisdiction India

Introduction

The concept of 'Sweat Equity' was initially employed in the United States by Co-operatives for real estate projects. In the mid-20th century, the American Friends Service Committee introduced the idea of sweat equity in the Penn Craft self-help housing project. Families came together to build homes, using labour and sweat as equity. Homeowners could perform D.I.Y improvements and increase the value of their homes significantly. Families felt a greater sense of

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