The Ups And Downs Of Upside-Sharing Structures In India

Abstract

The first section of this paper introduces the concept of upside-sharing arrangements and presents an empirical review of corporate disclosures made by certain listed and to-be-listed companies in India, woven around the regulation notified and informal guidance issued by the Securities and Exchange Board of India, requiring public shareholder approval for upside-sharing arrangements.

The second section highlights that current policy and regulation in this area do not directly speak to the issues faced by founders who do not have sufficient funds to finance their companies' growth, particularly in the early stages, without a financial investor, and financial investors who are happy to incentivize founders and key employees with a profit-sharing arrangement on their exit.