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ARTICLE · 20 MARCH 2021

ESOPs And SARs – A Comparative Guide

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ESOPs are a stock option provided by a company to its employees, to purchase its shares on future dates and at a pre-determined price.

IndiaTax
Faranaaz Karbhari
Faranaaz Karbhari
Ishwar Ahuja
Ishwar Ahuja
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1. What are Employee Stock Options Plans (ESOPs) and Stock Appreciation Rights (SARs)?

  • ESOPs are a stock option provided by a company to its employees, to purchase its shares on future dates and at a pre-determined price. They are basically a form of incentive given out by a company to its employee basis their contribution to the company. Further, such an incentive helps the company to motivate its employees to contribute to the growth and profitability of the company in future as well.

    ESOPs are defined under Section 2(37) of Companies Act, 2013 (CA 2013) and are governed by Section 2(37) read with Section 62(1)(b) of CA 2013 along with Rule 12 of the Companies (Share Capital and Debentures) Rules 2014.

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