ESOP Opinion

Dear All,

I have given an opinion in connetion with ESOP, i thought of sharing the same with you people. please find below extract of the same.

ESOP – Opinion

Background of the issue:

The Company has come out with a ESOP Scheme 2006 for its employees in the year 2006. The approval of the shareholders in General Meeting has been obtained on 27 ^th March 2007 and first tranches of granting of options was done on 9^th March 2006 to the eligible employees under the ESOP Scheme 2006.

The vesting periods are as follows

1^st year 15%

2^nd year 20%

3^rd year 30%

4^th year 35%

Options granted under the ESOP Scheme 2006 will vest after minimum period of one year from the respective date of grant. Exercise price of the option will be not more than 25% of the market price on the date of grant.

Queries and our Opinion:

Before replying to your queries I would like to bring to your attention that as per SEBI (ESOP and ESPS) Guideline, 1999 Grading of options can be done only after getting approval from the shareholders in General Meeting. But, in your case I observed that you have obtained shareholders approval on 27 ^th March 2007 and Options were granted on 9^th March 2006 before the shareholders approval. It seems to be violating the SEBI (ESOP and ESPS) Guidelines, 1999. It needs to be rectified.

Query No.1

Can Compensation Committee fix up a cut off date say 1 or 2 or 3 months from the completion of the vesting period for employees to exercise their options so that Allotment of the shares can be made in one lot? The intention is facilitate the filing of Form 2 and making application to Exchanges for listing. As otherwise each employee will exercise on different dates, which will hinder the allotment process. Would this amount to restricting employees from exercising their options through out the period of 1 year.

Or

Alternatively, should we hold meetings of the committee every month or quarter and allot shares for the exercises made during that period so that employees can exercise options any time during the year.

My Reply:

Yes we can have a cut off date and this should be mentioned in the grant letter. But this is not a normal practice followed by the Companies.

Whereas option number two is better most of the Companies following this practice. In this case we can fix the minimum number of options to be exercised at a time under the ESOP Scheme, so that the employees can exercise that minimum number of options during that period within the overall exercise period as specified in the ESOP Scheme. If, minimum number of options to be exercised is not fixed under the ESOP Scheme, the compensation committee can fix the minimum number of options to be exercised and intimated the same through the grant notice.

Query No.2

Can an employee carry over the option not exercised by him to the succeeding years and exercise them in full.

My Reply:

Yes an employee can carry over the unexercised options, but it should be exercise within the overall exercise period as specified under the ESOP Scheme, otherwise it will laps.

Query No.3

When can Further options be granted? Can it be given to new eligible employees also?

My Reply:

If further number of options to be issued is within the overall limits fixed in the ESOP Scheme 2006, then the Company can go head and issue the further options. The further options can be granted either to the existing or new eligible employees, it is discretion of the Compensation Committee.

Query No.4.

Should we once again obtain the approval of S/E now, as we had already obtained in – principle approval for the total options as approved by members in general Meeting.

Our Reply:

Again in-Principle approval is not required, if the further number of options to be issued within the limit fixed under the ESOP Scheme 2006 and for which already in principle approval has obtained.

However, where there is increase of options above the limit for which already In-Principle has been obtained and changes in the exercise price of options. In this case as per SEBI (ESOP & ESPS) Guidelines, 1999, the Company needs to obtain shareholders approval and needs to file application to SE's for In-Principle approval for that excess number of options.

Provided that re-pricing of options can be possible only in the case where options become unattractive due to fall in market price of the Company.

Query No.5

The shares allotted will be in demat mode. Hence can employees before the final listing approval trade the shares for these shares are obtained from Stock Exchanges?

My Reply:

Shares allotted under the ESOP Scheme 2006 cannot be traded until the listing of such shares in the stock exchanges where the Companies shares are listed.

Thanks & regards

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Alagar
09884731993

PERSONAL RECORD SHEET

Download PDF from Personal official disclosure.pdf

Personal Official Disclosure of

 A.N.S. VIJAY

 

NOW,

 

• Company Secretary in Practise
• Author of Only This Much for CS Executive Programme on Company Law, Economic & Labour Laws and Securities Law & Compliances

• Author of Only This Much for CS Professional Programme on Company Secretarial Practice, Drafting, Appearances & Pleadings, Corporate Restructuring, Alliances & International Trade, Due Diligence & Corporate Compliance Management, Governance, Business Ethics & Sustainability

• Associated with Learn Labz for Company Secretary Classes

• Blogging Corporate legal updates with http://yehseeyes.blogspot.com

 

PROFESSIONAL EXPERIENCE

 

Practising Company Secretary and has handled various assignments including,

• Secretarial Compliances

• Opinions on Company law, FEMA & Securities laws

• Project Report on Incorporating company in United States & European Union

Faculty with Learn Labz from 2008 onwards and has handled,

• Various Daily & Crash Batches on Company, Economic, Labour & Securities Law

• Other CS Executive & Professional Program classes

Trained with Bombay Stock Exchange Limited & Siemens Limited and handled,

• Bonus Issue for a listed company

• Filing of Industrial Entrepreneurial Memorandum & Production Returns

• Compliance filing of a listed company

• Filing Monthly Development Report to SEBI

 

ACADEMIC BACKGROUND

 

PROFESSIONAL QUALIFICATIONS

Year	Qualifications	University/ Board
2008	Cyber Crime Investigation Course	Asian School of Cyber Laws, Pune
2007	Company Secretary	Institute of Company Secretaries of India
2007	Corporate Governance (77.5%)	Module by NCFM, National Stock Exchange.
2006	Diploma in Patent Law	NALSAR, Hyderabad
2002-2005	B.Com (78.79%)	PSG CAS, Coimbatore

 

PERSONAL DETAILS

Born: 9^th November 1985

Contacts: thisisvj@gmail.com/

Date :                                    A.N.S. Vijay

Download PDF from Personal official disclosure.pdf

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EXCLUSIVE AREAS OF PRACTICE FOR COMPANY SECRETARY

SECRETARIAL AUDIT

ü Signing Annual Returns <= 30 listed companies in a year [provisio to Section 161(1)].

ü Secretarial Compliance Certificate (Form 66 – Section 383A) <= 50 certificates/ calendar year.

ü Clause 46 – Compliance Certificate for "timely transfer of shares" as per Listing Agreement that Certificates are issued <= 1month of lodgement, for every half year & company in turn has <= 24 hours of its receipt to intimate Stock Exchange.

ü Compliance of Buy-back requirements as to physical destruction of share certificate according to Private & Unlisted Public Limited Company Rules, 1999 which mandates it before 2 whole time directors & a Company Secretary.

Find wide range of services, a Company Secretary (CS) can offer under various acts in http://www.primeacademy.com/sat_16_2_08.pdf

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PAN also, Anti-Money Laundering for AP

Anti-Money Laundering Guidelines

A. P. (DIR SERIES) CIRCULAR NO. 14, DATED 17-10-2007

Attention of all Authorised Persons is invited to the Anti-Money Laundering guidelines for Authorised Money Changers issued vide A. P. (DIR Series) Circular No. 18 {A.P. (FL Series) Circular No. 01} dated December 2, 2005 and A. P. (DIR Series) Circular No.39 {A. P. (FL Series) Circular No.02} dated June 26, 2006. In view of the difficulties expressed by Money Changers Association in implementing some of the guidelines, it has been decided to amend the following instructions of the aforementioned circulars (the Circulars).

(a) In terms of paragraph 4 (c) of the Annex to A. P. (DIR Series) Circular No. 39 {A. P. (FL Series) Circular No. 02} dated June 26, 2006 requests for payment in cash by foreign visitors / non-resident Indians may be acceded to the extent of USD 2000 or its equivalent. This limit has been raised to USD 3000. All other provisions of paragraph 4(c) of the Annex to the Circulars remain unchanged.

(b) In terms of paragraph 6 of Annex to A. P. (DIR Series) Circular No. 18 {A.P. (FL Series) Circular No. 01} dated December 2, 2005, relationship with a business entity like a company / firm should be established only after obtaining and verifying suitable documents in support of the name, address and business activity, such as certificate of incorporation under the Companies Act 1956, Memorandum of Association, Articles of Association, registration certificate of a firm (if registered), partnership deed, etc. It has now been decided that in addition to the above mentioned documents, PAN Card may also be accepted as a suitable document for establishing the relationship with the company / firm. All other provisions of paragraph 6 of the Annex to aforementioned circular shall remain unchanged.

2. Authorised persons may bring the contents of this circular to the notice of their constituents and customers concerned.

3. Necessary amendments to the Memorandum of Instructions to Authorized Money Changers are being issued separately.

4. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Non-compliance with the guidelines would attract penal provisions of Section 11(3) of the Act ibid.

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SEBI's Proposal on PN which shook the Stock Market

Paper for discussion on Offshore Derivative Instruments (Participatory Notes) Objective This paper sets out the proposed policy measures on Offshore Derivative Instruments (Participatory Notes). Background With a view to monitoring the investment by FIIs through Offshore Derivative Instruments (ODIs) such as Participatory Notes (PNs), Equity Linked Notes, Capped Return Notes, Participating Return Notes etc., SEBI had prescribed reporting of issuance / renewal / cancellation / redemption of the ODIs on a monthly basis since October 2001. The figures submitted by the FIIs on a month to month basis showed an increasing trend. In the latter half of 2003, a Technical Committee of SEBI Regulated Entities was constituted by the HLCCFM to examine the issues pertaining to P-Notes more closely. The Committee, comprising representatives of RBI, IRDA, SEBI and NSE met in October, 2003 and extensively discussed the issues like : • Whether PNs should be allowed to be issued at all, • Whether restrictive use of PNs is possible, • Monitoring of compliance • Phasing out of PNs that are non-compliant with new restrictions, etc The Committee, having examined the concerns raised by the participants, felt that while these issues and concerns would have to be addressed in the interest of the market, the measures taken should be practical, pragmatic, non-disruptive and enforceable without great difficulty. Recognizing that it may be difficult to enforce a complete ban on PNs, the Committee made certain recommendations which included issuance of PNs only to regulated entities subject to KYC requirements. The same was implemented through suitable amendment to FII regulations. However, the year on year increase in ODIs, the anonymity that the ODI provides to the investors and the copious inflows into the country from foreign investors has been engaging the attention of the Government and the regulators such as the Reserve Bank of India and SEBI. This has been a topic for discussion in many fora such as HLCC and various committees set up by the Government/ regulators. Current Scenario: Currently 34 FIIs / Sub-accounts issue ODIs. This number was 14 in March 2004. The notional value of PNs outstanding which was at Rs.31,875 crores (20% of AUC 1) in March 2004 has grown to Rs.3,53,484 crores (51.6% of AUC) by August 2007. The value of outstanding ODIs with underlying as derivatives currently stands at Rs1,17,071 crores, which is approximately 30% of total PNs outstanding. The notional value of outstanding PNs, excluding derivatives as underlying as a percentage of AUC is 34.5% at the end of August 2007. Proposed Measures: Following consultation with the Government, the following measures are proposed to be implemented urgently: 1) FIIs and their sub-accounts shall not issue/renew ODIs with underlying as derivatives with immediate effect. They are required to wind up the current position over 18 months, during which period SEBI will review the position from time to time. 2) Further issuance of ODIs by the sub-accounts of FIIs will be discontinued with immediate effect. They will be required to wind up the current position over 18 months, during which period SEBI will review the position from time to time. 3) The FIIs who are currently issuing ODIs with notional value of PNs outstanding (excluding derivatives) as a percentage of their AUC in India of less than 40% shall be allowed to issue further ODIs only at the incremental rate of 5% of their AUC in India. 1 AUC = Assets Under Custody of all FIIs/Sub Accounts 4) Those FIIs with notional value of PNs outstanding (excluding derivatives) as a percentage of their AUC in India of more than 40% shall issue PNs only against cancellation / redemption / closing out of the existing PNs of at least equivalent amount. In view of urgency, any comments on the above proposals may be sent to odireporting@sebi.gov.in by 20th October 2007 with the subject line "Paper for discussion on Offshore Derivative Instruments - Comments" *****************

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IRDA Licensing Relaxation R5

Insurance Regulatory and Development Authority (Licensing of Insurance Agents) (Amendment) Regulations, 2007 - Amendments in regulation 5

NOTIFICATION F.NO. IRDA/REG./2/ 39/2007, DATED 8-10-2007

In exercise of the powers conferred by section 42 and section 114A of the Insurance Act, 1938 (4 of 1938), the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following regulations to amend the Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regula­tions, 2000, namely :—

1. (1) These regulations may be called the Insurance Regulatory and Development Authority (Licensing of Insurance Agents) (Amendment) Regulations, 2007.

(2) They shall come into force with effect from 1st Novem­ber, 2007.

2. In the Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulations, 2000—

(i) In sub-regulation (1) of Regulation 5 the words, "one hundred hours" and "three to four weeks" shall be substituted by the words "fifty hours" and "one to two weeks" respectively.

(ii) In the proviso to sub-regulation (1) of Regulation 5, the words, "one hundred fifty hours" and "six to eight weeks" shall be substituted by the words, "seventy five hours" and "two to three weeks" respectively.

(iii) In sub-regulation (2) of Regulation 5 the words, "fifty hours" shall be substituted by the words, "twenty five hours".

(iv) In the proviso to sub-regulation (2) of Regulation 5, the words, "seventy hours" shall be substituted by the words, "thirty five hours".

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Proposed Changes in SEBI QIP Norms

As many of you may aware of that as per existing SEBI QIP norms, offering of securities through Qualified Institutional Placement (QIP) is a Private Placement. As per Section 67(3) of the Companies Act, 1956 we cannot make offer to more than 49 Investors under the private placement. It means that we cannot issue an offer document inviting for subscription under the QIP placement to more than 49 Investors. The SEBI has confirmed this restriction through its informal guideline No. CFD/DIL/SM/98649/2007 dated July 13, 2007. To ease this restriction the SEBI is planning to make changes to Qualified Institutional Placement (QIP) norms in terms of investor eligibility and the floor price for the issue.

The SEBI will issue relevant Circular in this regard.

Thanks & Regards

Alagar
09884731993

Depositories & Participants - R7

Securities and Exchange Board of India (Depositories and Participants) (Amendment) Regulation, 2007 - Amendments in regulation 7

NOTIFICATION NO. 11/LC/GN/2007/ 4485, DATED 10-10-2007

In exercise of the powers conferred by section 30 of the Securi­ties and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Depositories and Partici­pants) Regulations, 1996, namely :—

1. These Regulations may be called the Securities and Exchange Board of India (Depositories and Participants) (Amend­ment) Regulations, 2007.

2. They shall come into force on the date of their publi­cation in the Official Gazette.

3. In the Securities and Exchange Board of India (Deposi­tories and Participants) Regulations, 1996, in regulation 7, after clause (c), the following proviso shall be inserted, namely :—

"Provided that a depository may carry out such activity not incidental to its activities as a depository, as may be assigned to the depository by the Central Government or by a regulator in the financial sector, through the establishment of Strategic Business Unit(s) specific to each activity with the prior approv­al of the Board and subject to such conditions as may be pre­scribed by the Board, including transfer of such activity to a separate company within such time as may be specified by the Board, having regard to the matters which are relevant to the efficient and orderly function of the Depository as mentioned in regulation 13.

Explanation.—For the purposes of this clause, a Strategic Busi­ness Unit shall be an organizational unit of a company with its own mission, objectives and business strategy that is given the responsibility to serve the particular demands of one business area with appropriate technological, financial and other segrega­tions."

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Booking of Forward Contracts - Liberalisation (RBI)

Press Release : 2007- 08/500 in http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=17340

Revised Draft Circular in http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=966

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Writs - Anantharaman

WRITS

I. CERTIORARI – "WE CERTIFY" [ONLY after decision]

By High Court to Inferior Court/Tribunal/Legal Authority;

Grounds – Want to exercise / exercise Excess of Jurisdiction; or violation of procedure or disregard to principles of Natural Justice.

II. PROHIBITION – ON TAKING UP THE MATTER

It commands Legal Authority to REFRAIN from doing something.

III. MANDAMUS – "WE COMMAND"

Ø Judicial remedy;

Ø In the form of ORDER from superior court to Government or Court or Corporation or Public authority;

Ø Order to do/forbear from doing some specific ACT;

Ø ACT àthe body is obliged to do/refrain from doing;

Ø In the nature of Public Duty.

IV. QUO WARRANTO – holding office under "WHAT AUTHORITY"

Ø Public Office;

Ø Holding without Legal Authoriy;

Ø Inquiry as to whether appointment as per law.

V. HABEAS CORPUS – "PRODUCE THE BODY"

An effective means of IMMEDIATE RELEASE from unlawful DETENTION (whether in prison or in control & custody);

Ø When confinement without legal jurisdiction;

Ø High Court order to bring such person before court;

Ø Court to know the ground for confinement.

"Understand this for GCL & Drafting exams"

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Judgments

VERY VERY IMPORTANT FOR HR/IR & INSURANCE EXAMS

Supreme Court on Indian Drugs & Pharmaceuticals Ltd., v. Workman, Indian Drugs & Pharmaceuticals Ltd., [2007] 79 SCL 21 (SC)

Service matters – Regularisation of TEMPORARY appointees – whether there can be occasions when State or its instrumentalities employ person on temporary or daily wage basis in a CONTINGENCY as additional hands WITHOUT following required procedure, but this does not confer any right on such persons to continue in service or get regular pay; unless appointments are made by following rules, such appointees do not have any right to claim permanent absorption in establishment – HELD, YES;

Whether Courts must exercise judicial restraint, and not encroach into executive or legislative domain; orders for creation of posts, appointment on these posts, regularization, fixing pay scales, continuation in service, promotions, etc…are all executive or legislative functions, and it is highly improper for Judges to step into this sphere, except in a rare and exceptional case – HELD, YES;

Whether therefore, Court/Tribunal cannot direct regularization of temporary appointees de hors recruitment rules, nor can it direct continuation of service of a temporary employee whether called a casual, ad hoc or daily rate employee, or payment of regular salaries to them – HELD, YES.

Supreme Court on Fazilka Co-operative Sugar Mills v. Jatinder Kumar Gupta [2007] 79 SCL 26 (SC)

Section 11A of the Industrial Disputes Act, 1947 – Labour Courts, Tribunal and National Tribunal – Powers of, to give appropriate relief in case of discharge or dismissal of workmen – Respondent-workman, upon his dismissal in year 1992, raised an "industrial dispute" – Meanwhile, workman filed writ petition, wherein appellant was directed to pay subsistence allowance to respondent – As appellant-corporation did not pay said allowance, Labour Court refused to grant opportunity to appellant to lead evidence and directed workman to be reinstated in service with continuity of service along with 50 percent back wages – High Court upheld award passed by Labour Court –

Whether since NO DATE was fixed for payment of said allowance, but dates were fixed in proceedings before Labour Court, payment made by appellant after order of Labour Court closing evidence could not be held arbitrary in any manner – HELD, YES.

Whether after a long passage of time, it would not be proper to direct reinstatement with back wages, and interest of justice would be met, if MONETARY COMPENSATION of Rs. 2 lakhs was to be paid to workman in full and final settlement of his claims – HELD, YES.

In the case of National Insurance Co. Ltd. v Sanjay Shivhare & others à The National Commission reconsiders its own conflicting judgments on "Whether an insurance claim is payable when there is a breach of policy terms" and now settles the law.

HELD that, even if there was a breach of the terms of the policy in respect of its use as a taxi or for hire or reward, the GUIDELINES specifically provided that in such cases 75% OF THE AMOUNT should be paid as a NON-STANDARD CLAIM.

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SEBI draft - Investment Adviser

Draft SEBI (Investment Advisers) Regulations, 2007

SEBI has framed draft SEBI (Investment Advisers) Regulations, 2007 and the same are placed in public domain for comments and suggestions.

Comments on the draft Regulations annexed herewith may be sent on or before October 31, 2007 through email to ashas@sebi.gov.in or to the address mentioned below:

Chief General Manager

MIRSD – DPS III

Securities and Exchange Board of India

SEBI Bhavan, 2nd Floor, A- wing,

Plot No: C – 4A, G Block,

Bandra Kurla Complex,

Mumbai 400 051.

Find full regulation in http://www.sebi.gov.in/Index.jsp?contentDisp=WhatsNewScroll&FilePath=/commreport/inv.html

Thanks & Regards

Alagar
09884731993