Startup Services · ESOP Compliance

ESOP Scheme Compliance reward and retain your team the compliant way.

Employee Stock Option Plans let companies grant equity-linked rewards to employees and directors, but the scheme must be structured, approved, and administered exactly as prescribed under the Companies Act and SEBI regulations (for listed companies) to remain valid and tax-efficient.

An ESOP scheme allows a company to grant options to its employees, giving them the right to purchase equity shares at a predetermined price after a vesting period. For startups and growth-stage companies, ESOPs are a key tool to attract and retain talent without an immediate cash outflow — but the scheme has to be approved by shareholders, administered through a formal trust or plan document, and reported correctly every year.

Section 62(1)(b) of the Companies Act 2013, read with the Companies (Share Capital and Debentures) Rules, governs how private and unlisted companies issue ESOPs — covering shareholder approval by special resolution, eligibility of employees, vesting period, exercise price, and lock-in. Listed companies additionally follow the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

At Beyonte Compliances, we help companies design the ESOP pool, draft the scheme document and trust deed, obtain the necessary board and shareholder approvals, and manage ongoing compliance — grant letters, vesting schedules, exercise processing, and annual disclosures in the board's report.

What Our ESOP Compliance Service Covers

ESOP Pool Structuring

Determining the appropriate option pool size and structure based on the company's cap table, funding stage, and future dilution planning.

Scheme Drafting

Drafting the ESOP scheme document covering eligibility, vesting schedule, exercise price, exercise period, and forfeiture conditions.

Shareholder & Board Approval

Preparing board resolutions and special resolutions for shareholder approval of the scheme as required under Section 62(1)(b).

Grant Letter Issuance

Preparing individual grant letters for employees setting out the number of options, vesting schedule, and exercise terms.

Vesting & Exercise Tracking

Ongoing tracking of vesting schedules and processing of option exercise requests, including allotment of shares on exercise.

ROC Filings

Filing PAS-3 for allotment of shares on exercise of options, and other filings triggered by the scheme's operation.

Annual Disclosures

Preparing the ESOP disclosures required in the board's report each year, including details of options granted, vested, exercised, and lapsed.

SEBI SBEB Compliance

For listed companies, ensuring the scheme complies with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, including trust administration where applicable.

Our Process

Pool & Scheme Design

Structuring the option pool and drafting the scheme document tailored to the company's stage and objectives.

Board & Shareholder Approval

Convening the board meeting and general meeting to approve the scheme by special resolution.

Grant to Employees

Issuing grant letters to eligible employees setting out their option entitlement and vesting terms.

Exercise & Allotment

Processing option exercise requests and filing PAS-3 for allotment of the resulting equity shares.

Annual Compliance

Maintaining the ESOP register and preparing the annual board report disclosures on the scheme.

Why It Matters

✓Legally valid scheme approved by shareholders as required under Section 62(1)(b)

✓Clear vesting and exercise terms that reduce disputes with employees

✓Correct ROC filings on every allotment arising from option exercise

✓Accurate annual board report disclosures on the ESOP scheme

✓Structured option pool that supports future fundraising rounds

✓SEBI-compliant scheme design for companies planning to list

✓Reduced tax and compliance risk on grant, vesting, and exercise

✓Professional documentation that stands up to investor and auditor scrutiny

Frequently Asked Questions

Yes. Under Section 62(1)(b) of the Companies Act 2013, an ESOP scheme must be approved by shareholders through a special resolution before options can be granted to employees.

Independent directors cannot be granted ESOPs. Promoters and promoter group employees are generally excluded, though the rules differ slightly for startups recognised by DPIIT, which enjoy certain relaxations.

The Companies Act requires a minimum vesting period of one year between the grant of options and the date they can be exercised, though the scheme can prescribe a longer vesting schedule.

No filing is required at the grant stage, but Form PAS-3 must be filed with the Registrar of Companies whenever shares are allotted to employees on exercise of vested options.

Set up a compliant ESOP scheme for your team.

Talk to our team about structuring, approving, and administering your ESOP scheme end to end.