Esop
Venkat Rao Marella
(Querist) 11 January 2012
This query is : Resolved
Employees of a private company were allotted esop’s which were excercised and they were allotted shares subsequently. The company also has one US subsidiary. If the employees to whom shares were allotted under esop plan of the parent company are transferred to one of the subsidiary company, does this imply the parent company to buy back the shares from the employees so transferred to its subsidiary? If yes, to what extent the buyback provisions apply to the private companies which are planning to buy back the shares from the shareholders who are ex employees now [can be the employees who were transferred to subsidiaries or who resigned]. At what rate should the company buy back the shares?
R.Ramachandran
(Expert) 11 January 2012
From the facts revealed by you, what emerges is that employees of a private limited company were offered ESOP by the company. The employees exercised the option of the ESOP. Subsequently the shares were allotted to the employees on the basis of the option exercised by them.
The said employees were subsequently transferred to another company in USA, which is a subsidiary company which allotted the ESOP.
I think I have understood the facts correctly.
If the above is the fact, I just do not understand where from the question of buy back of shares arises? Does those employees who exercised ESOP and got shares have sold the shares back to the parent Company?
Deepak Nair
(Expert) 11 January 2012
Answer the query of Mr.Ramachandran for an appropriate advise.
Venkat Rao Marella
(Querist) 11 January 2012
Sir: your understanding is correct.
The question of buy back arises
1. in case the employee does not want to hold these shares any more (after the lockin period).
2. if the employee quits the company and joins competitor, the management may not be interested in having that employee on the members register.
R.Ramachandran
(Expert) 11 January 2012
The buy back provisions will apply.
Rajeev Kumar
(Expert) 11 January 2012
Ramchandran sir has amply replied your query
Raj Kumar Makkad
(Expert) 11 January 2012
In the given matter only buy back provisions shall apply.
Deepak Nair
(Expert) 12 January 2012
Rightly advised by experts
prabhakar singh
(Expert) 12 January 2012
I am also of a similar view as are the other experts.
