The issuing of sweat equity shares for a private company used to be regulated by Section 79A and Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003 under Companies Act, 1956. Now the same is regulated by Section 54 and Chapter 4 under Companies Act, 2013.
Value addition has been defined as the actual or anticipated economic benefits that has been derived or to be derived by Company from an expert or a professional for providing know-how or making the available rights in the nature of intellectual property rights.
Yes, prior shareholders’ approval through special resolution is required.
Allotment of the sweat equity shares has to be necessarily made within 12 months from the date of passing a special resolution.
There should mandatorily be at least 1 year between the commencement of business and issue of such shares.
Valuation of the sweat shares and the intellectual property rights(IPR)/know how/ value additions shall be done by Registered Valuer.
The critical elements of Valuation Report shall be sent along with the Notice. The particulars like class of shares, price, consideration, key terms of conditions, employees to whom sweat is proposed are required to be mentioned in the explanatory statement.
In a year, sweat shares shall not exceed 15% of the existing paid up equity share capital or shares having issue value of Rs. 5, 00,00,000, whichever is higher. However, it should under any circumstances not exceed 25% of paid up equity capital of a Company at any time.
3 years from the date of allotment. The fact that the share certificates are under lock-in and the period of expiry of lock in shall be mentioned in prominent manner on share certificate.
Shall rank at the same rate or on an equal footing with other equity shareholders.
Particulars like the class of director or employee, class of shares, the number of sweat equity shares, the percentage of sweat equity shares in total post issued and paid up share capital, diluted Earnings Per Share and consideration received.
Details of sweat shares would be mentioned in this Register. Shall be maintained at Registered Office or such other place as the Board may decide. Entries shall be mandatorily authenticated by CS of the Company or by any other person authorized by the Board.