New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    Consider the following statements regarding regulation

    of “Sweat Equity” in the Indian economy: 1. Sweat equity refers to shares issued by a company to its employees for non-cash consideration. 2. There is no maximum limit of sweat equity shares that can be issued by a listed company 3. Companies are only allowed to provide Sweat equity benefits to employees, who are exclusively working for a company and not to any of its group companies including a subsidiary or an associate. Which of the statements given above is /are correct?
    A 1 only Correct Answer Incorrect Answer
    B 2 and 3 only Correct Answer Incorrect Answer
    C 1 and 3 only Correct Answer Incorrect Answer
    D 1 ,2 and 3 Correct Answer Incorrect Answer

    Solution

    ● Statement 1 is correct: Sweat equity is a nonmonetary contribution that the individuals or founders of a company make towards the company. Cash-strapped startups and business owners typically use sweat equity to fund their companies. ● Statement 2 is incorrect: The maximum yearly limit of sweat equity shares that can be issued by a listed company has been prescribed at 15% of the existing paid-up equity share capital or shares of the value of Rs 5 crore, whichever is higher. The issuance shall not exceed 25% of the paid-up capital at any time. In case of companies listed on the Innovators Growth Platform (IGP), the yearly limit will be 15% and overall limit will be 50% of the paid-up capital at any time. It will be applicable for 10 years from the date of the company’s incorporation. ● Statement 3 is incorrect: Companies will now be allowed to provide share-based employee benefits to employees, who are exclusively working for such a company or any of its group companies including a subsidiary or an associate.

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