ESOP IMPLEMENTATION CHECKLIST
Introducing an Employee Stock Option Plan under Section 62(1)(b) and Rule 12 of the Companies (Share Capital and Debentures) Rules.
Scheme Design
- ☐ Draft the ESOP scheme with pool size, eligibility and vesting terms
- ☐ Define minimum 1-year vesting period from grant
- ☐ Set exercise price and exercise period
- ☐ Confirm eligible employees exclude promoters and 10%+ shareholders (for private/unlisted, unless permitted)
Approvals
- ☐ Board resolution approving the scheme
- ☐ Special resolution of members approving the ESOP
- ☐ Separate resolution if grant to a single employee is 1% or more of capital
- ☐ File MGT-14 for the special resolution within 30 days
Grant & Administration
- ☐ Issue grant letters to selected employees
- ☐ Maintain the register of ESOP in Form SH-6
- ☐ Track vesting schedule for each grantee
- ☐ Record exercise, allotment and lapses
Post-Exercise Compliance
- ☐ Allot shares on exercise and file PAS-3
- ☐ Deduct perquisite TDS on exercise value in employee payroll
- ☐ Disclose ESOP details in the Board’s Report
- ☐ Update the cap table and register of members
Note: Eligible DPIIT-recognised startups get relaxed conditions on granting ESOPs to promoters/large shareholders. Tax on perquisite for such startups can be deferred as per Section 192(1C).