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November 2015
SEBI’s recent FAQ on way forward for Options granted to Independent Directors under SEBI (Share Based Employee Benefits) Regulations, 2014
  1. Backgroud
1.1  Securities and Exchange Board of India (“SEBI”) has issued a clarification in the nature of Frequently Asked Question (“FAQ”) on November 20, 2015 clarifying the way forward for Employee Stock Options (“Options”) already granted to the Independent Directors prior to coming into force of the relevant provisions of the Companies Act, 2013 (“Act”) and SEBI (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”).

1.2  It is worthwhile to mention that the Act came into effect in August 2013; whereas Section 149 of the Act dealing with Independent Directors and their remuneration/ entitlements came into effect on April 01, 2014 vide Ministry of Corporate Affair’s notification dated March 26, 2014. Sub-section 149(9) restricted grant of Options to the Independent Directors. In the meantime, on October 28, 2014, SEBI notified SBEB Regulations which vide Regulation 2(1)(f) restricted granting of Options to the Independent Directors in due compliance with the requirement of Sub-section 149(9) of the Act.

1.3  Given the background above, the prohibition of grant of Options to the Independent Directors commenced from the earliest occasion being April 01, 2014 (“Date of Restriction”).

1.4  The listed Companies who had already granted Options to their Independent Director(s) prior to the Date of Restriction were seeking clarity on the way forward for the already granted Options. SEBI by way of this FAQ has clarified the way forward.

1.5  By way of this newsletter, we wish to share our understanding of this FAQ.
  2. Published FAQ

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