ESOP Plan reviews on impending IPO – for alignment with SEBI in letter and spirit

Unlisted companies with outstanding ESOP Plan(s) must align their ESOP Plan(s) with the provisions of the relevant SEBI Regulations in order to secure approval for listing of their equity shares.

This alignment envisages not only theoretical alignment (i.e. language changes in the ESOP Plan) but also contemplates alignment in terms of facts and figures associated with the ESOPs implemented.

Out of many cases, one such case pertained to a company (a prominent insurer in India) with multiple Pre-IPO ESOP Plan(s) needing alignment. Being an IPO case, the requirement was perfection in a limited time.

Each ESOP Plan was verified meticulously word-by-word w.r.t. to the provisions of the relevant SEBI Regulations. The alignment included the (i) revision of the ESOP trust deed and (ii) making/ cross-checking disclosure in the Red-herring prospectus basis accounting, fair valuation (Black & Scholes value) and other transactional details.

It was a successful listing.