Felix Advisory

Post-event Summary Report:

  • Name: ESOP: Employee Stock Option Plan
  • Date of Event: May 30th, 2020

ESOP: Employee Stock Option Plan

Event Summary:

On 30th May, Felix Advisory an organized webinar on ESOP: Employee Stock Option Plan, effective employee motivation and retention tool. ESOP and similar employee benefit alternative schemes are effective employee motivation and retention tool and help employees realize wealth creation in conjunction with the organization’s success.

The session panelists were Ms. Manisha Rawat – Partner, Felix Advisory, Mr. Romesh Vijay – Partner, Felix Advisory, Ms. Lunika Lamba – Manager, Felix Advisory and Mr. Jatin Kumar – Consultant, Felix Advisory. Ms. Sanchita Midha, Consultant – Felix Advisory was the session moderator.

The session started with a welcome note and opening statement by Mr. Amit Jindal – Partner, Felix Advisory. He explained the origin of ESOP and how more companies, especially startups are opting for ESOP.

Ms. Manisha Rawat and Ms. Lunika Lamba took the first session on the basic concept, advantages and regulatory compliance of ESOP. They covered the basics of ESOP, its benefits for both employees and employers, procedure, eligibility, implementations and its routes, regulatory compliance and alternative plans like stock appreciation and phantom stocks. They also emphasised how ESOP is different from other similar tools like the Sweat Equity. Mr. Jatin Kumar then spoke about taxation under ESOP for both employers and employees. He also shed light on the relevant valuation provisions.

Mr. Romesh Vijay carried forward the session by discussing valuations for ESOP. He first explained the various stages of the ESOP cycle and its interlinkage with valuation. He further emphasised on the valuation process and its different approaches. The valuation approaches for business valuation / intrinsic valuation can be classified as cost, market and income approach. He spoke extensively about the option pricing methods and inputs to the option model and its sensitivity and Valuation Guidance published by AICPA. He also discussed accounting for ESOP.

They further addressed questions from participants. The participants were curious about shareholder’s approval for ESOP, time limit for exercising the options, the difference between RSU and ESOP, valuation of shares at the time of acquisition by trust and acquisition by the employee, unexercised shares with the trust, TDS and allotment of shares, the procedure to determine the period of holding the shares, the requirement of valuation at in balance sheets dates, date of exercise option and every grant time.

The session concluded with a vote of thanks from all the panellists and Ms. Sanchita Midha, the session moderator, expressing gratitude towards all the participants for sparing their valuable time to attend the audio-webinar and make it successful.