The Securities and Exchange Board of India (SEBI) has proposed a new rule that would allow startup founders to retain their Employee Stock Option Plans (ESOPs) even after their companies go public. This change is aimed at supporting founders of new-age technology startups, who often rely on ESOPs in place of cash salaries during their company’s early stages.
Relief for Startup Founders
ESOPs are crucial for aligning the interests of founders with shareholders and compensating founders for their contributions. However, as startups raise more investments, founders’ ownership stakes often get diluted. Under the current SEBI rules, founders are classified as “promoters” when they file for an initial public offering (IPO).
This classification has created a challenge because the existing regulations prevent promoters from holding ESOPs. As a result, founders who were granted stock options before the IPO face uncertainty about whether they can retain their vested or unvested ESOPs after their company becomes publicly traded.
Clarifying ESOP Rules
SEBI has proposed a clarification to address this issue. It suggests allowing founders to keep their ESOPs even after they are reclassified as promoters during the IPO process. However, the prohibition on issuing fresh ESOPs to promoters will still remain in effect.
This proposal is expected to benefit startup founders by ensuring they do not lose their equity-based compensation after their company goes public. It also aims to clarify SEBI’s position on the matter and prevent unintended losses for founders.
SEBI’s Broader Digital Push: Integration with DigiLocker
In a separate initiative, SEBI has partnered with DigiLocker to make it easier for investors to manage their financial assets. This integration will allow investors to securely track and retrieve information related to their demat accounts, mutual fund holdings, and other securities through the DigiLocker platform.
DigiLocker already provides access to important documents like bank statements, insurance policies, and National Pension System (NPS) details. With SEBI’s integration, investors will now have a centralised system for managing securities and reducing the number of unclaimed financial assets.
