ESOP Scheme Compliance
Overview – ESOP Scheme Compliance
At Cardiff Services, we specialize in providing end-to-end ESOP Scheme Compliance services to help companies legally and strategically implement Employee Stock Option Plans (ESOPs). ESOPs are a powerful tool used by startups, private companies, and listed entities to attract, retain, and reward key talent by offering equity ownership in the company.
However, designing and executing an ESOP scheme requires strict adherence to legal, tax, and regulatory frameworks, including those under the Companies Act, 2013, SEBI (SBEB & SE) Regulations, 2021 for listed companies, and relevant Income Tax Act provisions. Non-compliance can lead to legal penalties, investor issues, and employee dissatisfaction.
Cardiff Services ensures that your ESOP schemes are not only legally compliant but also strategically structured to align with your business goals. We assist with everything—from policy drafting, board/shareholder approvals, and option grants to regulatory filings, disclosures, and employee communication.
With our expert team managing your ESOP compliance, you can focus on scaling your business while we ensure that your equity incentive plans are fully compliant, transparent, and tax-efficient.
Features – ESOP Scheme Compliance
Cardiff Services offers fully integrated ESOP Compliance solutions tailored to meet the regulatory, financial, and strategic requirements of your organization. Our services ensure that your Employee Stock Option Plan (ESOP) is implemented smoothly and in full compliance with applicable laws.
- Customized ESOP Policy Drafting
We assist in drafting tailor-made ESOP policies aligned with your company’s objectives, ownership structure, and applicable legal frameworks. - Compliance with Legal Frameworks
Ensure compliance with the Companies Act, 2013, SEBI (SBEB & SE) Regulations, 2021 for listed companies, and the Income Tax Act. - Board and Shareholder Approvals
End-to-end assistance in conducting board meetings and shareholder resolutions for ESOP scheme approval and modifications. - ESOP Grant and Vesting Management
We manage the complete lifecycle of stock options—from grant letters to vesting schedules and eventual exercise. - Regulatory Filings and Disclosures
Ensure timely filing of statutory forms (like MGT-14, PAS-3) and disclosures to the Registrar of Companies (RoC) and SEBI, wherever applicable. - Cap Table and Option Pool Advisory
Expert guidance on structuring the option pool and its integration with your capitalization table (cap table) for future fundraising or M&A events. - Tax and Financial Reporting Compliance
Support for accounting under IND AS 102/IFRS 2 and tax compliance for both the company and the employees on ESOP gains. - Employee Communication and Education
Transparent communication materials and sessions to help employees understand the value and implications of their ESOPs. - Ongoing Monitoring and Audit Readiness
Maintain up-to-date records, grant logs, and compliance documentation to ensure audit readiness and investor confidence.
With Cardiff Services managing your ESOP compliance, you can focus on rewarding your team while we handle the legal, tax, and procedural complexities in the background.
Documents Required – ESOP Scheme Compliance
At Cardiff Services, we ensure that your Employee Stock Option Plan (ESOP) is implemented with full legal and procedural compliance. Below is a list of essential documents required to draft, approve, and manage a compliant ESOP scheme under the Companies Act, 2013, SEBI Regulations, and other applicable laws:
- Draft ESOP Scheme / Policy Document
A detailed policy outlining the terms of the ESOP including eligibility, grant conditions, vesting schedule, exercise price, and exit mechanisms. - Board Resolution Approving ESOP Scheme
Resolution passed in a board meeting for the adoption of the ESOP and calling of a general meeting for shareholder approval. - Shareholders’ Special Resolution
Special resolution passed in the general meeting to approve the ESOP scheme under Section 62(1)(b) of the Companies Act, 2013. - Explanatory Statement (Annexed to Notice)
Detailed explanation accompanying the shareholder meeting notice, disclosing key terms of the ESOP scheme as per statutory requirements. - Valuation Report (Optional but Recommended)
Report by a registered valuer or chartered accountant for determining the fair market value (FMV) of shares for grant/exercise pricing and tax purposes. - Employee Grant Letters / Offer Letters
Individual letters issued to eligible employees specifying the number of options granted, vesting timeline, and exercise terms. - Register of Employee Stock Options
As per Rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014, a register must be maintained to record all options granted, vested, exercised, and lapsed. - Form MGT-14 (for Special Resolution)
Filed with the Registrar of Companies after passing the special resolution approving the ESOP scheme. - Form PAS-3 (Return of Allotment)
To be filed after shares are allotted upon exercise of options by employees. - Employee Acceptance / Consent Forms
Signed copies of employee consents acknowledging the ESOP terms and their acceptance of grant letters. - Updated Capitalization Table (Cap Table)
Reflecting the option pool, grants made, exercised shares, and dilution impact for internal and investor use.
With Cardiff Services managing your ESOP compliance documentation, your business stays fully aligned with legal obligations while building an effective and trusted employee ownership program.
Procedure – ESOP Scheme Compliance
Implementing and maintaining a compliant Employee Stock Option Plan (ESOP) requires careful planning, documentation, and regulatory adherence. Cardiff Services provides end-to-end ESOP compliance support, ensuring full alignment with the Companies Act, 2013, SEBI (SBEB & SE) Regulations, 2021 (for listed entities), and Income Tax Act provisions.
Step 1: Draft the ESOP Scheme
We begin by drafting a customized ESOP policy in line with your company’s objectives, business stage, and regulatory requirements. This includes eligibility, vesting schedule, exercise price, and terms of grant and exit.
Step 2: Obtain Board Approval
The drafted ESOP scheme is presented to the Board of Directors. A Board resolution is passed to approve the scheme and authorize calling a general meeting for shareholder approval.
Step 3: Shareholder Approval (Special Resolution)
A special resolution is passed at a general meeting of shareholders as required under Section 62(1)(b) of the Companies Act, 2013. Cardiff Services assists in drafting the explanatory statement and meeting notice.
Step 4: File Form MGT-14 with RoC
Post approval, Form MGT-14 is filed with the Registrar of Companies (RoC) within 30 days to legally register the shareholder resolution.
Step 5: Grant Stock Options to Employees
Eligible employees are granted options via formal grant letters. Each grant specifies the number of options, vesting schedule, exercise price, and other terms.
Step 6: Maintain ESOP Register and Documentation
A Register of Employee Stock Options is maintained per Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014. All grants, exercises, lapses, and cancellations are recorded.
Step 7: Vesting and Exercise of Options
Once options vest, employees may exercise them according to the scheme. Cardiff Services assists in managing exercise applications, tracking vesting schedules, and collecting payments.
Step 8: Allotment of Shares
Upon exercise, the Board approves share allotment. Form PAS-3 is filed with the RoC for the return of allotment. Share certificates or demat credits are issued accordingly.
Step 9: Valuation & Tax Compliance
We assist with valuation reports for FMV determination, income tax treatment of ESOPs (TDS for employees), and accounting under IND AS 102/IFRS 2.
Step 10: Ongoing Compliance and Reporting
Cardiff Services ensures ongoing regulatory compliance by updating cap tables, maintaining ESOP logs, assisting in investor reporting, and preparing for audits or due diligence.
With Cardiff Services, your ESOP scheme is not only compliant and well-documented, but also structured to meet your strategic HR and equity planning goals, all while reducing legal and operational risk.
Frequently Asked Questions
A company name search ensures that your chosen business name is unique, legally compliant, and not already registered with Companies House UK. It helps you avoid legal disputes, trademark issues, and confusion in the Cardiff business market.
If your desired name is already registered, you’ll need to choose a different name or modify it. Using a taken name could result in rejection by Companies House or potential legal issues. Our experts can help you brainstorm alternative names that are compliant and market-ready.
It’s not advisable to use a name that’s too similar to another company, especially within the same industry. Similar names can confuse customers and risk trademark disputes. A company name search helps you identify these risks early.
For a company name search in Cardiff, you may need:
Proposed company name
Business entity type (Ltd, LLP, Partnership, etc.)
Jurisdiction (Cardiff / UK)
Owner or shareholder details (if applicable)
Business description
A “high probability” result means your proposed company name is likely to be available, but further checks are recommended. This is why our detailed Cardiff Company Name Search Report includes both identical and similar names for clarity.
Certain words are restricted under UK law (e.g., “bank,” “insurance,” “government”). If you want to use them, you’ll need special approval from regulatory bodies. We guide you through this process if your Cardiff business requires such terms