ARORA PREM AND ASSOCIATESDifference between Sweat Equity Shares and Employees Stock Option Scheme
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Difference between Sweat Equity Shares and Employees Stock Option Scheme
Following are the main points of distinction between sweat equity shares & ESOS:
| Basis of Distinction | Sweat Equity Shares | ESOS |
| Meaning | Sweat Equity Shares means equity shares issued by a company to its directors or employees at a discount or for consideration, other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called. | Employees Stock option means the option given to the whole-time directors, officers or employees of a company, which gives such directors, officers or employees the benefit or right to purchase or subscribe at a future date, the securities offered by the company at a pre-determined price. |
| Issue | Sweat Equity shares can be issued at discounted price or free for know-how and services to the Company. | Employee Stock option can be issued with conversion right at a pre-determined price. The issue price can be less than the intrinsic value of the shares. |
| Consideration | The consideration can be partly cash and partly IPRs/value addition or fully non-cash consideration. | The consideration has to be paid in cash. |
| Lock-in-period | Sweat equity shares have compulsory lock-in-period of 3 years. | Lock-in-period is not specified for the ESOS. |
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