ESOP Scheme Under Companies Act: Section 62(1)(b) Control Checklist
An ESOP pool is not legally effective just because a founder says “10% pool”. Employee stock options need scheme approval, grant records, vesting/exercise controls and eventual allotment filings.
For broader context, see the Companies Act, MCA and Startup Compliance Hub.
Legal anchor
Section 62 includes issue of further shares to employees under a scheme of employees' stock option, subject to special resolution passed by the company and prescribed conditions.
For the connected rule, example or next step, see LLP Penalties and Additional Fees: Late Filing Control Checklist.
ESOP lifecycle
| Stage | Control |
|---|---|
| Scheme creation | Board and shareholder approval with scheme terms. |
| Grant | Grant letter, vesting schedule and employee eligibility. |
| Vesting | Track time/performance conditions and lapse. |
| Exercise | Collect exercise application and money/tax support. |
| Allotment | PAS-3, share certificate/register and cap table update. |
For the connected rule, example or next step, see CSR Applicability Under Section 135: Board and Finance Checklist.
Startup diligence checklist
- Define pool, eligible employees and exercise price clearly.
- Maintain grant register and vesting tracker.
- Check tax/payroll treatment separately.
- Avoid promising equity without approved scheme terms.
- Reconcile ESOP pool with fully diluted cap table.
Finin2min warning
Official sources used
This article is intentionally source-limited to official India Code / MCA material. Verify final filing positions with the latest Act, Rules, MCA forms and portal advisories before publishing.
- India Code: Section 62 — Further Issue of Share Capital
- India Code: Section 39 — Allotment of Securities
- India Code: Section 88 — Register of Members etc.
- India Code: Companies Act, 2013 official PDF
FAQs
Section 62 includes issue of shares to employees under employees' stock option scheme.
Yes. Section 62 route refers to special resolution and prescribed conditions.
Options convert into shares only when exercise/allotment process is completed under scheme terms.
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Companies Act & MCA
- Official starting point
- www.mca.gov.in