Annexure : Scheme for issue of ADR/GDR Linked Stock Option for
employees of software companies in India
ANNEXURE
Scheme for issue of ADR/GDR Linked Stock Option
for employees of software companies in India
- A software company which has already floated ADR/GDR or a company which
is proposing to float ADR/GDR would be entitled to issue ADR/GDR Linked
Stock Options to its employees.
A software company which proposes to issue ADR/GDR linked stock option to
its employees should clearly include such proposal as part of its
application for ADRs/GDRs. While Government of India, Ministry of Finance,
Department of Economic Affairs, approval will be for total issue size
inclusive of stock option, the ADRs/GDRs earmarked for the employees up to
the specified limit will be issued by the company as and when an employee
exercises his stock option. Accordingly, the company shall not exceed the
approved level of ADRs/GDRs to be issued by it at any point of time.
In the case of software companies which have already issued ADRs/GDRs, such
companies may seek permission for issue of stock options for existing
ADR/GDR issue, observing the general parameters of the guidelines.
- The scheme would be available to listed and unlisted software Indian
companies which fulfil the performance track record eligibility and other
requirements under ADR/GDR guidelines of Government of India.
- A software company would be defined as a company engaged in
manufacture or production of software whose turnover from software
activities is not less than 80 per cent.
- A software company applying to Government of India for issue of ADR/GDR
linked stock options shall be required to submit relevant documents
certified by a Chartered Accountant, establishing that they are a software
company conforming to the stipulation indicated above. The relevant
documents shall also be submitted to Reserve Bank while applying for
permission for remittances of foreign exchange for acquisition of ADRs/GDRs
in exercise of the stock option.
- The stock option shall be available to non-resident and resident
permanent employees (including Indian and overseas working directors) of the
company. The stock options shall not be available to the promoters and their
relatives (as defined under the Companies Act).
- The eligible employees can remit up to U.S.$ 50,000 in a block of five
years for acquisition of ADRs/GDRs. Upon liquidation of ADR/GDR holdings the
proceeds should be repatriated to India unless permission from Reserve Bank
is obtained for its retention or use abroad.
- Issue of stock options shall require a special resolution as applicable
for preferential allotment of shares. The allotment of stock options shall
be done by a Committee of the Board of Directors of the company. The
Committee of Directors shall have a minimum of two non executive members of
the Board as its members.
- The issuing company would be entitled to issue options not exceeding 10%
of its issued and paid up equity capital.
- The stock options may be issued at a discount of not more than 10% to
the market price prevailing at the time of the issue of the stock option.
- While ADRs/GDRs acquired in exercise of the stock option shall be freely
transferable, the stock options themselves shall be non-transferable.
- Full disclosure should be made in the Directors Report or in an Annexure
to the Directors Report, of the details of the stock option scheme by the
company.
- ADRs/GDRs acquired on exercise of stock option would be eligible
for concessional tax treatment under 115AC of Income-tax Act, 1961.
(Necessary amendments under Section 115AC of the Income-tax Act, 1961 shall
be notified by the Government of India, Ministry of Finance, Department of
Revenue, separately.)