ESOP Policy Template
A comprehensive ESOP (Employee Stock Option Plan) policy template for private limited companies under Section 62(1)(b) of the Companies Act 2013, read with Rule 12 of the Companies (Share Capital and Debentures) Rules 2014. Designed for DPIIT-recognised startups and other growth-stage companies.
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Purpose and Definitions
Clear definitions of grant, vesting, exercise, option price, and eligible employee categories. Alignment with Rule 12 terminology.
Vesting Schedule
Standard 4-year vesting with 1-year cliff and monthly vesting thereafter. Provisions for accelerated vesting on acquisition or IPO.
Exercise Provisions
Exercise window, exercise price determination (Rule 11UA FMV), and share delivery mechanism after exercise.
Leavers Policy
Treatment of vested and unvested options for good leavers (resignation after cliff), bad leavers (termination for cause), and death/disability.
Tax and FEMA Provisions
Withholding tax obligations of the company at exercise. FEMA compliance for employees who become non-residents after option grant.
Professional Guidance Note
ESOP schemes require shareholder approval by special resolution and formal registration in the company's share capital records. Engage a Company Secretary to implement the scheme correctly.
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