First, to begin with, an employee stock ownership plan, it is important to establish a trust fund. Companies may place newly issued shares, borrow money to buy company shares, or fund the trust with cash to buy company shares. Meanwhile, employees are given the right for growing a number of shares, which increase over time depending on the length of their employment. Henceforth, these shares are sold when an employee gets retired or is terminated from the firm, and the employee receives the cash value of their shares.
Why is it necessary to review the plan?
A review of the Plan is necessary to determine which goals have been met, whether changes need to be made, and what new direction your company might want to take.
Plan Documentation Review and Modification to Ensure Compliance. The company reviews the existing ESOP schemes, grant letters, past compliances, enabling resolutions, employee communications, and statutory filings to advise on any gaps in legal compliances under applicable laws and suggest changes to schemes to bring them in line with the objectives of the company. Privately held the unlisted companies, in particular, rely on our advice on ESOP safeguards. We also assist you with scheme modifications to improve efficacy.
Non-compliance with Section 19: Lending to trust for the purpose of buying shares of holding company for ESOP may result in the indirect holding of equity shares of the holding company, which is prohibited under Section 19 of the Act. There is no certainty.