Question

Background tech solutions, a rapidly growing start-up company, faced the challenge of attracting and retaining ‘top talent’ in a competitive market. To address this, the company decided to implement a shares programme aimed at rewarding and incentivising key employees and directors.
Name and explain the type of shares that can be issued by the company.

Answer 1

1. Sweat equity shares can be issued by the company.
2. These are a type of equity share that a company issues to its employees or directors. The shares are issued at a discount or for consideration other than cash. The purpose of issuing sweat equity shares is to motivate employees to work harder and contribute to the company's success.
3. Sweat equity shares can be issued for providing know-how or for making intellectual property rights available.
4. The sweat equity shares issued to employees or directors must be subject to a lockin period of three years from the date of allotment. During the lock-in period, the shares cannot be transferred or sold by the employee or director who has been issued the shares.