Securities and Exchange Board of India Eases Rules for Employee Ownership Plans

The Securities and Exchange Board of India (SEBI) has liberalized rules for traded companies to acquire their own shares under employee stock ownership plans. Until now, companies could not make secondary market purchases to buy shares for employee ownership plans through trusts. SEBI was concerned companies were using these trusts to provide market support for their shares. The new rules allow for ownership trusts to buy back shares for up to 2% of paid-in capital per year, provided shares held by other employee benefit plans do not exceed 10% of all shares. Companies must get approval from shareholders, follow disclosure rules, and not sell shares in the trusts for at least six months after purchase.

Ownership plans in India are often called "ESOPs" but generally are stock option plans. They are particularly popular in technology companies, although broad-based grants are given by only a minority of the firms.