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Sweat Equity Shares

A company issues shares to its employees or directors at a discount or for consideration other than cash for providing know-how or intellectual property. Such shares are called sweat equity shares.

Section 79 A(1) of The Companies Act has laid down the following conditions subject to which sweat equity shares can be issued:

  • The share must belong to a class already issued.
  • The issue must be authorized by a special resolution passed by the company in its general meeting.
  • The resolution must specify the number of shares, current market price, consideration, if any, and the class or classes of employees or directors to whom such shares are to be issued.
  • At least one year must have elapsed since the date on which the company was entitled to commence business.
  • In case of listed companies, the issue must be in accordance with SEBI regulations.

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