Securities and Exchange Board of India (SEBI) vide Circular No. CIR/CFD/DIL/3/2013 dated 17th January, 2013 has amended its Employee Stock Option Scheme (ESOS) and Employee Stock Purchase Scheme (ESPS) Guidelines, 1999 by prohibiting the listed entities from framing any employee benefit schemes involving acquisition of own securities from the secondary market.

This move has been taken by SEBI in order to prevent companies from dealing in its own securities, through such schemes with the objective of manipulating its share price by engaging in fraudulent and unfair trade practices

The companies have been framing their own employees benefit schemes wherein Trusts have been set up to deal in their own securities in the secondary market, which was not envisaged within the purview of SEBI (ESOS and ESPS) Guidelines 1999. SEBI has further clarified that the companies, which have already framed and implemented, before the date of this circular, any employee benefit scheme involving dealing in the securities of the company, which is not in accordance with SEBI (ESOS and ESPS) Guidelines, will be required to meet the following requirement:

  1. Inform the details of their schemes to the Stock Exchanges within 30 days from the date of this circular, in the specified format and to disseminate the said information on their website;
  2. To align any existing employee benefit schemes with SEBI (ESOS and ESPS) Guidelines on or before 30th June 2013. In order to give effect to the above amendments, Clause 35C has been inserted after Clause 35B in the Equity Listing Agreement. The amendments will be implemented with immediate effect.