In today’s globalised arena, where the corporate sector is also widening its arms and becoming borderless, it has become the need of the corporate houses to not only cater the needs of their domestic employees but also extend benefits to the employees who are resident outside India, whether be it the employees of subsidiary or holding company. ESOPs and Sweat Equity have been recognised as the most effective form of rewarding employees, both domestically and globally.

The lawmakers have also kept pace with the requirements of dynamic business world, and have accordingly recognised and ruled out governing provisions for Employee Benefit Schemes, in relevant statutes, be it Companies Act, 2013, SEBI Regulations and now FEMA.

When it comes to participation of foreign employees in the Employee Stock Option Scheme, such a transaction attracts the applicability of the provisions of Foreign Exchange Management Act. The extant regulations stipulated that an Indian Company, issuing shares under ESOS to the employees overseas has to make sure that the face value of such shares does not exceed 5% of the paid-up capital of the Company. The Indian Company was casted with the responsibility to secure compliances with these conditions and the reporting requirements.