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Economic Times
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Explained: Sebi’s new Esop norms for IPO-bound startup founders
- Sebi approved measures to ease doing business, including relaxed Esop norms for IPO-bound startup founders.
- Founders can now hold Esops post listing, unlike the previous rule where they had to liquidate them after being classified as 'promoters' in IPO documents.
- Old rules prevented founders from benefiting from long-term growth by selling their holdings early, impacting them negatively.
- Startups often compensate founders with Esops in early stages to align their interests with shareholders, but equity stake dilution posed challenges.
- Sebi's new rule allows founders with Esops from at least a year prior to DRHP filing to retain benefits, addressing ambiguity and unfairness.
- The old regulation required forgoing Esop benefits once a shareholder was classified as a promoter, which Sebi found unjustified.
- The change is aimed at ensuring founders can benefit from their company's growth post IPO through stock options.
- Many founders considered the previous rule as unfair since it forced them to sell holdings early instead of benefiting from future growth.
- The relaxed Esop norms aim to support startup founders in aligning their interests with the company's growth trajectory.
- Sebi's move is part of broader efforts to promote ease of doing business and provide a conducive environment for startups in the capital markets.
- The decision is expected to positively impact startup founders looking to list their companies and retain ownership through Esops.
- This change reflects Sebi's recognition of the challenges faced by founders due to the previous Esop regulations.
- The rule change is in line with efforts to enhance the startup ecosystem and encourage more companies to go public in India.
- Sebi's initiative is seen as a step towards creating a more investor-friendly environment and supporting entrepreneurial endeavors in the country.
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