PQR Ltd. is a pharmaceutical company, whose equity shares are listed on BSE. Company management wish to issue sweat equity shares in accordance with provisions of the Companies Act, 2013. As a company secretary of PQR Lt

Section 54 of the Companies Act, 2013 inter alia prescribed that where the equity shares of the company are listed on a recognised stock exchange, the sweat equity shares are issued in accordance with the regulations made by the SEBI in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed. In the given case, PQR Ltd. is a pharmaceutical company, whose shares are listed on BSE. Therefore, the company is required to comply with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. Maximum quantum of sweat equity shares: In accordance with Regulation 31 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, a company shall not issue sweat equity shares for more than fifteen percent of the existing paid-up equity share capital in a year. However, the issuance of sweat equity shares in the company shall not exceed twenty five percent of the paid-up equity share capital of the company at any time. Further, a company listed on Innovators Growth Platform shall be permitted to issue not more than fifteen percent of the paid-up equity share capital in a financial year subject to overall limit not exceeding fifty percent of the paid-up equity share capital of the company, up to ten years from the date of its incorporation or registration. Pricing of sweat equity shares: In accordance with Regulation 33 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, the price of sweat equity shares shall be determined in accordance with the pricing requirements stipulated for a preferential issue to a person other than a qualified institutional buyer under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. Ceiling on managerial remunerations: In accordance with Regulation 37 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, the amount of sweat equity shares issued shall be treated as part of managerial remuneration for the purpose of sections 196, 197 and other applicable provisions of the Companies Act, 2013, if the following conditions are fulfilled: the sweat equity shares are issued to any director or manager; and the sweat equity shares are issued for non-cash consideration, which does not take the form of an asset which can be carried to the balance sheet of the company in accordance with the relevant accounting standards.