ABC Limited is a subsidiary company of XYZ Limited. Deepak is working as an executive director in ABC Limited. XYZ Limited passed an ordinary resolution in its general meeting to issue Sweat equity Shares to Deepak for p

According to section 2(88) of the Companies Act, 2013, sweat equity shares means such equity shares issued by company to its directors or employees at a discount or for consideration, other than cash for providing their know how of available rights in the nature of intellectual property rights or value additions, by whatever name called. According to explanation to Rule 8(1) of the Companies (Shares Capital and Debentures) Rules, 2014: For the purpose of this rule the expression "Employee" means- A permanent employee of the company who has been working in India or outside India; A director of the company, whether a whole-time director or not; or An employee or a director as defined in sub clause (a) or (b) above of a subsidiary, in India or outside India, or of a holding company of the company. Further, section 54(1) provides that notwithstanding anything contained in Section 53, a company can issue sweat equity shares of a class of shares already issued, if the issue has been authorised by a special resolution by the company in the general meeting. As per the above provisions of the Companies Act, 2013, the analysis of the objections of Company Secretary of XYZ Limited is as below- Sweat equity shares can be issued to the executive director of ABC Limited which a subsidiary company of XYZ Limited. Hence, the objection of Pankaj is not correct. Special resolution is required to be passed to issue of sweat equity shares. Ordinary resolution is not sufficient. Hence, the objection of Pankaj is correct.