Is an employee who is also a promoter of a company eligible to obtain sweat equity shares and employee stock option? Explain.

As per Rule 12 of Companies (Share Capital and Debentures) Rules, 2014, an employee who is also a promoter or person belonging to the promoter group is specifically excluded from obtaining shares issued under ESOP. In case of a start-up company as defined in notification number G.S.R. 180(E) dated 17th February, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India, this condition shall not apply up to five years from the date of its incorporation or registration. However, in case of sweat equity shares, the said exclusion is not specified in the provisions. Thus, an employee who is also a promoter of a company is eligible to get sweat equity shares. Accordingly, the employee who is also promoter of the company is not entitled to get employee stock option subject to above exemption, however he is eligible to obtain the Sweat Equity shares.