XYZ Ltd., an unlisted company, at its Board meeting decides to issue sweat equity shares to its employees at a discount. Some of the directors demand that such shares be issued to directors also for providing their techn

Section 2 (88) defines "sweat equity shares" so as to mean such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called. Therefore, the proposal is valid. In case of an unlisted company, check whether: The issue is authorised by a special resolution passed by the company, ensuring that the special resolution authorising the same is valid for making the allotment within a period of not more than twelve months from the date of passing of the special resolution. Not less than one year has, at the date of such issue, elapsed since the date on which the company had commenced business; The company has not issued sweat equity shares for more than fifteen percent of the existing paid up equity share capital in a year or shares of the issue value of rupees five crores, whichever is higher. Further it is to be ensured that the issuance of sweat equity shares in the Company has not exceeded twenty five percent, of the paid up equity capital of the Company at any time. The company is maintaining Register of Sweat Equity Shares in Form No. SH.3 The Register of Sweat Equity Shares is maintained at the registered office of the company or such other place as the Board may decide. The entries in the register are authenticated by the Company Secretary of the company or by any other person authorized by the Board for the purpose.