CHECKLIST FOR UNLISTED COMPANY THOSE ISSUE OF SWEAT EQUITY SHARES

 

CHECKLIST  FOR UNLISTED COMPANY THOSE  ISSUE OF SWEAT EQUITY SHARES
S.NO.	Procedures
1	Sweat Equity is covered by Sec. 79A of the Companies Act – 1956.
2	It Can be issued to Directors or Employees of the Company at a discount or for consideration for other than cash
3	The provision of Sweat Equity under Sec. 79A is not applicable to Foreign Companies and Body Corporate as defined under Sec. 2(7) of the Companies Act – 1956.
4	Sweat Equity can be issued of a class of shares already issued.
5	Subsidiary of an Indian Company incorporated outside India is within the ambit of Sec. 79A.
6	If the Shares are issued at discount, the maximum rate of discount should be authorised through an ordinary resolution.
7	The issue of Sweat Equity is subject to approval of share holders through a special resolution.
8	Atleast one year should have been elapsed from the date of entitlement to commence the business to issue Sweat Equity shares
9	The shares to be allotted is to be valued and the valuation should be placed before the share holder’s meeting
10	The Company should not issue Sweat Equity shares for more than 15% of total paid up equity capital in a year or value of 5 crores of rupees, whichever is higher, except with the approval of the Central Government.
11	Approval of share holders by way of separate resolution in the general meeting is required in case of grant of shares to identified employees and promoter’s, during any one year equal to or exceeding 1% of issued capital of the Company at the time of grant of the sweat equity shares.
12	Separate register of Sweat Equity shares has to br maintained
13	Details of Sweat Equity Shares are to be reported in the Director’s Report
14	If the Shares are allotted for consideration for other than cash, the valuation of the intellectual property or of the know how or any other value addition to consideration at which the sweat equities are issued should be carried out by an independent valuer.
15
	a	The Sweat Equity is issued to any director or manager and,
	b	They are issued for non cash consideration, which does not take the form of an asset which can be carried in the balance sheet of the company in accordance the relevant accounting standards.
16	There will be lock in period of 3 years from the date of allotment of sweat equity to employees and directors.
17	A certificate is required to be placed before the AGM from the Auditor’s of the Company or from a practicing Company Secretary stating that the allotment of sweat equity is in accordance with the resolution of the Company in general meeting and the rules.

 

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