New Update
The Ministry of Corporate Affairs (MCA) allows the start-ups to issue sweat equity shares not exceeding 50% of its paid-up capital. Within 5 years of incorporation or registration.
Now Start-ups can issue equity shares to their employees for up to 10 years from the date of their incorporation or registration. This will give a big relief to new start-ups.
What is sweat equity shares?
Sweat equity is those shares which usually issued by start-ups to their directors or employees for any know-how or intellectual property or value addition services provided by them. These shares were issued for considerations other than cash or even at a discount.
Benefit to employees
This move of Ministry of corporate Affairs will helps start-ups to provide better incentives to their staff and retains human resources.
Because of economic slowdown due to Covid-19 this incentive by the Ministry of Corporate Affairs (MCA) might push start-ups valuations back by up to few years, this additional of 5year will also improve the potential of start-ups to attract new talent and retain existing talent by offering them sweat equity shares.
