India: Market regulator Sebi on Monday extended the deadline for listed companies to comply with norms that bar employee benefit schemes and trusts from buying shares of their own firms from the secondary market, to December 31.
Sebi has also provided clarification on applicability of these norms besides directing companies to make additional disclosures in this regard.
The earlier deadline for these norms, aimed at curbing manipulative trading in shares of companies, was till June 30 this year.
Extending the deadline till December 31, the Securities and Exchange Board of India (Sebi) in a circular on Monday said the norms would be applicable to all employee benefit schemes involving the securities of the company provided those schemes are set up, managed or financed by the company directly or indirectly.
Among others, companies which have direct or indirect control over the affairs of the scheme or the trust/agency managing the scheme, would have to comply with the rules.
Sebi said that further grant of options from January 17, when the circular regarding amendments to norms on Employee Stock Option Scheme (ESOS) and Employee Stock Purchase Scheme (ESPS) was issued, should be strictly in accordance with Sebi rules.
Besides, companies are required to disclose details of benefits granted or shares allotted in the past up to January 17 with regard to employee benefit schemes if they are not in alignment with existing norms. This has to be provided to the exchanges by June 30.
Information pertaining to the quarter ended March 31 shall also be disclosed along with the quarter ending June 30, it said.
Sebi’s crackdown on unregulated staff welfare schemes and trusts last year came amid concerns that some companies may be funding these schemes to deal in their own securities with an aim to manipulate the share price by engaging into fraudulent and unfair trade practices.
The regulations had prohibited the companies from buying their own shares, unless it is consequent to reduction of capital and for certain regulatory requirements.
As per Sebi norms, ESOS/ESPS Trusts can only distribute options/shares to its employees issued by the company. Even under ESPS, the shares have to be issued by the company through a public issue or related methods.