Market regulator SEBI has proposed to allow companies to offer stock options to non-permanent employees and non-executive directors of the company. SEBI has floated a consultation paper on the issue based on the recommendation of a working group.

The expert group considered whether there was any need to amend the definition of “employee” to account for contractual employees, “gig workers” and employees on probation or deputation.In the present market scenario, companies may hire employees on a non-permanent basis, who, while exclusively working for such companies may not be “permanent” employees on the payroll of such companies.

Definition of employee

“The expert group also took note of other categories of persons who may provide services to the company, such as contractual or part-workers or gig workers that may not be “employed” by the company (such as delivery services, transport services, etc., provided to a web-based platform),” SEBI paper stated.

“The expert group took note that keeping in mind the prevalence of such employment practices, non-permanent employees may be considered for eligibility to receive share-based employee benefits under the SBEB Regulations,” it added.

The expert group further deliberated upon the restriction upon independent directors from being eligible to be issued stock options. “Taking into consideration that SEBI is currently looking into this topic in consultation with the MCA, the expect group was of the view that depending on the outcome of SEBI’s deliberations in this regard, the final decision may be taken and the SBEB Regulations be amended accordingl..”

The expect group was of the view that it is permissible to include a non-executive director (who is not a promoter or member of the promoter group) and such clarification may be included in the regulation.

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