Apr 29, 2024Offer for Sale to Employees through Stock Exchange Mechanism
SEBI, by way of a Circular dated January 23, 2024, has introduced a new framework for offer for sale (‘OFS’) of shares to employees through the stock exchange mechanism. This is in addition to the existing procedure of OFS to employees by promoters of eligible companies, which happens outside the stock exchange mechanism, in accordance with the Master Circular dated October 16, 2023, issued by SEBI. Following are the key procedural steps involved in OFS of shares to employees through the stock exchange mechanism:
i. OFS to employees will be on T+1 day under a new ‘Employee’ category along with the ‘Retail’ category;
ii. Employees can bid under the ‘Employee’ category as well as other categories, as per the applicable limits. However, the bid book for the ‘Employee’ category is required to be segregated from the ‘Retail’ category book for allotment;
iii. Certain number of shares are required to be reserved for the employees, and it is also required to be stated in the OFS notice to the stock exchanges;
iv. The floor price of the ‘Retail’ category is required to be disclosed to the participants in the ‘Employee’ category;
v. Employees can bid during trading hours on T+1 day only and are required to place bids only at the cut-off price of T+1 day. Bids for ‘Employee’ category will not be displayed on the stock exchange website;
vi. The maximum bid amount is INR 500,000 (approx. US$ 6000), and each employee is eligible for allotment of equity shares up to INR 200,000 (approx. US$ 2400). However, in case of an under-subscription in the ‘Employee’ category, the unsubscribed portion may be allotted to those employees whose bid amount is greater than INR 200,000 (approx. US$ 2400) on a proportionate basis for a value in excess of INR 200,000 (approx. US$ 2400) subject to the total allotment to an employee not exceeding INR 500,000 (approx. US$ 6000); and
vii. Employees are required to pay upfront to the extent of 100 percent of the order value in cash or cash equivalents.
The provisions of the Circular are effective as of February 22, 2024.