Companies Act Section 54 — Issue of sweat equity shares
CHAPTER IV SHARE CAPITAL AND DEBENTURES
Commercial / Corporate
Summary
Sub-section (1) states that, despite what section 53 says, a company may issue sweat equity shares of a class of shares it has already issued, but only if certain conditions are met.
Under clause (a) of sub-section (1), the issue must be authorised by a special resolution passed by the company.
Under clause (b) of sub-section (1), that resolution must specify the number of shares, the current market price, any consideration, and the class or classes of directors or employees to whom the shares are to be issued.
Under clause (d) of sub-section (1), if the company's equity shares are listed on a recognised stock exchange, the sweat equity shares must be issued according to the regulations made by the Securities and Exchange Board in this regard. If the shares are not listed, the sweat equity shares must be issued according to such rules as may be prescribed.
Sub-section (2) says that the rights, limitations, restrictions, and provisions that currently apply to equity shares will also apply to the sweat equity shares issued under this section, and the holders of these shares will rank equally with other equity shareholders.
Official Text
(1) Notwithstanding anything contained in section 53, a company may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely:—
(a) the issue is authorised by a special resolution passed by the company;
(b) the resolution specifies the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued; 1* * * * *
(d) where the equity shares of the company are listed on a recognised stock exchange, the sweat equity shares are issued in accordance with the regulations made by the Securities and Exchange Board in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed.
(2) The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.