The Companies (Amendment) Act, 1999
introduced through section 79A a new type of equity shares called
‘Sweat Equity Shares.
The expression ‘sweat equity shares’ means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions by whatever name called.
The expression ‘sweat equity shares’ means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions by whatever name called.
Notwithstanding anything contained in section 79, which deals with the power of a company to issue shares at a discount, a company may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely:-
(i) the issue of sweat equity shares is authorized by a special resolution passed by the company in the general meeting.
(ii) the resolution specifies the number of shares, current market price, the consideration if any, and the class or classes of directors or employees to whom such equity shares are to be issued.
(iii) not less than one year has, at the time of the issue, elapsed since the date on which the company was entitled to commence business.
(iv) the sweat equity shares of company, whose equity shares are listed on a recognized stock exchange, are issued in accordance with the regulations made by the SEBI in this behalf. But in the case of company whose equity shares are not listed on any recognized stock exchange, the sweat equity shares are issued in accordance with the guidelines as may be prescribed.
All the limitations, restrictions and provisions relating to equity shares are applicable to sweat equity shares also.