Sebi Eases ESOP Rules For Startup Founders, New Move Helps IPO-Bound Companies Retain Benefits

Mumbai: India’s market regulator Sebi has changed its rules about ESOPs (Employee Stock Option Plans). This is great news for startup founders who are planning to launch an IPO (Initial Public Offering).

Why This Change Matters

Earlier, if a startup founder was seen as a promoter of the company and had ESOPs, they had to give up those ESOPs before the company could go public.

This rule caused problems for many startup founders, because they were losing out on their benefits just before listing the company.

What Has Changed Now?

Now, Sebi says: If a founder or employee who is listed as a promoter or part of the promoter group in the IPO papers has received ESOPs or Stock Appreciation Rights (SARs) at least one year before filing the draft IPO document, they can now keep and use those benefits.

This means startup founders who got stock options before the IPO planning started can continue to hold or exercise them — even if they are marked as promoters.

What Is the Impact?

This is a big relief for startups and their founders. It will help them:

- Keep rewards given for their early work in the company

- Avoid last-minute selling of ESOPs before going public

- Make IPOs smoother and more attractive for founders and employees

It also helps companies that are doing reverse flipping — where they shift their registration from a foreign country back to India — and then plan to go public.

Why Did Sebi Do This?

The change came after Sebi’s board approved a proposal to fix this issue. Many startups and experts had raised concerns that the old rules were unfair to founders.