February 06, 2020

SEBI Okays Share Issuance On Conversion Of Stock Options

[ By Bobby Anthony ]


The Securities & Exchange Board of India (SEBI) has stated that issuing shares after conversion of restricted stock options (RSUs) will be allowed under the buyback regulation in response to a clarification sought by Infosys.

Earlier, Infosys had sought informal guidance from the SEBI about whether it can allot equity shares upon exercise of vested restricted stock options units after completion of the one year vesting period -- June 21, 2020 -- prior to the one year period from the end of the buyback period.

The SEBI stated that buyback regulation restricts further issue of capital for a period of one year from the expiry of the share repurchase program period, except in discharge of its subsisting obligations.

Incidentally, conversion of warrants, stock option schemes, sweat equity or conversion of preference shares or debentures into equity shares comes under what is known as “subsisting obligations”.

“The issuance of shares pursuant to conversion of RSUs would be considered as subsisting obligations... and the applicant (Infosys) may issue the equity shares after the completion of one year vesting period,” the SEBI clarified.

However, this would be subject to compliance of Share Based Employee Benefits (SBEB) Regulations, buyback norms as well as the Companies Act, SEBI added.

The SEBI also stated that its views are expressed with respect to clarification sought in terms of buyback norms and SBEB regulations and are not applicable for any other SEBI regulations.

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