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Taxvice

ESOP Advisory

ESOP Advisory: Turning Employees into Owners and Driving Business Growth

There is high competition among businesses for attracting a talent pool, retaining good working corporate professionals, and motivating leaders to achieve business goals. Traditional compensation often overlooks long-term business goals. To bridge the gap Employee Stock Options Plans (ESOP) are useful. This is the most conventional and powerful tool at present times and is very efficient to manage with the right expertise.

  • Are you a startup founder looking to save resources and, at the same time, retain your top senior talent?
  • Do you require long-term loyalty?
  • Do you want to get into the nitty gritty of legal, tax, and valuation implications?
  • Is the thought of SEBI regulations and company recognition a tedious process for you?
  • Are you worried about the idea of double taxation for employees or sales?
    If all these thoughts continuously haunt you, hire our ESOP expert advisory services.

    TaxVice advisors are skilled in implementing the formation of ESOP, going beyond legally structured policies, and helping companies seamlessly manage the ESOP scheme for the right talent management system. ESOP policies designed by Tax Vice are compliant, practical, and favorable for both your employees and investors.

    • The ESOP Conundrum: A Strategic Tool with Complex Layers

    The implementation of ESOP in India could bring up certain hurdles.

    While making a blueprint of the ESOP structure, various factors must be considered, like pool size, vesting schedules, exercise price, and eligibility criteria. The company’s stage does matter a lot, whether it's a startup or a mature company.

    The ESOP is governed and regulated by the Companies Act, 2013 and Rule 12 of the Companies (share capital and Debentures) Rules, 2014 (for unlisted companies). For listed companies, there are implementations of SEBI ( Share Based Employee Benefits and sweat equity regulation. Compliance could be critical in such situations for scheme disclosures

    The ESOP is governed and regulated by the Companies Act, 2013 and Rule 12 of the Companies (share capital and Debentures) Rules, 2014 (for unlisted companies). For listed companies, there are implementations of SEBI ( Share Based Employee Benefits and sweat equity regulation. Compliance could be critical in such situations for scheme disclosures

    The ESOP is governed and regulated by the Companies Act, 2013 and Rule 12 of the Companies (share capital and Debentures) Rules, 2014 (for unlisted companies). For listed companies, there are implementations of SEBI ( Share Based Employee Benefits and sweat equity regulation. Compliance could be critical in such situations for scheme disclosures

    It becomes a painstaking task to determine the Fair market value of shares in unlisted companies. If there is inappropriate valuation, then it could lead to tax issues and disputes.

    At exercise There are two stages of ESOPs, especially in countries like India.

    The difference between the fair price value on the exercise date and the exercise price is also defined as “Perquisite” and taxed as salary income at the employee’s slab rate.

     If there is any gain on the sale price over the FMV based on the exercise date, it is taxed as Capital gains (short-term or long-term) that truly depend on the holding period. It also checks whether the shares are listed or unlisted. It could later become a financial burden for employees if they are not managed well.

    There are specific accounting implications in ESOPs under Ind AS 102 (share-based payment), inclusive of fair value of options over the vesting period, that could have a major impact on a company's profit and loss statement.

    Our vigilance on the ESOP Pool and management of dilution of existing shareholder equity allows easy future grants. Our design ESOP allows you to optimize your cap table, which is crucial for fundraising and investor relations.

    Our ESOPs implementation effectively communicates the value, terms, and other tax implications. This step ensures understanding, appreciation, and motivation from the employees.

    Our ESOP structure has easily allowed for the tracking of grants, vesting, exercises, and the management of employee data accurately over the years. It can be marked as a significant administrative challenge.

    Our Solution: Comprehensive ESOP Advisory for Strategic Empowerment

    AT Tax Vice, we offer end-to-end ESOP advice that simplifies complex issues. By trusting us, the employees can get robust compliance solutions and the satisfaction of unlocking the true potential of employee ownership. Our approach includes legal, tax, valuation, and other administrative aspects.

    Here’s how we become your indispensable ESOP partner:

    1. Strategic ESOP Scheme Design

    • We eliminate the uncertainty of your optimal ESOP structure that meets with your unique business notion and talent goals.
    • Whether you are mature or a startup, our advisors closely work with you to plan and design a customized ESOP scheme. Multiple factors consideration, including compaincludingchmarks, fund rounds, talent acquisition strategies, and any other aspects. Our esive support also includes advising the pool size, vesting schedules (time-based vs performance-based), exercise price, and other eligible criteria.

    2. Legal Drafting & Documentation

    • We ensure your ESOP scheme is compliant legally and robust. The team of Tax Vice renders services for drafting comprehensive policies of ESOP, grant letters, and bringing up mandatory resolutions (Board and Shareholder special resolution). During the process, there is strict adherence to the Companies Act, SEBI regulations (if applicable), and other relevant laws. Our Tax Vice advisory even guides the regulatory approval process( e.g., filing MGT-14 with ROC).

    3. ESOP Valuation (Fair Market Value Determination)

    • Our services resolve the complexity and mandatory prerequisites of accurately valuing unlisted shares for the purpose of tax and accounting. Our services: Based on the fair market value, we provide independent and legally compliant valuation services for your ESOPs. These policies work wonders in critical stages like grants or exercises using prescribed methodologies.

    4. Taxation Advisory (Company & Employee)

    • We render services to navigate tax implications for both the company and its hired employees. We use our years of experience to guide the tax treatment of ESOPs. Our array of services includes expense recognition and tax deduction of the said perquisite value. To employees, we offer services such as perquisite tax at exercise and capital gains tax at sale. We are the best advisors to offer services for potential deferral benefits for DPIIT-recognised startups and curating strategies that optimize employee tax burdens.

    5. ESOP Accounting & Financial Reporting

    • We ensure correct treatment for accounts as per Ind AS 102 and provide accurate financial reporting.
    • We guide you with the right accounting recognition as per the ESOP expenses and ensure compliance with Ind AS 102. We help structure relevant disclosures for your financial statements that give audits and investor transparency.

    6. Cap Table Management & Dilution Analysis

    • We simplify the thing by keeping up a track record of equity dilution. We also brace the impact on existing shareholders. Our reports are beneficial for future funding rounds. We bring in the perfect blueprint that impacts your ESOP on your capitalization table. Our precision and detailing also analyze potential dilution scenarios and provide insight into how to manage your equity structure effectively.

    7. Employee Communication & Education

    • We build transparency by ensuring employees understand the value and aesthetics of ESOPs.
    • With us, you can be totally reliant on developing clear, easy-to-understand communication materials that will have FAQS presentations. The content will be relatable to the ESOP scheme, benefits, vesting, exercise, processes, and tax implications.

    8. Ongoing ESOP Administration Support

    • We lessen your continuous administrative burden of managing grants, vesting, exercises, and record-keeping.
    • Allow us to render our expertise and give robust administrative support, which will include tracking, employee data, vesting schedules, option exercise management, and the generation of other reports that are precise for compliance and internal review.

    Benefits That Drive Sustainable Business Growth

    Joining hands with TaxVice for your ESOP advisory is like fueling fuel to your scalable growth. We bring to you endless benefits of:-

    • Best of Talent Attraction and Retention: Our designed ESOP policies are perfect and apt for creating a perfect equity incentive system.
    • Synchronization of employee and company goals: To bring in a thought of value creation, the efforts of the employees are linked with the company's financial performance. This step works as a ladder in transforming employees into owners.
    • Efficient tax ESOP structures: Throughout the complex tax rules, our guidelines help both companies and working professionals gain benefits from the tax-efficient structures of ESOP.
    • Law Abiding and Compliant policies: Our Structured ESOP minimizes the legal and regulatory risks. We ensure that the policies are compliant with the latest standards.
    • Meticulously Planned ESOP Scheme for Fundraising Our well-structured ESOP solutions easily allow you to showcase thoughtful talent management and governance.
    • Reducing the administrative burdens: Other areas require a great amount of focus. The administration amongst the internal teams
    • Simplified Administration: Reduce the administrative burden on your internal teams, freeing them to focus on core HR and business functions.
    • Early detection of accounting implications: Though in many ways our well-equipped solutions are helping, this would create a great impact on the business if the accounting implications are done at an early stage. Our services are apt to advise you on the impact of ESOPs on your financials and shareholder equity.

    Why Choose TaxVice for Your ESOP Advisory?

    Our ESOP advisory services are beneficial for all business verticals. From startups and limited companies to stock-listed companies, we offer the best ESOP advisory. We are a one-stop solution for all your needs and have multidisciplinary apt for every ESOP Service.

    • Experience and expertise:We offer an array of services that are comprised of corporate law, tax valuation, and ethical and practical ESOP design and implementation.
    • Understanding your business needs first: We understand the terms that one solution doesn't seem to fit all. We make a note of unique strengths and weaknesses for startups or high-growth companies. Our meticulously designed ESOP is agile and scalable.
    • Practical advice as per today's challenging times: Our ESOP guidelines are designed with the best of the industrial standards in mind and ensure that they are up to the mark of industrial standards.
    • Competitive and Compliant at all times: Our compliance experts keep a strict watch on the changing trends and update the same ESOP scheme, which minimizes the risk of legalities and dissolution for the companies. Our policies are compliant with modern trends and industrial standards.
    • Transparent and easy communication policy: In umpteen ways, we help simplify the complex ESOP policies that could be beneficial for both management and employees.

    Are you ready to make the most of this powerful tool? Get in touch with us today by filling out our contact form. We would be obliged to give you a free consultation. We welcome you to the world of infinite possibilities.

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