On June 29, 2018, in the attached informal guidance issued by the Securities and Exchange Board of India (“SEBI”), the issue discussed was whether a trust set up by a listed company for conferring welfare benefits to its employees would fall within the purview of SEBI (Share Based Employee Benefits) Regulations, 2014 (“Regulations”). The trust holds shares of the listed company.
What sets the trust apart from typical ESOP trusts is that: (i) the trust independently runs and administers welfare schemes for employees such as scholarships, medical assistance etc; (ii) none of the schemes provide for any kind of share based benefits to its employees; and (iii) the trust does not propose to acquire any further shares.
In its informal guidance, SEBI stated that as the trust deed stipulates that the trust may for generating a source of income receive securities, the welfare schemes run by the trust involve dealing in securities of the company. Hence, the Regulations would apply to the welfare schemes floated by the trust.
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