ESOP structuring in Hyderabad.

Equity compensation that actually works

An ESOP is three disciplines in one document: company law, tax and incentive design. The legal frame for unlisted companies is Section 62(1)(b) of the Companies Act 2013 read with Rule 12 of the Share Capital and Debentures Rules — special resolution, scheme terms, eligibility limits (employees and directors, with exclusions for promoters and large shareholders that DPIIT-recognised startups are exempt from for ten years), and disclosure requirements. Around the legal core sit the design choices that determine whether options motivate anyone: pool size, grant philosophy, vesting curves, exercise pricing and what happens on exit or departure.

The tax layer decides whether employees thank you or curse you: options are taxed as a perquisite on exercise at the merchant-banker fair value, and again as capital gains at sale — but eligible startups under Section 80-IAC can defer the perquisite tax to the earliest of five years, sale, or the employee's departure. We design schemes that capture every available relief, document grants cleanly, and keep the cap table coherent for your next financing round.

What we handle

• Scheme architecture: ESOP scheme drafting under Section 62(1)(b) and Rule 12 — eligibility, pool, vesting, exercise, lapse and exit provisions in one coherent rulebook.
• Pool & dilution planning: Pool sizing (typically 8-15%) modelled against hiring plans and future rounds — with investor expectations anticipated.
• Approvals & compliance: Special resolutions, MGT-14 filings, register maintenance and the disclosures that keep the scheme valid through diligence.
• Grant documentation: Grant letters, vesting schedules, exercise procedures and acceptance records — the paper trail that prevents employee disputes.
• Tax optimisation: Perquisite valuation coordination, the Section 80-IAC startup deferral where eligible, and exit-event tax planning for employees and the company.
• Alternatives & liquidity: Phantom stock and SARs where real equity does not fit, trust-route structures, and buyback programmes that give options real value.