Equity Compensation In Asia’s Growth Hubs: A Comparative Analysis Of ESOPs In India And Singapore
- IJLLR Journal
- 5 hours ago
- 2 min read
Aashish Barman, Jindal Global Law School, O.P Jindal University.
ABSTRACT
ESOPs have thus been described as “one of the strongest means to realign employee-shareholder interests to produce further innovation and startup- ism”. The paper critically compares the diverse regulatory approaches to ESOP structures in the two growing financial centres, India and Singapore, with regard to the contours within which employee equity is offered.
The approach in India is largely prescriptive in nature, relying on the Companies Act, 2013 and the Securities and Exchange Board of India Regulations. The Indian regime focuses on protecting shareholder interests, transparency and good governance, mandating disclosure and an employee remuneration committee which should consist of two thirds of independent directors. The resultant procedural obligations of compliance and tax implications upon exercise leads to a liquidity crisis.
On the other hand, Singapore has created a milieu providing tax efficiency and flexibility on all fours with the Companies Act, 1967 and the SGX Listing Manual, proving very appealing to investors and multinational companies alike. However, the sheer absence of employee protections, especially on the valuation and liquidity front, in private companies is a major concern.
Also, the problem of insufficient alignment between ESG considerations with ESOP schemes is discussed within the existing legal and policy frameworks. The paper concludes that each of the models on its own is inadequate in meeting the challenges posed by the increasing usage of ESOPs and proposes a strong hybrid of India's transparency and robust governance with the flexibility provided by Singapore that could be considered the model that would challenge any globally existing standard.
Keywords: ESOP, Corporate Governance, Companies Act, SEBI Regulations, SGX Listing Manual, Taxation of ESOPs
