ESOP v/s Sweat Equity

​ Requires a vesting period before exercising

• ESOPs
• SWEAT EQUITY

Given in exchange for intellectual property or services​

• SWEAT EQUITY
• ESOPS

Typically issued to retain and reward employees​

• ESOPS
• SWEAT EQUITY

Often used as a form of compensation for startup founders​

• ESOPS

• SWEAT EQUITY

Often associated with the contribution of time and effort rather than capital

• SWEAT EQUITY

• ESOPS

ESOPs generally come with a:

• Dividend payment clause

• Loan recovery clause

• Vesting period

• Right issue agreement

Who approves the issue of Sweat Equity Shares?

• Board resolution only

• Special resolution by shareholders

• Registrar of Companies

• Ministry of Finance

Which of the following is a key feature of ESOPs

• Shares issued immediately on joining

• No vesting or lock-in period

• Employees receive the right to buy shares in the future

• Given to external consultants only