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The Companies Act, 2013

Chapter IV - Share Capital And Debenture (43-72)

Section 54- Issue of sweat equity shares.

[Notification Date: 26.03.2014; Effective from:01.04.2014]

 Section 54- Issue of sweat equity shares. [Corresponds to Section 79A of the Companies Act,1956]; [Relevant Rule: 8 of The Companies (Share Capital and Debentures) Rules, 2014]

(1) Notwithstanding anything contained in section 53, a company may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely:—

(a) the issue is authorised by a special resolution passed by the company;

(b) the resolution specifies the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued;

(c) not less than one year has, at the date of such issue, elapsed since the date on which the company had commenced business; and

Clause (c) of Section 54 shall not apply to the unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of  India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006 -Notification G.S.R. 08(E) dated 04.01.2017]

(d) where the equity shares of the company are listed on a recognised stock exchange, the sweat equity shares are issued in accordance with the regulations made by the Securities and Exchange Board in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed - [Rule 8].

(2) The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.