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54 Issue of sweat equity shares.

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CHAPTER IV

Section 54 of Companies Act 2013

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

[1] In case of specified IFSC private company clause (c) of sub section (1) shall not apply vide Notification No.G.S.R.9(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.

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.

[1] Inserted vide Notification No.G.S.R.9(E) dated 04.01.2017.

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Short Notes:

  • This section came into force from April 1, 2014
  • It seeks to provide that on fulfilling certain conditions, a company may issue sweat equity shares of a class of shares already issued.
  • The rights, limitations, restrictions and provisions applicable to equity shares shall be applicable to sweat equity shares and holders of such shares rank pari passu with other equity shareholders.

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