Employees play an important role in the growth and development of a company. They are a driving force that keeps the company going. The efforts and diligence of employees is the key component for the expansion and success of a business.
Published on 23 March 2023
Companies also tend to show their appreciation for their outstanding employees through various rewards. These rewards act as a method of appreciation and are a source of motivation for the employees to further improve the operations and take the company to new heights.
One of the ways companies appreciate their employees is by providing them with sweat equity shares. These are rewards that the company gives to the employees as a mark of recognition for the hard work that the employee has put in for the company.
Now, let us understand sweat equity shares meaning in detail.
These are the shares of the company that the company offers the employees as a reward or appreciation for the employee’s exceptional contribution. Sweat equity shares are a part of the profit of the company. The company invests in employees, and the contribution of the employees towards the company’s success is a return on this investment. Similarly, the employees put in hard work and dedication for the company, and these shares are a return on investment for them.
Now that you understand the sweat equity meaning, here is all the other information in detail.
According to the Companies Act, Section 2, of 2013, sweat equity shares mean the shares that the company gives to certain employees for the following reasons:
The category of employees to whom sweat equity shares are issued include:
The issuance of sweat equity shares is regulated as per the Companies Act, 2013 and Companies Act, 1956.
There are a few conditions that govern the value of sweat equity shares that a company can issue:
Thus, sweat equity shares are provided by the company to the directors or employees who have contributed remarkably to the growth of the company. These are issued when the employee has provided technical know-how, secured intellectual property rights, or has added value to the company.