Steps under the Direct route
- Company froms an compensation committee and define the eligibility criteria of ESOPs
- Issue fresh shares for ESOPs.
- After vesting period employee can exercise the option.
- On exercise of an option company issue the shares to the employees.
Steps under the Trust route
- Company forms an employee welfare trust.
- Company grants loan to the trust for subscribing shares.
- Company issues fresh shares to the trust and options to the employees.
- Employee exercises the options.
- Trust transfers the shares to the employee upon receipt of exercise price.
- Trust repays the loan to the company.