Nominated board directors can take part in stock options’ - India, SEBI

Wednesday, August 6, 2008

Nominated board directors can take part in stock options’

Nominated board directors can
take part in stock options’

Mumbai,
Aug. 5 - A director nominated by an institution as its representative
on the board of directors of a company is eligible to participate in
the Employee Stock Option Scheme (ESOS) of the company, SEBI clarified
in a circular on Monday.

This
is provided that the contract or agreement entered into between the
nominating institution and the director specifically provides for
acceptance of ESOS and that a copy of it is filed with the company,
SEBI said.

This
issue was under debate last year when LIC and GIC had sought legal
recourse to restrain their nominee directors on the board of Larsen
& Toubro from dealing in the stock options allotted to them. Their
argument was that the directors were their representatives and could
not deal in stock options in their individual capacity.

Their
nominee directors had stock options worth crores of rupees which they
had secured at a discounted rate of Rs 35 per share while the ruling
market price then was around Rs 1,700.

Currently
an employee of a company (including a director) is eligible to
participate in the ESOS of the company, if such an employee is not a
promoter, does not belong to the promoter group and is not a director,
who either by himself or through his relative or any corporate body
directly or indirectly holds more than 10 per cent of the outstanding
equity shares of the company, SEBI said.

Source:- Business Line