The Securities and Exchange Board of India (SEBI), in the year 1999, had framed "Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999" (hereinafter "existing guidelines") which provides for the stock based incentive schemes to employees. On 28th October, 2014, SEBI has notified Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014,
The provisions of which shall be applicable on the following:
i.    employee stock option schemes;
ii.    employee stock purchase schemes;
iii.    stock appreciation rights schemes;
iv.    general employee benefits schemes; and
v.    retirement benefit schemes consequent upon which the existing guidelines have been repealed.
The Regulations has been framed by the market regulator SEBI in order to bring into its wide ambit, all the shares related schemes issued by the companies for the benefit of its employees.
Applicability
As per the Regulation 1 (4), of the Regulations shall be applicable to those companies whose shares are listed on any recognised stock exchange in India, and which fulfills the following:
i.    has a scheme for direct or indirect benefit of employees;
ii.    involves dealing in or subscribing to or purchasing securities of the company, directly or indirectly; and
iii.    which satisfies, directly or indirectly, any one of the following conditions:
a. the scheme is set up by the company or any other company in its group;
b. the scheme is funded or guaranteed by the company or any other company in its group;
c. the scheme is controlled or managed by the company or any other company in its group.
As far as applicability of these regulations are concerned, Regulation 1(5) provides that these Regulations shall not be applicable to shares issued to employees in compliance with the provisions pertaining to preferential allotment as specified in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.
Further, it has been clarified that the provisions pertaining to preferential allotment as specified in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 shall not be applicable in case of a company issuing new shares in pursuance and compliance of these Regulations.
1. Employee : "Employee" means,
i.    a permanent employee of the company who has been working in India or outside India; or
ii.    a director of the company, whether a whole time director or not but excluding an independent director; or
iii.    an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company or of an associate company but does not include—
(a) an employee who is a promoter or a person belonging to the promoter group; or
(b) a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten percent of the outstanding equity shares of the company.
2. Employee Stock Option Scheme or ESOS (Regulation 2(g)): ESOS means a scheme under which a company grants employee stock option directly or through a trust.
3. Employee Stock Purchase Scheme or ESPS (Regulation 2(h)): ESPS means a scheme under which a company offers shares to employees, as part of public issue or otherwise, or through a trust where the trust may undertake secondary acquisition for the purposes of the scheme.
4. General Employee Benefits Scheme or GEBS(Regulation 2(l)): GEBS means any scheme of a company framed in accordance with these regulations, dealing in shares of the company or the shares of its listed holding company, for the purpose of employee welfare including healthcare benefits, hospital care or benefits, or benefits in the event of sickness, accident, disability, death or scholarship funds, or such other benefit as specified by such company.