What does 'E' stand for in ESOP?

Employee

The correct answer is option 1- Employee.

'E' stands for Employee in ESOP.

Employees Stock Option Plan (ESOP)- A company may offer option to its employees and employee directors to subscribe shares of the company at lower than its market value or fair value at a future date. It is known as Employees Stock Option Plan (ESOP). It being an option granted by the company, an employee may or may not exercise the right to subscribe. Employees Stock Option Plan falls in the category of Sweat Equity, Sweat Equity being a wider. A company issuing the options has to fulfil following prescribed conditions:

• (a) these shares are of the same class of shares already issued;
• (b) it is authorised by a special resolution passed by the company;
• (c) 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;
• (d) not less than one year has, at the date of issue, elapsed since the date on which the company had commenced business; and
• (e) these shares are issued in accordance with SEBI regulations, if the shares are listed.